Supplying the Supply Chain

Dec. 9, 2019
With parts shipping to service locations locally and globally, there's more to the aviation supply chain than what first meets the eye, with suppliers actively meeting, and anticipating, customer demands.

Having the right parts and an adequately stocked inventory is crucial to the success of any MRO, FBO or other aviation service, but where those parts come from, and how they get from point A to B, is of equal consideration. On the supplier side, industry and market trends, customer demands and technological innovation are all pieces of the greater supply chain and impact how requested inventory gets into the hands of workers — often across the globe. For a supplier, there’s more at play than parts.

Giving the supply chain sector an examination, Eric Young, AAR’s vice president of OEM Solutions, said current trends are positive.

“It’s a healthy market for OEMs and aviation services. One trend we are seeing is more consolidation among OEMs and a lot of MRO capacity being added,” Young said. “More OEMs and service providers are building repair facilities to take advantage of the increasing demand for MRO services. In regard to OEM Solutions, with our capability to focus on product lines and distribute throughout the world in many regions where OEMs are not specialized, we are benefiting from increased spare parts consumption.”

At Boeing Global Services, Ken Shaw, vice president of supply chain, said one of the larger trends they're noticing is with customers and the way they’re interacting with the supply chain.

“We continue to live in an environment where our customers expect us to meet our commitments, improve our cycle times, drive affordable solutions and bring innovative solutions to enhance their competitiveness. A few specific trends we see are around data analytics — from supply and demand planning all the way through repairs; we see customers exploring different ways to operate, including offloading non-core operations and we see customers requesting more integrated solutions,” Shaw described.

On the flipside, Kelly Palma of Business Aircraft Consumables, Inc. (BAC) said one trend they’ve noticed is in the way some suppliers are interacting with customers.

“I’ve noticed that other major distributors are steering customers to their websites to place orders. While we underwent a major redesign of our website a few years ago, we by no means intended it to replace a live customer service representative. There will always be someone at BAC who is happy to talk to a customer on the phone to answer any questions or to take an order,” she said.

Additionally, Palma added that customers are not necessarily always looking for the best price when shopping but are more concerned with timely delivery.

“The majority of our customers are most concerned with getting what they need when they need it. Price is important, but not necessarily the deciding factor when choosing a supplier,” said Palma.

It’s a customer-trend that Shaw echoed.

“While we still see some customers shopping for the lowest price, we are starting to see more and more customers seeking best value where suppliers can help improve customer operations and lower the customer costs. We are seeing an uptick on interest in managed programs,” Shaw said. “Customers are also looking for ways to reduce inventory costs while having quick access to the parts they need.”

Brad White, vice president of North America Customer Service Centers at Textron Aviation, said that there are many outside influences affecting customer expectations.

“Amazon has set a new bar in terms of customer convenience,” White said. “Customers want to order parts from their phone and receive overnight shipping with free return goods policies, and they expect 24/7 service with counter-to-counter delivery on parts. Requests to drop-ship parts from one supplier to the end customer are growing. Communicating the status of orders is essential—customers want continuous updates of where their parts are and how their aircraft is progressing.”

White explained that while expectations for customer convenience are growing, so is the strain on the supply chain.

 “Overall, we are experiencing perhaps the most significant imbalance between demand and supply in the history of aerospace,” White described. “The demand for commercial aircraft is at an all-time high, which has created a constraint on the supply chain. The lead time on raw materials has increased by nearly 75 percent over the past 12 months, which has created a challenging environment for OEM airframers to procure needed materials. At Textron Aviation, we are working to address this new reality in a variety of ways—including increasing our inventory of spare parts and growing our part warehouse storage footprint around the world, so that when our customers need help, we’re always ready to help.”

“Our customers’ top priority is being able to count on us to have the inventory in stock and ready to distribute when the order comes in and we strive to deliver on that,” added Young. “A lot of customers are asking for more long-term agreements, as opposed to transactional purchase orders, for various reasons. On the compliance front, they know that as a provider we can meet their compliance requirements. Administratively, they prefer to work with fewer vendors and are interested in a broader service provider with a range of specializations, so our customers are taking advantage of our bundled solutions across our business units.”

With current trends in mind, for the future Young said that there looks to be an increasing focus on data-driven decisions.

“There is an increased focus on data analytics in our industry, and OEMs and service providers alike are seeking to capture as much data as possible. Beyond stocking, OEMs are looking for a distributor that brings strong market intel to the partnership — an expert on the current parts market who knows the competitors and has the data capabilities to forecast demand and strategically stock inventory around the world. We also serve as the key connector to all of the crucial technical and procurement decision-makers for our OEM partners,” Young elaborated.

Boeing, too, sees a future based off of data driven trends in the supply chain market.

“Boeing’s focus is on increasing operational efficiency for our customers and growing the relationship between OEMs and customers. As aircraft connectivity allows us to leverage data collected, operators are seeing a decrease in delay and an increase in on-time flights and mission readiness,” Shaw noted. “We are also noticing a more integrated supply chain, including increased connectivity between Boeing and the customer, and also more connectivity between Boeing and our suppliers. As we increase tools and data that allow a better understanding of emergent needs, we are also seeing an increase in awareness and proactive action from the supply chain of the future.”

Building towards that future, Shaw added that: “Boeing Global Services Supply Chain strives to be a one-stop-shop for all of our customers’ aftermarket supply chain needs. We have made marked advancement toward this goal with the acquisition of Boeing Distribution Services, previously known as KLX, while accelerating a number of organic investments from USM to Additive Manufacturing to E-Commerce. As we look to the future and how best to serve our customers, we recognize the importance of commonality across the supply chain to create value for our customers with scale, innovation and affordability.”

“Right now, a priority is expanding our services with current OEM customers and building new partnerships. As an independent distributor, not affiliated with a certain OEM or airline operator, we are able to focus on all of our OEMs without any conflicts, and that is really resonating with component OEMs,” said Young, speaking to AAR’s future. “We continue to grow our online PAARTS Store, which provides customers with real-time information and immediate access to our inventory of over a million parts — and breaks revenue records every month. When we sign a commercial customer, their product line is added to our database.”

Giving the entire supply chain sector an overview, White forecasts an increasing interconnectedness between companies.

“In general, I suspect we’ll see more enterprise resource planning (ERP) system interconnectedness between companies. When a buyer places an order, it will automatically create demand in the supplier’s ERP system. The Industry 4.0 concept, meaning a trend toward automation and data exchange, will become more widespread,” White said. “Textron Aviation is considering supply chain vertical integration to create more control over cost and delivery. We are actively looking to develop vertical integration opportunities.”

And in BAC’s future is a continued emphasis on customer satisfaction.

“We are always looking for new ways to make consumables acquisition easy for our customers so they can consolidate their purchases in one place,” said Palma. “Quick turnaround is the most important. We are able to get our customers their orders quickly by offering same day shipping up until 4 p.m., sometimes later. Because we are a smaller company, we have more leeway when servicing our customers. For example, it’s not uncommon for us to take an order right before 5 p.m. and drive it to FedEx Office on our way home so that a customer can get it the next day. Larger distributors are more confined to rigid shipping cut-off times, whereas we can provide a value-added service they cannot.”