Our readers are more than aware of the ongoing unique challenges facing the global supply chains involving the aerospace industry. Airline and aircraft leasing customers demanding more cost-efficient and innovative aircraft, coupled with breakthroughs in the development of lighter composite materials have resulted in the current unprecedented backlog of customer orders for OEM’s such as Airbus and Boeing. These respective OEM’s continue to be challenged with large scale multi-year production ramp-up needs while continuing to deal with engineering and production challenges.
Supply chain teams within aerospace are also fully aware that long-term maintenance and the service supply chain can be far more profitable and provide more opportunities for sustaining revenues than the product focused supply chain. Today’s more technology laden aircraft represent far larger potential capital expenditures for airlines and over the past few years, aerospace OEM’s and component providers have come-up with creative leasing, financing and ongoing maintenance plans that reduce up-front capital and long term operating cost burdens.
This especially concerns the far more fuel efficient engines that will power the next generation of aircraft. Airbus was able to seize first mover market advantage and book over 800 aircraft orders in months because of its collaborative co-development efforts with Pratt & Whitney in the development of the geared turbofan Pure Power engine offered on the A3320neo aircraft. Consider the fact that each plane comes with at least two engines, and aircraft engine manufacturers are bursting with order backlogs. Pratt has secured orders for upwards of 2900 engines while CFM International, the joint venture among General Electric and Snecma, whose Leap engine is offered as an option for the Boeing 787 Dreamliner, has amassed over 4100 orders. Engine manufacturers are keen to provide customers with long-term leasing and “power by the hour” maintenance programs where both airline customers and engine providers have incentives to insure that their engines provide reliable, continuous service at a lower overall cost.
The long-term profitability stakes are so high that Rolls-Royce, the sole engine provider for Airbus’s A380 superliner and the upcoming A350 has been involved in a high visibility public dispute with Air France-KLM over that airline’s independence in providing long-term maintenance for itself and other airlines. The airline was keen to continue its in-house maintenance program, so much so, that it was willing to hold hostage for months, a pending $6 billion order for 25 new Airbus A350 passenger jets until its demands for in-house maintenance were met. A Financial Times article in late August noted that the Rolls “Total Care” maintenance activities had already yielded Rolls over €1.5 billion in revenues for the first half of 2012.
While the long-term rewards for a robust service supply chain are lucrative, the product lifecycle management, information and supply chain challenges for engine providers are complex and require innovative approaches. Rolls Royce has already experienced initial learning with its Trent family of engines powering the massive A380. A catastrophic engine failure in 2010 involving a Qantas Airlines A380 was ultimately traced to a manufacturing flaw involving the assembly of engine oil tubes that initiated oil leaks resulting in the in-air failure of the engine. Since that time, Rolls has responded to a number of safety and maintenance inspection mandates involving the oil distribution systems of the Trent.
The General Electric GEnx engine is a powered option for the 787 Dreamliner. This new engine utilizes the latest generation materials and design processes to reduce weight, improve performance and lower maintenance. The rear turbine blades section is described by GE as featuring: “unique powdered metal rotors, specialized coatings, enhancing cooling techniques and new blade materials.” In late July, a brand new 787 scheduled for delivery to Air India experienced an inflight engine failure during final testing and the engine had to be returned for teardown analysis. During the same period, ANA (All Nippon Airways) had to temporarily ground part of its operating 787 fleet after unusual corrosion was found in the gearbox components of a Rolls Royce Trent 1000 engine. ANA, the original launch customer for the 787, indicated that the action stemmed from a flawed process that could leave a certain parts of the Trent 1000 engines vulnerable to early corrosion.
The sophisticated engines being introduced by aircraft engine manufacturers are breaking new ground in technological capability. They are akin to the breakthrough introduction of direct fuel injection systems over carburetors in automobiles so many years ago. Over time, engine manufacturers will eventually reach stated goals for performance, long-term reliability and uptime. But as this occurs, the paradigm of the service supply chain shifts towards early warning predictability maximized uptime and needs for precise synchronization of service events. This includes on-board and self-communicating diagnostics providing early warning to operating issues, more responsive networks of service parts and service depot suppliers as well as highly networked maintenance facilities.
In our view, aerospace manufacturers need to consider increased investments in their service supply chain capabilities including deeper product lifecycle management integration and supply chain intelligence, collaborative execution and supply chain control tower concepts.
The service supply chain will no longer take a back seat to the product-driven supply chain, and for aerospace specifically, it will be instrumental in fulfilling long-term revenue and profitability business objectives.