Opinion: Airlines Must Develop Resilient Supply Chain Strategies
Taking stock of aviation parts is critical for every airline’s supply chain and daily operations. Whether for maintenance, repair, upgrading or overhaul, aircraft parts form the building blocks of your fleet and are essential necessities to lock down and get absolutely right.
Although it is crucial to have a supply chain and inventory plan to avoid costly parts shortages, not many operators can get it down just right, as it is tricky to formulate a strategy on your own in this unpredictable economic climate.
Many operators that have not engaged enough in their inventory planning are facing challenges in their return-to-service phase, making it difficult to bring their aircraft back into action. We have seen this time after time with airlines. Those that have not been prepared in advance and have not had the foresight to do so are now in situations where their aircraft face the risk of being grounded, even due to smaller parts not being available on the market for them to get hold of.
This has been evident in regions like the U.S., Europe, Middle East and Africa and more, where it has been difficult for airlines to get the parts needed, when needed, to reboot their fleet because planning ahead and forecasting their consumption has been challenging. It is very important, even crucial, to have these conversations and to do the right supply chain planning needed to obtain spare parts and avoid any shortages.
Today, there are still large markets that have yet to reboot fully, and we continue to face the same challenges when additional markets reopen, as there will be even more pressure on the supply chain.
The flip side to this supply chain shortage is that the manufacturers are now producing at the highest capacity trying to fill this pent-up demand. In the short term, this is necessary to deal with the current situation. However, with continuously high production outputs without regard for the specific requirements for satisfying the return-to-service, the probability of running into an oversupply is very likely in the near future.
There needs to be a full synchronization between the actual market demand at present time and the understanding of how the demand will move in the near future. Production levels need to go up, but market demand needs to be followed meticulously to ensure production levels are brought down again once the market stabilizes.
So, what is the best approach to stay ahead? Here is the secret I share with our customers and partners that has given them that winning edge:
Do not just manage your supply chain; optimize it.
With a fully resilient supply chain formula, there are no more surprises. By having the right plan in place, operators can unload the weight of parts shortage worries. Here are three tips on how:
· Forecast your parts consumption and needs.
The best way to overcome supply chain shortages is not with short-term fixes but by taking long-term perspectives and accurately identifying present and future needs for parts. Plan ahead by mapping out your consumption requirements and forecasting parts you need to tie in with your longer-term company objectives.
· Set up a profitable inventory management structure.
With proper inventory management in place, operators and manufacturers can reduce the capital burden of holding inventory and free up cash flow. Customers can consolidate their purchases while having access to aircraft parts as and when required.
· Reduce tied-up capital burdens and free up cash flow.
By identifying your parts procurement cycles in advance while ensuring precise budget and capital flow planning, both airlines and manufacturers can optimize operations and free up their cash flow for other investments.
Project and stabilize your resources and inventory by consolidating them into one source. The most straightforward way to do so? Strike up a collaboration with a solid distribution partner that can provide all of this and more.
Through such collaboration, it becomes possible for the placement of available inventory at any geographical location, supporting airline operations while also assisting the manufacturers in planning their production. Running an as-per-requirement procurement system and manufacturing will incur huge challenges and unnecessary expenses. With a solid distribution partnership in place, both of these will be mitigated.
Peter Kjeldsen is the COO of Leki Aviation, where he leads strategic global decisions for operations, future strategies and implementation.