Understanding the Current Spare Aircraft Parts Market & How Technology Can Improve It
Author: Prashant Mohan, Director- India Operations and Procurement
This article is also featured on MRO Business Today
Aviation is one of the most challenging industries because of its razor-thin margins, complex makeup and unique nuances. The most difficult subset of this ecosystem is managing the maintenance, repair and operations of aircraft.
At the very foundation of all of this is ensuring the right material is available at the right time. Otherwise, performing maintenance and repairs are impossible. Therefore, let’s investigate the state of the aircraft parts procurement market, examine traditional processes, highlight the biggest challenges and offer practical solutions.
The Current Ecosystem
As mentioned, there are several unique attributes to aviation and its supply chain. Running an airline is a business that is both financially demanding and structurally complicated. Commercial aviation is a very capital-intensive industry that operates in a very complex ecosystem.
And of course, ensuring the safety of passengers is paramount. Therefore airlines must run under stringent regulations. This makes aircraft maintenance a non-negotiable priority.
This maintenance can be broadly categorized into Scheduled Maintenance and Non-Scheduled Maintenance. Both of these types of maintenance require resources and materials in order to be executed, including aircraft parts.
Ensuring a seamless supply chain for these parts is crucial for the smooth operation and commercial success of an airline.
The cost of an aircraft being non-operational, often referred to as an Aircraft On Ground (AOG) situation due to technical issues, can range from $10,000-20,000 USD to upwards of $150,000 USD after being grounded for just 1-2 hours.
The Role of Traditional Procurement & Logistics
As we previously stated, procurement and logistics play a pivotal role in supporting airline operations. They ensure the availability of all types of supplies, including aircraft spares, tooling, test equipment, consumables, and ground support/ground handling equipment, which are all essential to flying an aircraft.
Traditionally, parts procurement for aircraft involves the following steps:
- A purchase indent is created by maintenance and planning teams to authorize the requisition of purchase of scheduled and non-scheduled material.
- Upon submission of the material requisition, the parts are categorized into contracted and non-contracted.
- For non-contracted, a request for quotation (RFQ) is sent among the approved source of suppliers.
- Quotations are received and primarily analyzed based on cost and lead time.
- The offers are analyzed and the best quotation is awarded by way of order.
- Contracted spares are sourced through the contracted suppliers which primarily fall under the rotable category.
Despite being well-established, these traditional methods can have several drawbacks:
- Limited reach of suppliers: Airlines/Maintenance, Repair, and Overhaul (MRO) organizations/departments can only reach out to known registered suppliers, potentially missing out on better prices or lead times from a larger supplier database.
- Time constraints: Procurement can be a time-consuming process. Delays or oversights can turn routine material demands into AOG situations, leading to significant costs and operational disruptions.
- Resource intensity: Traditional procurement processes require a considerable amount of manual monitoring, and therefore, human resources. This can be a challenge, given the global shortage of skilled workers.
- Capital blockage in inventory: Class-C inventory, Consumables and expendables (C&E) are often purchased in bulk to avoid a stock-out situation. However, this can lead to excess stock at potentially higher costs, tying up significant working capital that could otherwise be allocated to other areas.
A New Era: AI in Parts Procurement
To overcome the drawbacks associated with traditional procurement methods, the aviation industry is turning to Artificial Intelligence (AI). AI can streamline procurement processes, making them more efficient and helping organizations make better procurement decisions.
With real-time data and analytics, procurement teams can identify and mitigate procurement delays and excessive costs, which are key factors in successful airline and MRO operations.
AI in procurement can offer several features:
- Integration with maintenance & engineering systems: This enables automatic pushing of part numbers instead of relying on time-intensive manual processes.
- Sourcing from hundreds of suppliers: AI can source from hundreds of suppliers in a matter of minutes, instead of procurement teams having to rely on the dozen or so suppliers they already have a relationship with.
- Consolidation and analysis of quotes: AI can automatically consolidate quotes and recommend the best ones based on defined business rules.
- Automated Purchase Order (PO) placements: AI can automate PO placements to major Original Equipment Manufacturers (OEMs) such as Boeing and Airbus.
- Tracking of POs and management of delays: Potential disruptions can be mitigated and solved before leading to any operational delays.
- Market insights: AI can provide valuable insights into market trends and patterns, which can help with forecasting.
With these capabilities, AI can transform the traditional landscape of aircraft parts procurement, optimizing efficiency, cost-effectiveness, and overall performance of airline operations.
The aviation industry is in a constant state of evolution, with technology playing a pivotal role in shaping its future. In the realm of aircraft parts procurement, AI has the potential to revolutionize traditional processes, offering solutions that are not only efficient but also cost-effective. By understanding the challenges of traditional procurement methods and harnessing the power of AI, the aviation industry can ensure smoother and better operations.
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