Airlines are facing significant challenges as they analyze the best way to optimize their supply chain and maintenance, repair and overhaul activities. The converging forces of different business models are impacting decisions on how best to transform their business processes and what technology to use as an enabler of these improvements. In order for an airline to achieve this transformation, there are three fundamental forces at play: Original equipment manufacturer service models, offshoring of heavy maintenance tasks to third-party providers and the need to optimize internal processes.
OEMs, led by the engine manufacturers, increasingly have transformed the process of buying an engine based on price and performance into being based on price for an individual unit of output and service levels. Forms of this aftermarket practice are being rolled out by airframe OEMs. When taken to an extreme, these models can eliminate the entire maintenance operation of an airline, including the need for airlines to carry rotable and expendable inventory on their balance sheets, as the OEMs are responsible for virtually all services related to keeping the aircraft airworthy.
If airlines do not evolve to the OEMs' services-based model, they are employing models that increasingly optimize the use of onshore and offshore labor to drive cost- effective delivery. The airline typically retains responsibility for line maintenance, while heavy maintenance checks are performed by third parties at a low-cost location. Airlines usually retain the responsibility to maintain adequate stores of rotable and expendable parts; however, the models around these stores are evolving, with OEMs beginning to open parts depots in proximity to maintenance bases to help with supply chain efficiency of the airline.
As major airlines begin to migrate to some hybrid form of these two models, they will be faced with the daunting task of modernizing their legacy information technology systems. Equally as challenging is selecting an IT direction while the business models are continuing to evolve. In this case, a multiyear plan is required that anticipates how the business model will likely continue to evolve even while implementation projects are in progress. In order to achieve this objective, it is important that an airline formulate an IT strategy that is aligned with its business strategy.
This strategy is never a one-size-fits-all solution, as every airline is evolving in terms of business models, current-state IT capabilities and labor relations. The first step is to ensure executives understand the relationship and tradeoff of making certain technology and business process decisions during the development of their transformation roadmap.
Overcoming resistance to change that is basic to human nature is the key element to a successful solution, and it must be met head-on at the beginning of a transformational project. Otherwise, the users inevitably will try to recreate the current processes in the new systems.
This is especially true when it comes to the implementation of the MRO modules of Enterprise Resource Planning solutions like SAP or Oracle. The natural tendency of many organizations, especially in projects that are heavily IT-led with minimal business unit involvement, is to avoid the hard decisions around process change by making custom changes to the software in an effort to keep the status quo in business process areas. In most cases the ERP applications have well-thought-out business processes that equate to best practices, and unfortunately these custom changes drive significant increases in expense, especially when it is time to upgrade the application.
In order to get this business involvement, an airline must take formal steps during the launch phase of any large transformational project to make sure the business and IT are aligned not only on a technology and business process angle but also on an organizational and governance level. This is the only practical way to ensure success as an airline begins to optimize its MRO organization and supply chain.
By Eric Harte who serves as the global leader of EDS's Air Services Industry Group.