When The Floodgates Open: Additive Manufacturing in Commercial Aviation MRO, Part 3
10 minute read
I'm thrilled to welcome friend and former colleague Colleen Wilson to the conversation for this blog post. Colleen is the Surplus Trading Manager at Lufthansa Technik Component Services in Miami, Florida. I met Colleen when she worked on-site at Lufthansa Technik in Hamburg, Germany as the Manager of Programs with AeroTurbine. She's also halfway through a Master of Business Administration program at The University of Florida. I much appreciate her willingness to help with this and assist with gathering accurate information on MRO policies, regulations and processes.
I spent 3 quick, busy days at IMTS (International Manufacturing Technology Show) last week and of my whirlwind time in Chicago, I had the pleasure of spending several of the 72 hours with the Director of Additive Manufacturing Programs at ASTM International.
After a great discussion on personnel training for AM, our conversation accidentally drifted into a surprising and inspiring conversation about AM applications in MRO.
We both agreed that there are few with experience in both Additive Manufacturing & MRO, yet there are plenty of opportunities for implementation in this industry. I was secretly, or maybe not so secretly jumping up & down with excitement. He shared his thoughts on the potential for AM and commented on how substantially he believed things can change "when the floodgates open." We exchanged ideas and agreed we should continue the conversation after the show.
It was then that I decided it was time to write the next blog in my current series on the topic.
In my previous article of this series, I ask:
"What does the 'aftermarket parts-sourcing ecosystem' look like with Additive Manufacturing in the equation?"
My response, still open for discussion:
Design & Certification at one location and Manufacture at another.
Not too different from the model today: Design & Certification at one location and Repair at another. The question left to ponder on is who fits into that "Manufacture" space in this new model?
This blog will attempt to find the answer to that question. I'll start by defining a few frequently used terms in the event there are readers from various industries.
Maintenance, Repair, Overhaul (MRO)
MRO is defined as all actions that have the objective of retaining or restoring an item in or to a state in which it can perform its required function.
Furthermore, an MRO is not allowed to perform tasks on aircraft without the proper certification. MROs certification requirements vary from EASA to Part 145, and depending on their certification approval the services offered include base maintenance and/or line maintenance. Base maintenance tends to be scheduled/longer-term shop events while line maintenance is frequent checks between flights and sometimes unscheduled which require immediate action.
Aircraft MROs play an important role in keeping product availability, reliability and quality to a level in accordance to regulations put forth by the FAA. The value of MRO is judged by the fact that MRO spend is often more than 15% of an airline’s operating cost.
Service Bureau or "3rd party"
A service bureau, or contract manufacturer, is a company that provides business services for a fee or a manufacturer that contracts with a firm for components or products. It is a form of outsourcing.
The "other 3rd parties" mentioned alongside the service bureaus include aircraft component brokers or component aggregators. This blog focuses on aggregators.
Aggregators maintain a pool of inventory to support various fleets under contract. For a fixed price, an airline can access a power-by-the-hour (PBH) service which will guarantee the supply, repair and overhaul of rotable components. A level of complexity is often introduced here with airlines who require a specific level of integrity with component traceability. Aggregators become mediators between not only the end-user and MRO, but the OEM supplier and MRO as well, setting up their own closed, fully functional distribution channels.
An original equipment manufacturer (OEM) is a company that produces parts and equipment that may be marketed by another manufacturer.
An end-user is the person who actually uses a particular product. In these examples, it is most likely an aircraft operator.
Creative Sourcing Solutions for End-Users
More and more, end-users are looking to creative sourcing solutions for spare parts provisioning. One solution includes signing long-term components and maintenance agreements, or PBH agreements.
There is also now a widespread acceptance of used serviceable material (USM) as an alternative for new parts. This trend is so significant that several component OEMs have entered the USM market (an example is: Honeywell Aerospace/Honeywell Aerospace Trading). USM is now an acceptable and competitive alternative to OEM parts and it brings airlines an option for significant cost savings, up to 20% on an engine shop visit (GE, 2017).
As mentioned in the first blog of this series, however, USM may very soon no longer be the top "go-to" for creative sourcing solutions for airlines. I believe in the future, if applicable, we may start to see a shift in creative sourcing from USM to 'replace vs. repair' using AM.
Let's first look at the average journey of a rotable (repairable) aircraft component after a scheduled or unscheduled removal.
(Think of this as a 15,000 ft. view)
After entry into service, and perhaps circling the world several times over, a component may be removed during either a scheduled or unscheduled (AOG) event. Currently, it is either placed in a repair cycle and eventually returned to the aircraft or exchanged with either a factory new component or a component which has already been repaired, and the removed serial number component is either repaired & held by the MRO or sold into the market, repaired or not.
Now things get exciting.
If we include areas where additive manufacturing has a play, this is where we are today:
Currently, MROs are using additive manufacturing in both tooling and replacement parts in the cabin. In this example, the benefit of using AM in a replace vs. repair scenario lies in a shortened lead time of the overall repair cycle and eventually a shorter scheduled or unscheduled check. Other benefits include producing parts that are out of production, parts with design improvements, lighter parts, or even the elimination of price fluctuation seen in USM parts... but we'll save that for another blog.
In my opinion, where we could be in the future:
In the future state, AM may have an impact through both the original manufacture of a new part (#1) or with replace vs. repair (#2) using two potential methods.
Original manufacture by an OEM (more common today).
Replace vs. repair through a license from an OEM; or as PMA (Parts Manufacturer Approval).
The more challenging path, PMA, involves pursuing a combined design & production approval for modification and replacement articles. It allows a manufacturer (non-OEM) to produce and sell these articles for installation on type certificated products.
To achieve certification, PMA manufacturers must demonstrate to the FAA that a part is the same in all respects to a design in a type-certificated product or, through test and computation, that the part is the same as, or better than, the one it seeks to replace.
It is a historic belief that changing an OEM part to a PMA alternative is likely to lower the value of the entire aircraft, however, these opposition trends are changing, as the price difference between the OEM and PMA parts may be as high as 40% and lowering cost is a constant battle. (A great article from Chromalloy if you're interested in learning more). Although a bit dated now, a stat from 2015 from ICF calculated more than 1.1 billion PMA part numbers available.
Are there examples of AM components certified with a PMA process? In brief, yes. In 2016, a major airline/MRO outlet expressed interest in printing metal engine components and other low-risk parts under Title 14, CFR Part 21, Subpart K. As well, under FAR 21.9, through an OOP (owner-operator process), you can produce your own parts. And while it may still be difficult, expensive, and time-consuming to a receive a PMA cert, it's also difficult, expensive and time-consuming to repair many of these components, and end-users are taking note of their other options.
When PMA is utilized, however, the OEM loses out on aftermarket revenue. End-users and MROs are now savvy with sourcing and have new alternatives available, and the OEM has to work to find solutions for revenue recapture.
Earlier this year, an example of the second path, utilization of AM to manufacture a component through a license from an OEM occurred through the purchase and settlement of an aircraft part whereby ST Aerospace purchased a digital design (license agreement) from Moog and printed the part at its facility in Singapore. As part of the transaction, the settlement was instantaneously completed. This agreement is similar to OEM-licensing repair agreements in place today.
Stated as simply as possible: If I were an OEM product manager, I would start looking at ways to adjust my business model to accommodate the sale of a digital file via license. I would focus on finding ways to follow the ST Aerospace example.
Going back now to the original question:
Who fits into the "Manufacture" space in this new model? Is it the MRO, the service bureau/3rd party, the OEM, or the end-user?
And more importantly, how is this new process & ecosystem optimized?
If we look at introducing AM through a license from an OEM, we come up with a pioneering solution.
But we still find ourselves back at the original question of who will be the one to perform the manufacture of the component? The component manufacture is essentially no different from a component repair; the end-user must decide to either integrate vertically & perform the manufacture themselves, or outsource it to the supply chain. (Will operators become spare part manufacturers? Thoughts from a Siemens panel, DB Mobility Talk, InnoTrans 2018).
If the answer is in the latter, outsource to the supply chain, who is responsible for the outsourced work? Does the service bureau push out parts for everyone, keeping costs low? Or perhaps the parts aggregator breaks into manufacturing (alone or via JV) and replaces part of their inventory pool with a library of digital files? What about the MRO who also operates as an aggregator? Is it necessary to include everyone - the MRO, the parts aggregator, the service bureau and the OEM in the solution?
What do you think is the right answer?
I have an opinion, but I am curious to hear how the industry feels, and curious to see how things develop as the AM industry matures.
I again acknowledge that this comes with a substantial set of challenges, including the need for education of design & production engineers (and others) in the FAA Part 21 environment, the complexity & immaturity of the full AM value chain (feedstock to post process), the time & cost to certify AM parts, and the current relationship hurdles between design, production and maintenance, among others. But, I also think conversations need to start now, and I'm not alone.
"3D printing is already starting to threaten the traditional spare parts supply chain. Organizations that face potential disruption from 3D printing must start piloting, partnering, and investing soon if they want to be well positioned to capture future value."
This leaves me asking, when the floodgates open, where will you be?
Will you be on the bank, watching? Will you be in the water, but capsize due to inadequate preparation of your safety raft? Perhaps you'll be fighting the current, trying to force yourself upstream?
Or will you be heading downstream, fast & furious, with the current?
I know where I'll be found.
As always, I welcome any comments or questions at email@example.com.
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