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Delta TechOps is using advanced analytics to optimize predictive supply chain needs.
In recent years, the commercial aerospace sector has shifted from a state of abundance to a supply-constrained environment, leading airlines to seek predictability. This change demands that suppliers prove they have sufficient inventory, adequate workforce and robust control over their supply chains. Consequently, two critical strategic functions have emerged for MRO providers: human resources and supply chain management.
The industry’s well-known struggles with shortages of skilled labor and expertise are exacerbated by a wave of retirements. Smaller shops with niche capabilities have become bottlenecks because the necessary knowledge for specific repairs is no longer available. Even large MROs and airlines are struggling with hundreds of open positions despite increased efforts in apprenticeship programs. Airlines have lowered their hiring standards from requiring 5-10 years of experience to just one year, intensifying recruitment directly from schools and MRO suppliers.
Several factors compound these recruitment issues. The younger generation is less loyal to a single employer or even the aviation industry. Rising training costs, inconvenient shift work and the necessity to relocate to high-cost-of-living areas deter potential recruits. Despite considerable recent investments by prominent players, the MRO industry will lag behind for a long time. Therefore, addressing these issues requires an upgrade of the human resources (HR) function.
Developing and maintaining robust talent pipelines, including partnerships with educational institutions—as exemplified by AAR’s apprenticeship programs and SIA Engineering’s university collaborations—is crucial. Training programs must be cost-effective, enabling early contribution and presenting an attractive face of the industry to reduce high dropout rates. Clear career paths, attentive employee sentiment monitoring and balanced job schedules are vital for retention. Competitive compensation and benefits should facilitate career progression from training to relocations. Cultivating a strong company culture and hiring from a broader base are also essential for sustained success.
Supply chain management was historically a “backwater” function at MROs, focused on placing orders and receiving supplies 30-60 days later. Now, MROs face the same supply chain challenges as OEMs, with major bottlenecks in castings, forgings, electrical components or even commodities such as white paint.
New-generation engines present additional teething problems. The Pratt & Whitney geared turbofan powder metal contamination, for example, will impact 2,000 engines, causing a surge in unexpected engine shop visits to already full shops. Parts shortages result in longer turnaround times for components (20-80 days) and engines (100-150 days). To cope, MROs and airline maintenance organizations now stock “just-in-time inventory.” Southwest Airlines, for instance, has increased its inventory per aircraft by more than 40% since 2019. The industry’s extra inventory holding comes at a price: for every $5 of inventory held, it costs $1 per year in holding costs.
As a result, MROs need to upgrade their supply chain function, making it strategic. This requires a talent infusion with more knowledge of manufacturing supply chains. Supply chain management must address several fundamental questions to foresee and manage risk and cost: Where should companies build more redundancies, and where should they build partnerships? For example, there is a rising interest in parts manufacturer approval or PMA to provide a second source for supply chain resiliency. What are the perceived values and cost of near-shoring versus global sourcing (if possible)? What should be bought long term versus spot purchased? How can companies stay on top of their supply base and improve their ability to anticipate disruptions? How can they better forecast demand and anticipate purchases?
Delta TechOps’ engine MRO business serves as an interesting example: They invested multiple years of technology and data into an advanced analytics and optimization model that can anticipate purchase requirements as far out as 24 months.
Investing in human resources and supply chain management will increase overhead costs, making scale more critical. This dynamic is likely to drive further mergers and acquisitions within the industry as companies seek economies of scale. Beyond scale, these strategic investments likely will necessitate restructuring management teams to integrate new expertise in HR and supply chain management. There is also a global dimension, where multinational entities can more easily tap into local talent pipelines and offer global opportunities to enhance their attractiveness as employers.
