Embracing modern e-commerce: towards a more effective aviation aftermarket
Jul 13th, 2015
During a recent DLD conference, Scott Galloway, founder of a benchmarking and education firm L2, shared an insight that the global e-commerce companies are either going to open stores or go out of business. For instance, Amazon can be expected to decline in value mostly due to its ineffective logistics system, which involves shipping products from a small number of major warehouses. In the meantime, Apple's online retail strategy appears to be more viable, since it realizes the potential of multiple stores serving as a network of warehouses, making product purchase more convenient for its clients. According to Locatory.com, to a certain extent, this new trend in online retail is exactly what aviation aftermarket needs to pay attention to.
Monitoring stock levels, as well as managing logistics and logistics costs has recently become a critical part of aircraft spare parts business. According to IBM, airlines spend more than $200 per flight hour on spare parts. However, the delays caused by technical faults and poorly managed logistics of spare parts still add up to $22 million per year in the U.S. alone. In the meantime, with most industry players relying on generally ineffective spare parts trade-related processes, the segment is less evolved than might at first be imagined.
According to Locatory.com, even though the aviation spare parts market is forecasted to grow by 4% in the following three years’ time, since 2013 the number of AOGs, including those prolonged by the wait for a spare, has actually increased by 2%. As a result, seeking to avoid downtime-related losses, some players still choose to maintain huge stocks of spares and components just for insurance. However, even if a carrier is geared up with spare parts for ad hoc situations, there’s still the need to deal with such issues as the vast distances between part storages and airports, not to mention cumbersome procedures.
For instance, since the aviation industry is deeply scattered, the chances of discovering a spare part when you are in a remote region without proper communication are close to zero. As a result, considering the increasingly complicated and fragmented nature of today's supply chains, one is often left at the mercy of other people's databases. In other words, today the aviation supply chain management and logistics systems are only as good as the data that feeds them. Thus, while opening a strategic warehouse in every country an airline operates in would technically solve the problem, a more effective way to avoid unexpected delays is simply to ensure accessibility of every existing stock. However, many industry representatives are unsuccessful even in making their stocks both, up-to-date and visible to potential users via search engines.
“In today’s industry, it’s all about transparency and exchange of information. However, while parts distributors are generally well integrated with their customers' IT systems, their relationship with the companies supplying parts is typically less developed, a situation even more pronounced with parts repairers. Therefore, if we compare the situation with the most recent trends in global e-commerce, we can say that we don't need to tell the industry to open more warehouses, or where to open them. The thing is, the network is already out there. So what we need is to join forces and finally make use of it by fully embracing what modern e-commerce solutions have to offer,” comments Zilvinas Sadauskas, the CEO of Locatory.com.