Efficient Process and Resource Management Are Critical to Effective MRO

The world of civil aviation is changing, and organizations involved in maintenance repair and overhaul (MRO) and the supply chain need to ensure they aren’t left at the departure gate when it comes to industry innovation. International Air Transport Association (IATA) figures show the global commercial aerospace sector sustained significant growth throughout 2014 with international passenger traffic rising more than 6 percent, underlined by extended record-setting production levels. Growth continued through 2015 caused by an accelerated replacement cycle (more fuel-efficient aircraft, e.g. Boeing’s 787 Dreamliner and the Airbus A350XWB, linked to increased passenger travel demand — India, China, Middle East, and Asia-Pac). Annual revenue growth is also expected to continue in the region of 5 percent over the next 20 years — demand increased by 400 percent and passengers by 30 percent between 1981 to 2013.

Aircraft production is also showing dramatic rises — with Frost and Sullivan, the IATA, and the Official Airline Guide all predicting a 25 percent increase in aircraft production over the next 10 years. More planes are making more flights, with flight routes becoming busier and increasingly globalized. These new aircraft, complete with new technologies, must merge with a fleet containing planes at varying stages of their operational lifespan.

Aerospace MRO services/supply chains face significant challenges to meet the demand and will need to drive in transformational efficiencies.

Why Is MRO Important to the Bottom Line?

Wall Street Journal research showed that in many cases, 99 percent of the revenue received per flight by many airlines is needed simply to break even on the high base costs incurred in operation. The largest cost to airlines is fuel, followed by salaries, taking 29 and 20 percent of revenue respectively. Hedging is a key play here for fuel but that is effectively a risk and airlines cannot directly influence the barrel price. Salaries are also difficult to reduce because of the global competition in a unionized industry for qualified aircraft maintainers driven by forecast market demand growth, insufficient numbers being trained, and the consequential reduction in many military air forces (a historic source of experienced staff). As such, both fuel and people are costs that cannot be influenced easily or minimized to maximize profit.

The one area where an airline can help boost profits is that of maintenance (be it indigenous or contracted out), where costs typically make up 11 percent of revenue. By transforming MRO and its associated supply chain into a more holistic efficient and effective enterprise approach it is possible to achieve increased value from investments. In addition, the sums indicate that if operators can reduce their maintenance costs by just 10 percent, they could double their profits.

Transforming to Impact the Bottom Line

For an MRO to be able to deliver on the bottom line the maintenance operation needs to transform and adapt. New technology such as new composite materials, the continual development of passenger services such as touch screen entertainment and Wi-Fi, as well as government initiatives such as ‘Clean Sky’, brings widely different MRO demands than ever before. Link this to an ever increasing regulatory compliance framework and this is only going to get more complex over time as new requirements continue to evolve.

Some key challenges IFS sees being fed back from the civil aviation sector include:

• It’s a dynamic market — The MRO market dynamics are transforming, and an organization needs process and information system (IS) solution agility to deal with them. There is currently a tightening of relationships in the market — smaller MRO businesses are facing increased competition as more airlines bring MRO in-house coupled with the increasing dominance of original equipment manufacturers (OEMs) seeking to maintain and support their own products and draw in additional revenues. New technologies, green engines, and composite materials are adding further pressure on aircraft maintenance where process efficiency, high resource utilization, and process innovation are key requirements in order to stay competitive.

• It’s a growing market — Do maintenance organizations have the IS solutions and agility to support this market growth? MRO services must adapt to cope with the resulting increase in demands. This requires continued investment in facilities, training, and modern IS.

• It’s hard to optimize scarce, skilled resources — With staff resources stretched, it becomes critical to manage those skills more effectively with greater flexibility. Operators also need a better understanding of cost structures and activities to facilitate adjustments to maintenance engineer tasking.

• It’s challenging to drive in regulatory requirements — Further considerations in the MRO environment are strict compliance requirements including maintenance standards and health and safety. Increasing pressure is also coming in the form of environmental factors such as Clean Sky and the annual reporting rigours associated with eco-footprint.

• It’s a complex supply chain — Supply chain assurance is critical to operations and the MRO process. The costs of aircraft parts are increasing — the logistics needs to be managed efficiently. At the same time there needs to be a healthy mix of competition and managed stability in an organization's MRO supply chain alongside rapid fleet growth for airlines. The supply chain needs visibility and it needs to be optimized and kept as low as possible. It also needs to be secure and able to deal with the growing risks of counterfeiting.

With such challenges putting strain on maintenance operations, how do organizations remain flexible, agile, and informed? How do they optimize their assets and resources so that efficient and effective MRO is the key driver to maximizing profits?

One View Needed to Manage Assets and Resources Across the Whole Enterprise

Businesses need to manage assets and resources across the whole enterprise. Effective asset management and MRO efficiency are, and will continue to be, critical factors in business performance and ultimately the bottom line.

Many operators currently and historically use solutions that have emerged from specific initiatives — for example one solution for managing aircraft fleet line maintenance, another for heavy maintenance, a further vendor solution for technical publications management, and yet another vendor solution for an end-to-end supply chain and the close contractual engagement with key suppliers. An organization may also have a mix of in-house and OEM-supplied solutions.

MRO is a complex process and needs industry standard, robust processes but it doesn’t need to be serviced and supported through an equally complex user interface. What is key is that the business be treated as a business not a set of distinct organizations. How an engine is progressing through an MRO shop, where certain parts are in their lifecycle, how certain suppliers are performing, how HR manages the resource risks we are holding, are we meeting compliance reporting and audit obligations are all constituent parts of the P&L success and all contribute to the enterprise.

The key therefore is IS support that combines both industry standard, robust processes with an enterprise wide operational information driven perspective.

What Does This Mean in Practice?

This means being able to integrate data, metrics, and operational and business objectives. The value-add of an integrated approach to asset management and maintenance is a common user-interface (reducing the amount of training needed and encouraging cross-department collaboration). Agile line maintenance — civil aviation operators need a line maintenance solution that enables the optimization of resources, allocation against planned tasks, and capture of costs of works undertaken. Robust heavy maintenance, repair, and overhaul — MRO solutions need to provide an integrated, incremental solution to match the demands of engine and airframe MRO overhauls — on time, on budget, with safety and within regulation. Organizations need the ability to work smarter and adapt through the use of agile, modular enterprise solutions based upon open standards that can provide the broader functionality needed. In addition, successful MRO providers realize that making operations smarter requires end-to-end strategic intelligent business operations. This requires solutions that provide a range of tools delivering visual insight, decision support, and action execution at the enterprise level, to accelerate business performance. In effect, to support a complex MRO business operation, three key elements are required:

• Map the Enterprise — In order to reach the nirvana of well-informed decision making, the first step is to have a top-down corporate business management process that gives the leadership ‘Visual Insight’. Most traditional business intelligence solutions are limited by using a bottom-up approach, a legacy of patching in stovepiped functional systems without real interconnectivity.

• Monitor Performance — Management needs a system that monitors the performance of activities against business goals and can monitor real-time performance specific to each functional area — for example, be able to calculate the impact of raw material price or quality changes on the bottom line in real-time. In this way, each functional leader can direct their energies toward those tasks that matter the most to achieving the corporate strategic goals.

• Manage the Business — Managing the business isn’t just about watching things happen, it is about doing things when necessary. When business leaders have gained the required enterprise intelligence from the first two steps, they need the ability to execute decisions supported by real-time ‘what-if’ analysis that drives their specific business and gives them a competitive edge.

What Other Market Trends Will Impact Civil Aviation MRO? 

Consumer IT is having a drastic effect on the way we work. With the growth in popularity of smartphones and mobile devices has come an expectation for the same functionality in the workplace as we enjoy in our personal lives. Civil aviation is not immune from the ripple effect of consumer trends. Support solutions are becoming less about IS infrastructure and more about open access and ease of use. Mobile devices such as tablets and smartphones are now commonplace in maintenance hangars, and wearable technology has recently been trialled to inspect aircraft on the ground. Over the coming years, we will also see the full integration of operations, maintenance and the supply chain. The next generation of logistics will see the full integration of operations, maintenance and the supply chain, into the optimized logistics support enterprise.

We will also see the continued trend of mobile — with airline maintenance teams equipped with mobile apps to access relevant information at the time of need, rather than the long walk to the back office or standing in line to access the terminal to get the relevant information. The trend will be to create an environment to better enable the user to do their job, reducing solution overheads, for busy maintenance engineers. While also providing the always essential feedback loop, it’s critical the user is not inundated with functionality. Information must be in a format optimized for specific equipment, easily customizable, and devoid of superfluous overhead.

The first glimpses of genuine return on investment from additive manufacturing are anticipated. It has been widely predicted that additive manufacturing — or 3-D printing — will become ubiquitous within the aerospace industry. Indeed A&D is already a huge trend-setter in terms of adopting additive manufacturing, contributing 10.2 percent to the industry’s $2.2 billion global revenue in 2012, and all indications are that this will continue to grow. Companies such as Boeing and Airbus have been using the process to manufacture components for over two years. In MRO terms, the technology allows printing of replacement parts on demand for damaged equipment to support maintenance operations. 

We are also seeing a real business need for wearable technology emerging. Airlines are now trialing Google Glass in the maintenance process. The glasses are worn by engineers working around the plane on the tarmac. Images of the aircraft are sent to maintenance specialists for assessment who then feed any issues they see back to the engineer on the ground. Maintenance is completed promptly, can be assessed in real time, and all information is recorded to assess further issues down the line. Wearable technology, particularly in the context of the ‘remote expert’ has the potential to reduce complexity, workload, and crucially maximize deployment of scarce skill resources. Context-aware computing is also coming to the fore, IS solutions will automatically tailor their operation through recognition of the maintenance environment they are in. The technology’s key benefit is that it reduces the time taken to complete complex maintenance tasks in difficult environments — engineers can get the job done quickly, streamlining the maintenance process.

Companies such as Boeing and Airbus have been using the process to manufacture components for over two years. In MRO terms, the technology allows printing of replacement parts on demand for damaged equipment to support maintenance operations.

But as new technologies are implemented, MRO IT solutions must be able to adapt and integrate — and quickly. Traditional ERP solutions have had a track record of months or even years to install, let alone adapt to incorporate new technology and that can result in a dramatic effect on the bottom line. But, modern, modular, ERP applications have an inherent agility — reducing the time and pain required to implement and modify processes and make it possible to deploy new technology quickly.

But There Are Some Risks ...

Make it, or fake it — with large fleets containing aircraft at various stages of lifespan, there is constant demand for parts, while at the same time cost and schedule pressures placed on manufacturers have started to create an environment which allows counterfeiting to flourish. As new technologies, such as 3-D printing, gather pace there are issues that need to be addressed. The Federal Aviation Authority (FAA) estimates that 2 percent of the 26 million aircraft parts installed each year are counterfeit. This has the potential to severely impact the support chain assurance as well as airworthiness. There are comprehensive and cost-effective solutions available to dramatically reduce the number of counterfeit parts in the supply chain — but again it requires agile IS solutions to integrate effectively and to introduce key audit checkpoints across both logistics, supply, and MRO processes.

Strict export control plays an increasingly important role in keeping the world safe. It’s not just a defense issue and can cut across all sectors of the aerospace industry. Only by complying with stringent export control regulations, as implemented by various government agencies, is it possible to combat infringements of sanctions. Meeting the demands of the most stringent export control is vital for companies whose business includes dual-use items. It is absolutely critical that these businesses can demonstrate to customers and regulators, that they can comply with the most robust export control if they are to be recognized as bona fide suppliers. Solutions available to dramatically reduce this risk that can be implemented across agile IS solutions — as audit and checkpoints are required across the enterprise not just at the point of receipt or dispatch.

And Benefits

Efficient and effective MRO is one of the key areas that an airline can significantly influence in order to drive increased profits and USPs. It needs to offer effective MRO and efficient enterprise resource management that combines both industry standard, robust processes with an enterprise wide operational information driven perspective — a 360-degree view of the operational business processes, performance, and value chains.

It requires advanced regulatory and safety compliance, ability to optimize workforce resources with a focus on efficiency, high utilization, and process innovation. It needs to contribute to smarter procurement, better parts availability, better supplier management in one environment, and improved use of facility capacity and also deliver better financial performance — by aligning contracts and resources to operational efficiency, while meeting contract requirements with minimized overall operating costs. But any supporting IS solution needs to underpin this with the inherent solution agility that can readily adapt to the changing aviation market and future technological initiatives.

This will provide airlines with increased customer service, increased availability with minimized turnaround times, and a real business differentiator going forward — achieving that 10 percent reduction of maintenance costs that can result in a doubling of profit.

Kevin Deal is the vice president for aerospace & defense at IFS North America. IFS develops and delivers enterprise software for enterprise resource planning (ERP), enterprise asset management (EAM), and enterprise service management (ESM). IFS was founded in 1983 and currently has over 2,700 employees. For more information visit www.IFSWORLD.com.