The constantly evolving aerospace logistics or the supply chain sector has seen massive transformation with advanced digitization. Every OEM, operator and MRO reply on the advanced digitised technology for smoother and optimised supply chain operations. However, after the COVID-19 pandemic the supply chain industry like everything else is starting to pick up pace. In an exclusive Interview with Kaarle Karp, the head of Supply Chain at Magnetic MRO, he speaks about how the partnership with SkySelect came at a right time to help make them right procurement decisions, how COVID-19 pandemic helped them strive harder by coming out of their comfort zones and adapting to newer normal and their business relations with Avioparts, Swati.k finds more…
Q – What are your observations of the changing trends in Supply chain operations Pre and Post Covid-19 pandemic?
A – Supply Chain is constantly in transformation regardless Covid-19 pandemic. Biggest changing trends are related with digital transformation. Magnetic MRO started to transform its supply chain digital solutions approximately a year before Covid-19 and made first important steps right before all was closed down. Funny to say, but timing was perfect in our case. With our partner SkySelect, first steps were to automate procurement processes, shipments tracking, orders follow up and more. It still requires fine tuning every day as we constantly looking leaner solutions, therefore can’t say we are finished with automation and digitalization part. Cooperation with SkySelect has helped us to make right procurement decisions much faster – thanks to their smart algorithms, integration with suppliers systems, we have managed to cut the corners and find shortcuts to work more transparent and faster. Changes have been successful and written into our processes. I would say that Covid-19 pandemic kicked us out of comfort zone and forced to think out of box much faster and pushed into fast pace digitalization transformation. In upcoming years industry will see much more digital transformation and adoption of the new technologies to grow their business which is unavoidable and is very much needed. When aviation industry digitalization part has been far behind from other industries, we probably see fast pick-up in upcoming years. Luckily, within last 2 years there has been positive trend of new digital solutions to help airlines and MRO’s to work more effectively. Historically we know that Airlines and MRO business were separated in order to focus more on their core business – flying, I have strong inner feeling that it’s not far when Supply Chain operations will be separate from MRO business fully and become individual support function and both businesses can focus on their main function, one for the maintenance and other part for supply chain. Is it going to be new trend that we will see hopefully soon.
Q – What are the reasons behind selecting Avioparts as ideal partners for optimizing company’s supply chain?
A – Magnetic has clear vision to strengthen its wheels and brake shop activities, have stronger presence on the market globally and meet our customer needs, therefore we always looking various solutions to serve Magnetic MRO customers best possible way. There is no big story or hidden reasons why Avioparts selected – the important role in this decision was possibility to have consignment stock and not to freeze our own capital and reduce inventory holding cost. Not to depend on manufacturers lead times which may impact our operations. Administrative part is mainly managed by Avioparts, their EU location is preferred as there are no additional customs formalities which plays big role today.
Q – How will you describe your business relations with Avioparts over the last few years?
A – Last few years we have been moving slowly but firmly into more business every day. Consignment Stock contract will boost business even more. When overall business will recover, we are ready to support our customers without having any disruption, like many airlines are experiencing now. It is strategic move to be ready when skies are open again and more wheels and tires are needed.
Q – What are your expected outcomes out of this partnership? How will it benefit your customers?
A – One of the main reasons we signed the consignment contract was to improve service levels and minimize TAT for wheel repairs and avoid stock out situations. Airlines value time the most and every minute is important. Our wheels and brake shop is big enough to manage high volumes, but same time relatively small to be flexible. Flexibility is also key word what customers are expecting and we have possibility to offer this.
Q – How has Magnetic MRO faired in the pandemic havoc? What are your recovery strategies?
A – Companies who adapted new reality faster and were more flexible will have less harm today. MRO’s, airlines or repair shops who were slower, dependant on governmental aid and hoping that Covid will fade are still in difficult situation.
Magnetic MRO started to put strategy in place before first big Covid wave hit the Europe. Lessons from China were quickly adapted and implemented in our case. Our advantage was probably info we received from Hangxin. Based on information we had available, light measures and actions were planned already in February, tangible actions were made already in March, when there was more confidence that aviation sector will take the enormous hit.
Our core businesses, heavy maintenance didn’t have that hard hit, but several other units providing luxury services got the hit we all felt.
First strategy is to stay alive, literally – we have done everything to avoid the virus. From the Supply Chain perspective, we did several changes in our structure which were unavoidable. Lowered headcount where we saw long term impact and retained critical positions and skills. Step by step we have started to hire again, new positions are needed to grow business more.
Also, we know that cash is the king so stop bleeding the money and control receivables; keeping the liquidity is really important.
It is a good lesson for all companies to look more out of box solutions to survive. There are hundreds of books about risk management we can read how to tackle risk, but not many books how to come out of crises, therefore, there we can only assume which methods work best. And apart from financial part, pandemic has affected negatively many people’s mental health and created new barriers, therefore speaking with colleagues, having team events, calling each other and speaking about business and showing how business is going is relatively important.
Q – How do you see the global aerospace logistics and supply chain industry evolving in terms of market forecasts and revenue?
A – The industry has become cost conscious whereas end users buy directly thus leaving less room for brokers. This fact alone has made the whole supply chain leaner.
However, despite the network is leaner and one would expect cost lowering, then costs aren’t down. The reason is increased E-commerce, which increases the costs and the overall cost ‘delta’ fades.
The ultimate logistics challenge is not just Covid – it is the combination of Covid, plus Brexit and without any doubt the often-underestimated global geopolitical situation, whereas sanctions, KYC and AML requirements have made the smooth operation more complicated than ever. Therefore, we shall not get blinded by the fact, as if the software is making us more efficient, while the efficiencies are eroded by above factors. Simple example: we are not yet solving Brexit, while a new tsunami is at our door.
In summary: the losers are those, who seek ultimate Zen in supply chain and logistics. The winning formula evolves flexibility and avoiding rigid evergreen solutions.
Q – As the aerospace industry is gearing up for a comeback from the pandemic, what advice will you give to the young talent looking at this space as their career.
A – Probably it’s the best time to join the aerospace and start your new interesting career. New blood is required to reshape our industry, bring in the right attitude, shake the old industry specialist and show how smart and innovative tools can help to recovery process. Think out of box and use your strengths. Here at Magnetic MRO we say: everything is possible.
