Printed headline: Blockchain For Parts
Lisa Butters, Honeywell GoDirect Trade’s general manager, talks with Inside MRO’s Lee Ann Shay about the importance of blockchain and why she thinks e-commerce could finally take off in the aftermarket.
What makes GoDirect Trade different from other online platforms?
There are 20 competitors out there. What differentiates us are three things. First, we are the only site that requires sellers to have prices, product images and paperwork—including quality documentation—in order to list a product. If you don’t have those three things, you can’t list on the site. Also, we are the only site that includes a search engine. You can create a customized storefront in three steps, in 5 min. Finally, we are the only platform that is blockchain-enabled. We leverage blockchain technology to create trust between buyers and sellers, much like a CarFax for aerospace parts. We try to show consumers as much information about a part as possible. That provides even more transparency for the consumer so they can make quick, efficient and good decisions.
We have everything from 50-cent fasteners to multimillion-dollar engines on the site. We have a whole spectrum of parts for air transport aircraft, from Boeing 777s to small prop jets. We also have $500 million in inventory.
How does Honeywell use blockchain to trace the pedigree and documentation of each part?
Blockchain is valuable because it helps build trust between two parties in a digital way. Like a scoreboard at a football game, everyone can look at it and know the score at the same time—that’s what blockchain does. Blockchain is a very secure way to have a decentralized database that is crowdsourced by all the people in the network. For serialized parts, we try to store as much information as possible about that part. We connect to other enterprises, connect to repair shops and to dismantlers. Using that technology, we can securely store information and what we call events tied to that serialized part. So when a consumer is looking for an engine starter, for example, they can see that it was repaired by a certified shop by using blockchain data.
In that example, are those players willing to give you that information?
For aerospace, it’s a really new technology. We are barely scratching the surface of how we can use blockchain effectively. Blockchain is not commonly used across many players and enterprises, so for us to collect data from repair shops and dismantlers, we have to partner with those that are willing to go onto the network and set up a blockchain node or submit information through the secure-user interface so we can start collecting and sharing data. There is an aircraft dismantler and a couple of repair shops that we set up nodes for so they could be on the blockchain network. That gives them the exact copy of the blockchain database, so we all have the same copy. It’s not about Honeywell owning all of the data and then having a walled garden around it. This is about motivating enterprises and smaller players to operate in the blockchain space.
For example, the aircraft dismantler eCube has set up a node outside of our blockchain network, creating a chain-of-chains effect. When eCube starts dismantling, it loads that event into the blockchain ledger, so there will be a copy on its blockchain, and there will be a copy on our blockchain. Then we can start sharing the data. Blockchain can be described as a team sport that is only successful as more players enter the game by connecting together. In these early stages, we only have data through Honeywell and a few repair stations and dismantlers we’ve partnered with.
For your blockchain partners, what is the advantage? Does it lock them into only working with GoDirect Trade?
It’s not meant to lock them into anything. It’s just to start this revolution about storing part pedigrees. We call it “Project 0 through 10.” What that means is, for any part, we want to store step zero—where the raw materials come together and you assemble the part. Step 1 is the part’s first day: Who manufactured it on what day and its serial number. Step 10 is the death of a part—when it gets scrapped. So when a dismantler participates in the blockchain, they can include the aircraft the part came from, what day it was dismantled and the technician who dismantled it, so there is complete pedigree information about that part.
It’s kind of like Google Maps, a gigantic platform that includes directions, locations and waypoints. You can take that big platform and put services on top of it, such as what Tesla does for its cars and Waze. It’s the same thing with this parts-pedigree blockchain network that we are trying to build out within this ecosystem. You’re never going to get 100% of aerospace companies to participate, but eventually, if we’re able to partner up with people on blockchain to store all of this information, then you end up building a robust parts-pedigree platform that would be valuable. Not just for the people who are on it but for services that could be built on top.
The more people you can bring on, the more dots you can connect. The theory is that if we can get all of the OEMs to participate in blockchain, that means that you’ll always have at least step one—the birth date of the part.
Honeywell is pioneering this, as a $40 billion company that manufactures, repairs and trades aerospace products. We have all of the data that goes with that. Across our 25 manufacturing sites, our 20 repair sites and our large trading organization, all of that data is populated into the blockchain network, so we have a good start on what data we can collect every day, along with our blockchain partners.
Does the platform include military parts, too?
Right now we only have commercial parts. As we expand, we hope to include military parts, probably later on this year—through other storefronts.
Are customers using GoDirect Trade to actually complete transactions instead of calling or emailing the vendor?
Customers are closing transactions online. We had a customer purchase a used TFE engine on GoDirect Trade two months ago. The customer did ask a few questions online, via the Ask the Seller button, but they could access the logbook, the pictures and specs online. It went into a 1984 aircraft. It was a good signal to us that the time is here—people are ready to not just look online and then pick up the phone. They’re ready for e-commerce in this industry.
How many transactions have been completed on GoDirect Trade so far?
We have transacted more than $3 million in sales since January, when we went live. That may seem small, since this is a $4 billion used-parts industry, but generally, none of that is done online—it’s still mostly done via email and phone. So for us, in these early stages, we have really high hopes that people are going to accept e-commerce in this industry. As the millennial workforce continues to grow—by next year it will make up about 70% of the workforce, and the Gen Zs in three years will make up 40% of the workforce—we believe that as those two generations come onboard, they will not accept a solution that isn’t online.
Of the $3 million in transactions that we’ve processed to date, half have been for new customers. Sellers have to realize that if you don’t sign up for the digital revolution early, you will be left behind. We aspire to be the No. 1 platform in three years for online used-parts sales. If we don’t figure it out, someone else will.
Why is three years important?
If you have $500 million going through the site by Year 3, at that point you know that the digital revolution will take hold.
Are new features coming out soon?
We just rolled out Seller Wizard, which in three easy steps allows users to set up a full-blown store in 5 min. Repair and overhaul services is a major functionality that is coming this quarter or next. It will be similar to the experience on Amazon when you buy a ceiling fan: The next question they ask is if you need someone to install it. On GoDirect Trade, that makes perfect sense. People are buying used parts, and a lot of times they buy something that needs to be repaired. So if they put a used part that needs to be repaired in their cart, the next question could be, do you want to find a repair provider for your part and send it for repair?
What’s the biggest surprise you’ve had about setting up and running this online platform?
The biggest surprise is resistance. We’re offering a platform for sellers to go digital when they had zero e-commerce presence and allowing them to launch an online store in minutes. You would think sellers would be beating down your door for global reach to customers they never could have seen, but that has not been the case. It’s like what Amazon experienced in the late 1990s. Sellers didn’t feel compelled to go digital. Going digital means that they now have to price their products on a regular basis, take pictures of their products, and scan and store their quality documents so they can make a listing. It’s harder. It takes more steps and more work. It’s digitizing your back-end operation so you can have an e-commerce storefront. You’d be surprised at the resistance of companies to digitize their back-end operation and be more transparent. We have more than 40 sellers on GoDirect Trade. We’re winning them over—we’re actively trying to market to them. I think that when we reach a critical mass of the right sellers, maybe 150, others will feel like they are being left behind and then they’ll be compelled to participate. I think that will be the tipping point.
You can never have true e-commerce without transparency. Not only are sellers hesitant to launch a digital storefront because it’s hard, digitizing their back-end is hard, and they are not used to transparency. Showing prices isn’t something people are used to doing.
At GoDirect Trade, we have technology solutions that address some of the trepidation they have about pricing. We give them pricing controls to look at all of the companies that are looking at their lists. And they can control which companies can see which listing, which helps them avoid price scrapers. But in three years, all of that will be a moot point because transparency is coming to the used-parts market.