For the past few years, the expense and activity of the asset operator have been seen as being primarily responsible for maintenance. The Original Equipment Manufacturers (OEMs) designed and developed assets with the goal of maximizing their availability and streamlining their repair, maintenance, and overhaul processes. When they encountered numerous technological difficulties in the end of 1980, the strategy began to change (McFadden & Scott, 2012).
Several operators created a distinct operating organization because they saw a chance to increase their net sales from MRO operations. As a result, a number of maintenance organizations emerged and assumed responsibility for streamlining maintenance operations. The act of the MRO industry contributed to the removal of the most complex and the large costs. It was combined with the lively economic times and high demand, which lead to increased number of companies that wanted to operate the assets. According to EFNMS (2013), the economy was flourishing, demand was high, and there were few options for optimizing the end-to-end industrial supply chain.
The basic economics are changing for the OEMs and MRO at an alarming rate. For the past few years, decisions on product lines, fashion, safety improvements, engine platforms, and marketing development were made for consumer demand. Currently, the OEMs are implementing model and production changes for mere survival (Shafiee & Chukova, 2013).
In addition to the modified type of production, the OEMs and MRO market is affected by the inflow of new competitors who seek for low assembly costs as a result of the impact of the falling dollar currency exchange. New assembly plants in different regions have given rise to more challenges for the industry market shares (Shafiee & Chukova, 2013).
In respect to better supply chain management and logistics, many people have been living on a small planet. The increase in productivity, accompanied by the search for cheaper products, has resulted in a gradual change in the people's long-term equipment, workforce needs, and facilities. Recently, the chief aviation purchasing leaders have made an announcement of sourcing materials from low-cost companies (Shafiee & Chukova, 2013).
Logistic is a major component of the total cost for every product sourcing. To adapt to changes in customer demand and have flexible manufacturing plants, OEMs and MROs are looking for flexible capital commitments. According to McFadden and Scott (2012), the companies wish for flexibility to reduce the risks induced in instances where the products received are poorly built. There is no invested time, capital, or cash flow to wait for the customer tastes to change. The success of each product created is crucial for survival.
The aviation industry has taken some steps to adjust itself to consumer demand. Lately, the financial filings of OEM indicate that the value of their manufactured equipment has forced massive write-offs. In the second year of usage, the worth value of the equipment is less than the amount indicated on the balance sheet (EFNMS, 2013).
In support of the recent advanced technology in the modern fleets, OEMs are in need of strategies to make the right equipment. Supposing that it was just a demand problem, it would, therefore, be a serious issue. The OEMs have faced a market problem and a supply problem as well (EFNMS, 2013).
The Aviation Safety Bureau has challenged the aviation equipment manufacturers on what to design, sales issues have challenged the mix of parts they will make, and the increasing cost of raw materials have caused a problem in cost budgeting (Aviation Safety Bureau, 2013).
The increase in raw materials cost has affected not only the original manufacturers but also the marketing producers. McFadden and Scott (2012) indicate that the aviation maintenance parts have extremely increased, resulting in costing pressures within the support manufacturers. Any service contract with no indexing due to the increase of operation cost has turned into a serious challenge.
The rapid fleet growth and the rise of new markets, especially in Asia, have changed the way operators make decisions concerning the MRO supply chain. In the meantime, MRO providers should compete with new competitive forces and the increasing customer demand. They must be alert and prepared for upcoming shifts in market forces. In general, commercial planes are retiring at a high rate. Therefore, the MRO market has been profitable. Currently, plane-makers are making more efficient and advanced engines and components. The emerging new technology has added more pressure on MRO providers. Fleet growth has changed the timing and type of maintenance needed (EFNMS, 2013).
There is tension in the MRO environment, and the competition is fierce. One of the reasons is because the OEMs want to have a bigger share of overhaul activities and maintenance. In affirming more control, they are exploiting their position with suppliers on prices. In that event, the MRO providers get pressure from cost. It is clear that there is the rise in demand for MRO services coming from new regions. Shafiee and Chukova suggest that the companies must be ready to have a quick adjustment for new requirements.
According to the Aviation Safety Bureau (2013), the OEMs and MROs companies have at one point, struggled with overcapacity. As a result, the companies have experienced similar challenges. In each case, there was a change in the balance between supply and demand and the consumers responded slowly by adjusting investment. In particular cases, the companies missed the influence of government intervention. In every case, the companies lost a point of inflection.
In September 2001 there was a significant change when buoyant aviation marketplace declined. Consequently, the supply chain in the airline industry shifted into a new phase. McFadden and Scott (2012) claim that these modernized drivers have seen the managers in the industry restructuring the methods of providing their services and starting to compete in other ways. Market trends have encouraged the players in the aviation sector to reposition themselves.
There has been a significant transition in the view of the operators regarding the supply chain where agreements of services with the maintenance organizations have become more common. As a result, there has been more pressure put on the support companies of keeping an asset mobile, and achieving this implies that better means of communication are needed along the supply chain. Within the changing market, the industry faces a serious challenge to beat the optimum balance between maximizing fleet availability, minimizing operation costs, and ensuring compliance with regulatory requirements (Aviation Safety Bureau, 2013).
In conclusion, the maintenance companies have developed a set of strategic models to manage the challenges that emerge during the process of production. McFadden and Scott (2012) point out that the strategies have led to a higher level of outsourcing the cost and quality of the services needed by their consumers which in turn will deal with the challenges of reliability, performance and financial risks.
References
Aviation Safety Bureau (2013). Retrieved August 15th, 2017, from http://www.aviationsafety-bureau.com/aircraft-maintenance.html
EFNMS (2013). MRO Definition. European Federation of National Maintenance Society. Retrieved August 15th, 2017, from http://www.efnms.org/
McFadden, M. & Scott, D (2012). Global Outsourcing of Aircraft Maintenance. Journal of Aviation Technology and Engineering.
Shafiee, M. & Chukova, S (2013). Maintenance models in warranty: A literature review. European Journal of Operational Research, 229, 561–572.
