Alistair Dibisceglia, director at Oliver Wyman CAVOK, discusses the state of Eastern Europe’s MRO supply chain and how the region is contending with geopolitical and labor challenges.
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Rush transcript
James Pozzi:
Hello and welcome to the MRO podcast. I'm James Pozzi, MRO Editor for the EMEA regions at Aviation Week. At the MRO BEER Conference in Warsaw earlier this month, I spoke with Alistair Dibisceglia, Director of Aviation Aerospace and Defense at Oliver Wyman, about the challenges facing the MRO supply chain and how the Central and Eastern Europe region will evolve over the coming years.
Well, we've just finished our supply chain panel, Aviation Week's MRO BEER 2023. Alistair, one of the speakers, thank you for joining me today. We're here in Warsaw ready to discuss the supply chain and the challenges around that. So thank you for joining me today.
Alistair Dibisceglia:
Oh, thank you, James. Thanks for having me.
James Pozzi:
So just to start off with then, let's get a general overview of the current state of the supply chain. What are you seeing as some of the main challenges, and how is the supply chain, I guess, fairing in comparison to a pretty challenging, to say the least, 2022?
Alistair Dibisceglia:
In a post-COVID era, we are now faced with a lot of supply chain issues, manpower, also the new technology engines that are not performing as we would like them to perform. But certainly supply chain issues are extremely relevant nowadays. So everything is delayed. There's no material. There's not even raw material.
Talking about this region due to the conflict in between Russia and Ukraine, there is lack of raw materials such as titanium and steel that are putting a lot of pressure to the OEMs. So what we've been doing as an industry, I suppose, to try to tackle this supply chain issues is that we have been using a lot of USMs. We have been using a lot of PMA and DER repairs. We have been trying to repair more than replace because, obviously, the OEM parts are not the only solution, specifically in today's double-digit inflation world and also because of the long lead times.
Another thing that I've noticed and that we have noticed at Oliver Wyman is that usually companies were buying a lot of material at the tail end of the year in order to try to mitigate the new catalog list price. But also this strategy is not really going forward because of all the issues that we are facing. So everything is a little bit more strategic.
One thing that is really working well is when airline are working with the MROs and they are opening up a little bit their planning and that is really helping to really strategize on what to buy next, either new or used, etc.
James Pozzi:
Yes, they've got a bit of oversight there. What can you tell us about the manpower issue? This came up earlier fairly regularly in the supply chain panel we had this afternoon, but how is the industry getting to grips with the manpower issue and the workforce in terms of recruitment and where are the challenges lying around that evergreen topic?
Alistair Dibisceglia:
Absolutely. That is another extremely big issues that we are facing nowadays. So I think as an industry, we try to be closer to the next generation. And what we have been doing at Oliver Wyman is that we try to understand why we are losing that appeal as an industry, why we are having this sort of image issue in the bracket lately. And it was interesting to see that the new leaders, the students coming out of university, they're not seeing our industry as stable as we were before. Obviously, they have seen basically the aviation market being grounded during COVID and that is not kind of comforting them. They're not even super thrilled about the kind of stall in technological advancement simply because they are seeing things like an iPhone or a Tesla or artificial intelligence to be more attractive when it comes to technological advancement. And also they do see our industry to be an industry where they can have a work-life balance to be nice or let's say, as they would like to have it nowadays because it is a very demanding industry.
So all of those things combined have to allow us to reflect on what we need to be doing next. So in my opinion, we need to try to stay closer to universities, try to provide to the younger brains a little bit of a program where they can develop internally and try again to be a little bit more appealing as an industry.
James Pozzi:
Yeah. And that's going to be very much a long-term thing and an ongoing battle by the sounds of it because it sounds like there's so many challenges related to the workforce, which I guess COVID has amplified many times over.
Alistair Dibisceglia:
Absolutely. And also let's not forget that we are a very sort of regulated environment. So in order to have someone able to work in our industry, it needs to go through training, on-the-job training. It is not like a plug and play most of the time. So even if you're coming out of university, you will need to go through a certain level of, sort of phase in, if you like, that can really last a lot. And these kind of on and off of COVID is not really helping because as an industry we are not as flexible.
Also, another interesting factor that I haven't mentioned during our panel is that we observe that when a former aviation employee's kind of left our industry, he's not coming back. So usually, in the past, they were kind of coming back because it was always very appealing. But now when they experience other industries, it's kind of lost. So the vast majority of us are not coming back. So that is also something that we need to reflect on.
James Pozzi:
Just moving topics then, maybe pertaining to the region we're in at the moment, obviously the Eastern Europe region, what are you seeing there? I know beforehand you mentioned consolidation in MRO. What do you see there in terms of that related to the Eastern European region?
Alistair Dibisceglia:
So we have been noticing that there have been some discussions around MROs and their production line to be partners, to be more kind of part of a joint ventures, or perhaps strategic acquisition. So the whole idea is to try to, of course, reduce the cost. And if you can do some economies of scale when you're able to, again, acquire an organization that is helping you in what you're doing overall is really potentially supporting your cost base as well. So you are able to control more about your product line.
And this is also helping you in negotiating with the OEMs because the OEMs, obviously, they kind of divide and conquer, and so they try to have the best of both worlds. But now if you're kind of
consolidating, you're a bigger group, and potentially you can also strike a better deal with the OEMs that ultimately is going to be one of your main customers.
So consolidation is certainly a key element that in this region is happening and is still happening. The like of a FL Technics, which is a sponsor of today's MRO BEER. So they're doing a good job, in my opinion, in trying to consolidate themselves.
James Pozzi:
And just finally, what about the topic of nearshoring? I mean, we've heard some useful insights today about that in relation to, I know Russia, Ukraine, a deglobalized kind of region or even world that one of the earlier speakers alluded to. But what are you foreseeing in terms of nearshoring and moving things kind of closer to their site of production, for example, or the site of assembly? What's your insights on that topic?
Alistair Dibisceglia:
We are used to think about the final assembly lines. So famous final assembly lines seem to lose are Hamburg or Seattle. And this is in today's environment is something that I know OEMs are kind of trying to revisit and try to rethink how to be better and more lean and streamlined. So they are trying to also look at other industry, like the automotive industry, for example, how they kind of nearshoring their production in order to try to be more effective. There has been, without disclosing exactly the part, but one piece of the leap has been done copying what the Porsche is doing in Germany. And I think that was a good trial and I think that tendency is going to be continuing over the next years.
James Pozzi:
Lot to think about there actually, a lot going on in the region and obviously closing in in the wider world. But Alistair, thank you for joining us on the MRO podcast today.
Alistair Dibisceglia:
Thank you, James. Thank you, Aviation Week.
James Pozzi:
That's all we've got time for today. Don't miss the next episode by subscribing to us in your podcast app of choice. And one last request. If you are listening to the MRO podcast in Apple Podcasts and want to support this podcast, please leave us a star rating or write a review.
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