A version of this article appears in the September 8 issue of Aviation Week & Space Technology.
Experts say the time is right for the MRO industry to adopt intelligent and integrated planning.
At American Airlines, Craig Harry, managing director of supply chain materials administration, and his team are working to change the dynamic that exists between an airline customer and its MRO and parts suppliers. In many organizations, the conventional relationship has been tight-lipped, adversarial and a little like a Miranda warning: Anything one side says can and will be used against it at a later date.
“In our industry, like most industries, suppliers have been viewed as natural enemies,” Harry says. “That needs to change. If I want consistent turn times, lead times, quality, and costs, I need to communicate my requirements with our suppliers and report back to them how they’re performing. The more information and data we share, the more likely it is that everyone’s performance is going to be consistent.”
In other words, American Airlines wants to integrate its planning with its suppliers. As an example, Harry says that during the planning stage for a modification program, American will bring in key suppliers to develop a removal and replacement plan based on parts availability, or how fast the suppliers can receive, repair and return a component. “We’re going to provide ‘demand’ information and they’re going to provide ‘supply’ information,” says Harry. “If need be, we’ll adjust the maintenance schedule—it has to be a collaborative process if we’re going to be successful.”
He is describing a concept the consulting firm PwC refers to as intelligent and integrated methods for maintenance planning. “Intelligent” refers to the collection of more data from more nodes in the supply chain (see page MRO25). That includes the expanded use of sensors, radio-frequency identification (RFID) chips, and mobile technologies like smartphones and tablets.
The integrated piece refers to sharing that data with everyone involved in a process, whether they are internal to an airline or an external partner. The idea is to optimize the end-to-end process and not just the individual pieces, or silos, of the process, as is often the case.
The concept brings together several trends in supply chain management, including the development of strategic relationships with key suppliers in and outside the company (see AW&ST May 26/June 2, p. MRO19), the collection of big data, and the sharing of information via collaboration. The benefits should flow through the supply chain, from more efficient processes to greater availability of parts where and when they are needed. Or, as Steen Karsbo, vice president of business development for Sattair, puts it: “We’re really talking about risk management. When we have more information about an airline’s plans and collaborate, we can guarantee that a part is available in their shops or in their hangar when they need it. It smooths out their operations.”
While other industries, such as automotive and consumer packaged goods, already have these kinds of initiatives in place, integrated planning is an emerging best practice in the MRO industry for a variety of reasons.
For one, says Harry, airlines have historically done work internally and now we are doing much of it externally. “We’re a little behind other industries when it comes to methodologies for managing suppliers, which is different from working with your own internal shops,” he says.
That was confirmed by a PwC survey that found a low level of maturity in the adoption of leading planning processes in the MRO industry. At the same time, those best-in-class organizations with a jump on their competitors—defined as the top 25% of the industry—are seeing results in key metrics, according to Rick Wysong, a PwC director.
For example, the best internal shops outperformed the rest of the industry in turnaround times, with 87% compliance versus 73% for the industry median; the most mature organizations also realized better on-time delivery compliance on repaired parts with third-party suppliers (72%), compared to the rest of the industry (68%).
Performance is not the sole reason for organizations to collaborate more closely. “We have a limited number of suppliers and service providers, and the number of players is getting smaller every year with mergers and acquisitions,” says Tamas Stefka, senior director of integrated provisioning services for SCSM, Airbus. “The volume of work they have to deal with is growing, so planning becomes more important.”
Despite efficiency benefits, adoption is slow. “Today there are exceptions but no rule for the industry,” says Dirk de Waart, a partner at PwC. “And that leads to a wide variety of outcomes. We need to work toward a consistent set of best practices across the industry.”
Simply put, Wysong says, intelligent and integrated maintenance planning is a matter of better sharing data with MROs so the overall value chain can be better optimized. It can be internal within an airline, so engineering, maintenance, procurement and logistics are all working from the same playbook; or it can be sharing plans and information between an airline and its third-party maintenance and parts suppliers.
For example, an MRO that has visibility into an airline’s plans for expected removals can provide a higher level of service by making sure the parts and capacity are in place when needed. “Too often, an airline sends a part out for repair with little advance notice and no discussion about future plans,” says Wysong.
A key is ensuring that all players in the process are working with the same data, plans and metrics. For example, an airline may measure repair shops on turnaround time, order-to-delivery, or on the total number of parts repaired. Based on those measures, the shops may work on the parts that are the quickest to put back into service and not necessarily the parts that are most needed for upcoming work. Similarly, an internal shop may focus on how quickly a part can be repaired without looking at the time involved in the overall process—from removal of the part until it is back on the wing. “We often see an emphasis on reducing the component turn time to 13 days from 16,” says de Waart. “They forget that shaving three days off the time it takes to pack and ship a part, or to receive it and get it back on the warehouse shelf, is still three days out of the cycle.” Those types of improvements can take place when logistics has visibility into a removal plan in advance.
When the process works, airlines and suppliers benefit. Suppliers can better plan their capacity and inventory because they have more insight into the planned maintenance events and the parts that will be needed. Airlines should benefit from better on-time delivery and a higher service level. “Consistency in performance allows us to optimize our operations and minimize our investments in inventory,” says Harry.
Several airlines already have realized the benefits of the intelligent and integrated planning approach. One carrier has invested in the maintenance network on its international fleet so work could be done where scheduling dictated. That allowed the airline to make a 4% shift from unprofitable domestic routings to more lucrative international flights. “Maintenance needed to adapt because this wasn’t in the budget,” says de Waart. “Because the airline had an integrated view, someone was able to justify that expense.”
In a pilot program with PwC to begin sharing maintenance plans across all functional areas, another global airline reduced parts-related delays and cancellations by 40% and inventory by $50 million.
Suppliers and service providers also are advocating an integrated approach to maintenance, says Jim Nystrom, senior director of account management for the Americas for Thales Avionics. “For us to be successful, our customer has to run a good airline,” he says. “To do that, we try to get deeper into the airlines’ operations to understand their needs, their flight operations, finance and engineering. We don’t want to just show them our catalog.”
One airline may want repair work completed in a certain region rather than send it to Europe for repair, Nystrom says. Using turnaround time, one customer may measure the time for the repair and another may measure the complete process, including the communication required to order a repair and process the payment. “We want to understand those most important requirements, and we want to understand how customers measure performance so we can tailor our operations and reports to their metrics.”
While integrated planning sounds great on paper, there are barriers to making it happen. “The biggest barrier is trust,” says Nystrom. “This is a different way of doing business, not just with purchasing, but with all the groups across an organization. You have to establish a dialogue that leads to insight.”
It is easy to read an engineering order, for instance, but if you do not understand who wrote the order or why, you may not be able to provide the level of service they’re looking for.
Beyond trust, there is simply a reluctance to share information, especially in organizations that have typically kept information close to the vest. “If you think about a major airline or MRO, they have a great deal of information, and they view that as a competitive advantage,” says Stefka. “But if you talk to the major players, they also experience bottlenecks in their operations. As an industry, we have to realize there is an opportunity to improve everyone’s efficiencies by improving the overall value chain.”