Printed headline: Smart Logistics
Cost, speed and quality are the key metrics of aircraft MRO, and logistics affects all three. Smart logistics requires expert staff working with a widespread set of facilities and transport options. Increasingly, it also requires advanced digital tools, especially in two areas—forecasting demand for parts and tracking shipments of them.
This view is shared by a pure logistics provider, an asset manager that incorporates logistics in its services and a global transportation company that needs logistics for its own aircraft and manages logistics for other carriers.
Logistics improvements once focused on reengineering supply chains, remembers Erik Goedhart, senior vice president of aerospace at Kuehne+Nagel. Now the focus is on automation with data.
For example, “electronic booking of freight reduces data errors,” Goedhart notes. “When you automate order booking, repeat orders can be made automatically.”
Another example is gaining digital visibility into where parts are, in production or in transportation. The K+N executive says visibility into aftermarket deliveries is progressing well, but there is still no visibility into parts in production. “Work flows in production are not yet connected to the aftermarket, so there are still gaps in end-to-end visibility,” he notes. Goedhart stresses visibility should mean real-time information, not delayed by 30 min. And OEMs are now concentrating on supplying parts and predicting part requirements, rather than making production lines visible.
Forecasting part demand accurately is essential to reduce unnecessary stocks without undermining deliveries. Logistics networks must thus be continually tuned and updated. “If Rolls-Royce gets a new customer, it must put the customer in the model, recalculate the model and see if the distribution of part stocks is still correct,” he says.
The real forecasting challenge is fully exploiting big data from the newest jets. “Now we can predict when things will fail and parts will be needed,” Goedhart notes. “But who will manage that data?”
The K+N executive does not know whether an independent company should do part forecasts or let OEMs predict demand. But aviation is headed toward “‘aircraft-on-ground-less MRO,” he says. “It will happen gradually.”
Meanwhile, Goedhart warns airlines against purchasing logistics “like paper clips,” looking only at price. Logistics choices must be based on airline key performance indicators. These KPIs include turnaround time for checks and mods and logistics costs per flight-hour.
Apart from speed, care is needed in shipping valuable aircraft parts. “You can’t ship a $30 million engine like it is paper,” Goedhart says. The European Aviation Safety Agency requires aircraft engines to be stored and transported “properly” but does not define this requirement. K+N trains and certifies staff on engine handling and does not let uncertified employees touch engines. “If a blade is touched, it goes back to the shop,” Goedhart says.
Just improving the visibility of assets can reduce the need for excess quantities of inventory. For example, by putting GPS devices on engine stands, one company reduced its need for these pieces of equipment, each costing about a quarter million dollars, by 10-15%.
To connect charges more closely to an airline’s KPIs, K+N obtains a bill of procurement for an aircraft such as a 777, for an upcoming check. Then it quotes a total price for the whole shipset of parts needed for that check.
Goedhart says there are only a handful of logistics companies that can match K+N’s capabilities. “You need a global, multi-mode network, and you need IT to manage it,” he notes. -Lufthansa Technik is a K+N customer, although it also has a sister logistics company. “There is always the question of what logistics should an MRO do, what should the airline do and what should the specialist logistics provider do?” he says. K+N has worked with all the different models and mixes of models.
Major MROs and airlines may be quite good at doing logistics, but Goedhart says they rarely make investments necessary to improve logistics, including investments in new IT tools. “They say they must invest in keeping aircraft flying,” he says.
AJW Group dispatches 4,500 shipments of aircraft parts a week, mostly under 50 kg (110 lb.), but a few larger ones like engine inlet cowls or internal drive generators. Smart logistics is a “key differentiator,” says Chief Operating Officer (COO) Gavin Simmonds. “You can do all the other stuff right. Without good logistics, it all goes out the window.”
The need for speed puts all shipments on trucks or planes, with the mode chosen according to part and destination. With AJW regional hubs in all populated continents, delivery is usually fast and easy, and AJW staff speak more than 60 languages to deal with local customers. But sometimes customs processes take longer; clearing borders to Brazil, for instance, may take a week. “You have to know local regulations—for example, not shipping on wooden pallets to some countries or not shipping from U.S. origins to others,” Simmonds notes.
All this requires substantial staff: about 10 logistics managers to do bookings, another 150 employees to handle receiving and inspections in the warehouse and two dozen more to make sure the network is running smoothly.
Simmonds says only a few major airlines can handle logistics as well as AJW, and even these often delegate logistics to his company.
Technology is increasingly essential to logistics for parts. Traditionally, AJW used RFID to track every step in delivery of aircraft-on-ground (AOG) parts. It pulls this data into a central data warehouse and matches all tracking data to each customer order. “That gives us one place for all the answers,” Simmonds explains. “We can see exactly what steps it has completed, awaiting shipping or during shipping, and which airline it is on.”
Now AJW is testing putting live, GPS-based transmitters on shipments so AJW and customers will know exactly where a shipment is, physically and in real time. The trial is for AOG deliveries for a major airline. Simmonds predicts it will eventually roll out for all deliveries for all customers. “I expect it will be general in a few years,” he says.
The other critical IT system is forecasting demand for parts. Simmonds stresses forecasts must be done for multiple customers. AJW has its own forecasting software, fed by hundreds of thousands of data points on hours flown and part removals, all segmented by aircraft age.
“We take the [meantime between unscheduled removal] and put in it a forecasting tool,” the AJW COO says. “We have invested several million dollars to ensure we can prevent delayed aircraft. About 80% of line component failures are easy to predict; the other 20% are hard. This tool helps tell us where to hub the parts.”
Another investment is in forecasting staff to work with software and render “sanity checks” on predictions. “For live analytics, you need people,” Simmonds says. “We also benchmark on other industries. It’s easy to get aviation blindness.” He notes the auto industry works with six daily deliveries and has developed very sharp forecasting tools.
Tracking and predicting part demand leads to another gain. Removals partly depend on how an airline maintains its assets. If AJW spots an anomalous trend in one operator’s removals, it can suggest improvements or better training that would be helpful. “Some are black-box pullers,” Simmonds notes. “We track no-fault-founds.” Both AJW and customers benefit from improving maintenance.
Simmonds expects the market will only get more demanding for “prices down, services up.”
United Parcel Service’s (UPS) logistics solutions can include warehouse automation, inbound and outbound inspections, specialized kitting, AOG shipping, control-tower services, engine transport and packaging, explains Tom Upshaw, director of aerospace operations at UPS. On-time delivery is at about 99.9%. “Since we own our own airline, we understand time is money,” he notes.
UPS uses multiple warehouse management and control IT systems. For spare parts, it tailors IT solutions to customers’ own IT infrastructure. For example, many aerospace customers operate on SAP platforms. “We have experts in SAP, know how to use it and integrate our systems with SAP,” Upshaw says.
UPS exploits IT for inventory management, real-time visibility, quality management and provision of transportation. For example, for a large aerospace OEM, UPS scans and tracks each part so customers can see where their parts are 24/7. UPS also oversees order status and location of parts using what Upshaw calls a “control tower concept.” It designs a control tower to monitor and report on critical areas of customer supply chains. Staff can answer questions, divert critical parts when necessary and perform other tasks, again 24/7.
Some customers forecast their own demand for parts, but UPS can also partner with forecasting companies to predict requirements, often based on historical demand patterns.
Still, IT is not everything. For international shipments, Upshaw stresses the importance of UPS’ 80 years of experience in customs brokerage, a transportation network in more than 220 countries, offices in more than 60 countries and 900 logistics facilities in 120 countries. Trade-compliance tools like UPS Import Control and UPS Paperless Invoice enable customers to create, complete and file invoices, often online to speed clearance and reduce customs holds by up to 56%. And UPS ensures adherence to the U.S. International Traffic in Arms Regulations.