Manufacturing Work.jpg James Pozzi/Aviation Week

Opinion: Three Market Forces That Require A&D OEMs to Have MRO Partners

While aviation industry growth presents new opportunities for the A&D industry, it also creates many challenges.

Technological innovations are rapidly changing the A&D industry landscape in many ways, from growth in air travel to increasing demand for cheaper, more reliable aircraft, combined with the emergence of new technologies and supply chain models. This creates constant pressure on A&D OEMs to better leverage data management; maintain and service mature systems while addressing product obsolescence; and still leave time to focus on next-generation innovation. They are hard pressed to tackle all three in parallel, which should compel them to seek out MRO partners who apply a holistic approach to the entire product lifecycle and help eliminate the complexities inherent to the traditional MRO process.

The good news is that global demand for new aircraft production over the next 20 years is expected to reach more than 41,000 commercial aircraft, with a market value of  $6 trillion, according to Boeing’s Current Market Forecast 2017-36. This translates to more business for the major aircraft manufacturers.

Despite the growth ahead, commercial aircraft are remaining in service for longer than ever before. A key area of focus for Tier 1 & 2 A&D suppliers and OEMs becomes the aftermarket, where they need to drive greater efficiencies, increase reliability and reduce turnaround time (TAT) to help lower costs, reduce aircraft on ground (AOG) and free up personnel and infrastructure to focus on forward innovation.

While this growth presents new opportunities for the A&D industry, it also creates many challenges. OEMs must lower overall cost of operations while continuing to provide highest product reliability and fast time to market in the face of three powerful forces: higher-than-ever customer expectations, constant technological innovation and globalized competition. These three forces are fueling a transformative era we call The Acceleration Economy that will require OEMs to rethink their approach to MRO. It also necessitates OEMs’ broader digital transformation journey is on the right path. 

McKinsey and Co. recommends A&D OEMs focus their digital transformation initiatives on driving growth with better products, services and customer experiences--and by creating greater efficiencies in operations such as engineering and supply-chain management. For example, predictive analysis can improve inventory management based on projected needs. Additionally, incorporating new technologies into MRO processes can facilitate health monitoring, predictive maintenance, dynamic maintenance records or augmented-reality work instructions to reduce costs and improve profitability.

Capitalizing on these kinds of new technology trends and innovations requires an MRO partner that is able to engage early in the product lifecycle to allow for “design for reliability,” ensuring components and processes are sourced, designed, tested and qualified to perform in challenging, real-world conditions in line with regulatory criteria. Leveraging insights from the design, manufacturing and test processes into the repair and maintenance cycle to deliver faster repair turnaround is critical.

OEMs are also looking for more agility and responsiveness from their suppliers especially when they need to service or replace systems quickly and cost efficiently to keep airplanes flying. The same suppliers at every step of the process bring a level of desired continuity and a more efficient MRO engagement.

Oliver Wyman reports that the steady transition to new-generation aircraft over the next decade means OEMs need to work with MRO providers that are able handle the work associated with the newer fleet types or focus their strategy to capture end-of-life markets. The firm’s recent “Global Fleet & MRO Market Forecast Commentary 2018–28” report states that from an airframe MRO perspective, providers need to handle the new composite and metal matrix materials dominant in the latest-generation aircraft. Advancements include highly sophisticated avionics and systems that interface with health monitoring technology, designed to recognize pending system or component failures. Additionally, the ability to capture, analyze and process big data requires “a clear strategy to take full advantage of its potential,” according to this Oliver Wyman report.

As companies look to modernize their supply chains, the most successful ones recognize they cannot do it alone. Businesses that create and maintain deep and lasting partnership networks will be best positioned to spot changes, pick-up new ideas and fend off global rivals. That includes MRO partners that enable the OEM to extend innovation. As OEMs build new aircraft to catch up on delivery backlogs and speed the replacement of previous generations, they face the constant challenge of keeping up with the latest technological innovations in areas such as fuel efficiency and avionics technology.

The Acceleration Economy forces OEMs to transform or risk irrelevance, and that demands partnering with strong MRO partners that optimize their supply chains and drive lower operational costs and inventory. That is the key to OEMs gaining the ability to innovate faster and create new efficiencies while continually meeting critical demands for safety, security and reliability. The speed of business is accelerating faster than ever, and strategic partnerships have never been more important to fostering innovation, speeding time to market and enhancing competitive advantage.

Jack Jacobs is Celestica’s vice president of aerospace and defense



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