Supply chain challenges in a post-pandemic world

In 2020, the aviation supply chain has been stretching and straining like never before. In the MRO sector, the task now is to ensure it doesn’t break as the recovery begins at varying speeds in different parts of the world.

Just as an airline sells ‘time’ with flights to transport us all around the world, it pays for ‘time’ whenever its aircraft are not in the air. Swifter turnaround times for aircraft under maintenance are therefore vital to the bottom line, more so when that maintenance is unscheduled and parts may not be available.

Predictability is a key attribute for supply chain in the maintenance, repair and overhaul (MRO) sector, especially when MRO providers don’t want capital tied up in stock and rely on just-in-time (JIT) deliveries. With the commercial aviation in-service fleet having been vastly reduced during the pandemic, the elasticity of the supply chain – and how predictable it is – has been put to the test. And according to Erik Goedhart, global head of aerospace at logistics specialist Kuehne + Nagel, it has been found wanting.

“This pandemic shows more than ever before the need to reform the supply chain,” he declares. “The aerospace supply chain is behind other markets like automotive and high tech. The main reasons for this, among others, are:

• aviation being different from other industries – it is a low volume, high value market

• airworthiness requirements – although these are also sometimes misused as an excuse

• being fully B2B without any link to final consumers – the passengers.

“There is no excuse anymore not to reform as the survival of companies is at stake. Adjustment of the supply chain is not enough, it needs to reform, with key pillars being digitisation and sustainable CO2 reduction,” Goedhart continues, adding that a significant change in focus is also needed. “We have just-in-time of course, but even more now we need to consider just-in-case. Every few years the aerospace industry will experience one or other event, so are we prepared for the next one or just acting to deal with the current one? Just-in-case will be the focus of the reformed supply chain.”

Montreal-based AJW Technique has experience of being on both ends of the supply chain. It requires parts to perform maintenance and it needs to return them, often via a parts pool, to the operator. The company’s chief executive officer, Sajedah Rustom, believes that the events of 2020 have “demonstrated extreme need for streamlining to cope with reduced demands across the board. Demand for component repairs has fallen by almost 70% activity as the fleet was rapidly parked during the early days of the pandemic”.

With the industry moving to smaller, leaner and more efficient fleets of narrowbody aircraft to accommodate the reduction in passengers through to 2023, Rustom expects an increase in the retirement and subsequent surplus of A310, A330, A340, B747, B767, B777 inventory. “Airlines are cannibalising inventory from early retired fleet, causing rapid price decreases and a near stop of piece part manufacturing as the parts market is flooded,” she reports.

“From an MRO point of view, we work closely with airlines to ensure the minimum repair requirements are met and we offer flexible cost-saving solutions to enable airlines to conserve cashflow. For example, AJW Technique has launched a ‘Quote and Hold’ programme which allows us to hold components in-house after conducting a thorough evaluation and providing a detailed quote to the customer – letting customers plan their financial exposure smartly. We have also hunted the market for all possible PMA (Parts Manufacturer Approval) solutions to allow customers to apply cost savings solutions to their maintenance functions,” Rustom adds.

“The supply chain has flexed, with the majority of suppliers (OEMs, distributors and so on) supporting the delay or cancellation of piece part ordering, enabling MROs to adjust quickly to a revised resource plan and replenishment model with appropriate inventory levels. AJW has dedicated a considerable amount of manpower and focus on building the proper digital tools and dashboards to closely monitor the aviation industry and fleet recoveries by customer and by platform to ensure operations are in line with projected demand.

“All digital projects have been accelerated in this time – from activity trackers, purchase order dashboards, turnaround time alerts, automated notifications, credit control automation, piece parts provisioning, automated quoting and pricing models, to customer portals – with an immense focus on aligning work inflow to flexed resource planning and JIT material replenishment,” Rustom confirms. “This has been the key to our sustainability throughout this pandemic and continues to prove fruitful as we dynamically adjust a suitable cost structure to our forecasted work inflow.”

As noted, there has been some variation, particularly geographically, in the return-to-service rates of grounded aircraft across different airlines. Again, the elasticity of the supply chain comes into question as some of those aircraft will need maintenance checks – and possibly some repairs – before re-starting revenue operation.

“The return to service as such is not a big deal. It is maintenance work which can be programmed,” say K+N’s Goedhart. “Recently however a number of announcements occurred on the unexpected work to be done in aircraft return – and this aspect is being underestimated.

“During the return process there will be unexpected demands for work and material, often at locations other than the ‘home base’. Is the material available? Will it delay the return? There are two pieces of advice I’d suggest to cope with this. One is to make the returns a standalone project and plan for work and materials. The second is to have a ‘just-in-case’ logistic partner close by with a ‘time critical’ focus. Time critical is more vital than an AOG – we call it the fourth service level above routine, critical and AOG,” Goedhart explains.

At AJW Technique, Rustom notes that besides the variety in return-to-service rates across different airlines – “mainly depending on their location as lockdown measures provided by our Governments are region specific” – there has also been differences depending on each carrier’s business model, from leisure focused to business focused and cargo operators. “Each has varying demands regardless of lockdown measures,” she states.

“Initially, airlines simply stopped all maintenance and parked their fleet. Then aircraft platforms that would remain parked long-term and retired early versus those that would remain in operational condition were quickly identified. This led to demand for life-limited components such as safety equipment and batteries to remain in serviceable conditions, becoming the major volume drivers as all other condition-based components requiring maintenance have been put on pause.

“Covid-19 sparked an accelerated need for digital innovation within all industries,” Rustom observes. “Every company has been put to the test to eliminate administrative work through automation and to elevate the workforce into more strategic functions for reduced cost and increased efficiencies. AJW has pushed digital solutions for increased productivity with an immense emphasis on better management of our supply chain and labour capacity in line with a rapidly changing demand. With volatile demand of certain components (life-limited versus condition-based) we have been able to flex our manpower to ensure our customers are supported.

The CEO adds that forecasting incoming units, combined with business intelligence data obtained from airline customers, has allowed the company to ramp up the supply chain proactively for piece part purchases. “Due to the overall reduction in volumes, suppliers have piece part inventory on hand causing lead times generally to shorten,” she notes.

“Our digital forecasting model is able to react to this in real-time and ensure a purchasing profile that matches actual demand. Also, to ensure full support as aircraft move back into operational conditions, AJW strategically positions inventory (at an LRU level) globally through exchange pools, should failure occur as aircraft become active. The shift to digital solutions has ensured that AJW has optimum serviceable inventory pools across the globe, but most importantly ensured that we can predict customer requirements and support all of their needs,” Rustom emphasises.

The increased use of digital solutions thus seems set to add to the predictability of the supply chain, enable it to flex further, all the while ensuring that every link stays intact.

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