Opinion: How Automation Can Improve Aircraft Parts Purchasing
Given the current demand shock facing commercial aviation due to the COVID-19 pandemic, the squeeze has been felt across the board, from commercial and revenue teams to operations, customer service and pilots.
The line between success and failure has always been razor thin, even before the pandemic. The average earnings before interest and taxes (EBIT) of a commercial airline was 5.5% in 2020 pre-COVID-19, before shrinking to -31% post-COVID, according to Statista. In comparison, the average earnings before interest, taxes, depreciation, and amortization (EBITDA) across all industries is 15.25%, according to Assets America.
Given these dire circumstances, every penny matters for airlines as they learn how to do more with less. This is especially true on the MRO side of aviation, which represents up to 12-20% of an airline’s operating costs.
Fortunately, like many other facets of business, new automation and workflow tools are replacing manual processes, making it possible to run more efficiently and cost-effectively.
“Robotics and [artificial intelligence] helped [companies] keep their businesses going,” says Susan Lund, a partner at McKinsey Global Institute. “And that’s going to continue to have long-lasting impacts on where the jobs are going to be in the future.”
Airlines Adopt Automation
One of the spillover effects of the pandemic and consequent demand shock has been airlines investigating new technologies and procedures.
A report from Future Travel Experience (FTE) and the Airline Passenger Experience Association (APEX) found that 63.7% of respondents expect the COVID-19 crisis to accelerate innovation and digital transformation projects within their organization, 19.2% expect their organization to continue with precoronavirus plans, and only 17.1% expect innovation and digital transformation projects to be delayed.
One of the major digital transformation trends occurring at airlines around the world is the adoption of automation technology. In his 2021 Airline Digital Trends Report, Iztok Franko, founder of Diggintravel, identifies robotic process automation (RPA) as an emerging technology.
Franko points out, for example: “AirAsia announced last year that they will start implementing [RPA]. The airline plans to automate mundane and repetitive tasks, which will free up their workforce to focus on more complex tasks that require critical thinking and experience-based judgment.”
This has the potential to affect the MRO industry specifically, where the majority of parts purchasing is done for low-costs parts. As represented in the graph above, more than 90% of aircraft parts cost $5,000 or less.
Technology has never been about machines replacing mankind but about augmenting it. Machines and automation enable people to focus their time and energy on more important tasks that require human intelligence. In the case of airlines and MRO providers, automation can free up planners to focus on that 5-10% of spare parts for which the right choices can directly affect the bottom line by reducing costs.
Data from SkySelect, an aircraft spare parts marketplace and supply chain software provider, shows a potential for a 30-50% productivity increase from leveraging algorithmic decision-making to streamline and optimize the procurement process for both buyers and sellers. This is a substantial improvement from a slow, tedious and error-prone process. Automating those decisions delivers real results more quickly and consistently.
With the nature and scale of the manual process, airlines are often unable to evaluate the quality of decisions. A more automated process not only facilitates high-quality decisions 100% of the time, it also captures all the decision data so that it can be tracked and analyzed. This has a compounding effect: The more data you capture, the more automation you can apply through machine learning and artificial intelligence.
Integrating automation into operational processes enables airlines not only to survive COVID-19 but also to position themselves well post-pandemic by having the right workflows in place to capture the influx of demand and thereby keep their fleets running by focusing on decisions that have the most impact.
Brakmann is CEO and founder of aircraft spare parts marketplace and software provider SkySelect.