The MRO Supply Chain

1. The MRO Supply Chain 

The MRO supply chain has been improving over the last 10 years, but it needs to become even more efficient and, in turn, reduce its environmental footprint. The large number of parts that must be held in inventory to support a worldwide fleet lies at the heart of much of this inefficiency. A 1996 study by The Canaan Group estimated that the world’s fleet of 12,000 aircraft was supported by $44US billion worth of parts. While the value of inventory has remained static since then, the number of aircraft in the world’s fleet has risen to 17,000. In other words, according to AeroStrategy, an aviation consulting group, each aircraft in 1996 was supported by $3.6US million in inventory compared with $2.5US million in 2007. This is a considerable reduction in the inventory “footprint” due largely to increased reliability of the aircraft. 

Like any other supply chain, inventory is held to provide a buffer against late deliveries from a supplier, long order cycle times, expedited air freight costs for last minute shipping, and so forth. Other industries have adopted lean principles to reduce inventories and supply chain costs. The automotive industry, including manufacturers like Toyota, has implemented the principle of co-location where suppliers cluster around manufacturers in order to reduce transportation time and costs. 

Some industries have adopted a common global infrastructure and distribute parts globally as needed. The growing trend of outsourcing MRO represents a similar opportunity to move towards a common infrastructure and MRO supply chain in which the service provider for many airlines provides central management of parts and gives an individual airline visibility into a larger pool of available parts. And new technologies like RFID promise further reductions in inventory and cost while increasing availability through visibility. 

As an MRO provider, The Boeing Company has very successfully leveraged information technology to manage its MRO supply chain, especially through its flagship services offering Integrated Materials Management (IMM). IMM transfers the responsibility for managing spare MRO parts to Boeing and its logistics partners. The airlines pay for parts only when they are delivered for installation on an aircraft. Also, in 2006 Boeing acquired Aviall, the largest independent provider of aviation parts and services, to support its growing MRO business. 

Currently, The Boeing Company sources parts worldwide for its MRO supply chain, including China. Boeing has been buying parts from China since 1979 and will continue to buy components from Chinese suppliers, according to Rob Laird, vice-president of China sales for Boeing Commercial Airplanes. "China is part of our global supplier network. These are business decisions made based on cost, quality and the capability of the supplier," said Laird. An illustration of the parts and components sourced in China was shown earlier in this document. 

Today, Boeing is actually the largest foreign customer of the China aerospace industry. Boeing purchases about one billion dollars worth of hardware, and has active contracts in place for about $2.5 billion. According to John Bruns, vice president China operations of Boeing, “The 737 is probably the best example of where we do the most work in China—they build the whole tail section, the vertical fin and the horizontal stabilizer, and then all the doors for the airplane.”