"Imagine an ideal situation in which the world is a global village…every location can be reached at any time. And with data every aerospace part will be globally visible for use anywhere. This is where digitisation and connectivity will create a breakthrough in supply chain thinking", quotes Erik Goedhart, Senior Vice President, Global Head of Aerospace and Industrials at Kuehne-Nagel in a candid talk with Swati.Ketkar. .READ ON!
Q - It is said that Digitisation will bring about not just disruption but complete transformation of Aerospace logistics sector. Also it is the next step for mastering the future challenges in aerospace industry. Can you elaborate on this?
A - Well before digitisation let's talk on data itself. When I used to work in the computer industry in the 80's, there were computers with disk storage capacity of 20 MB. By than that was enough for business to business technology. However it was a bottleneck for banks and retailers to store consumer data. But data itself has always been the business imperative. Nowadays the technology capacity seems to be unlimited and data the basis for being competitive. In Kuehne Nagel we already always worked with one global IT system for internal and external purposes, both operational and financial. Once the technology allowed, we had that basis of data to ''digitise' and make a competitive advantage out of it.
Now coming back to the topic, Disruption or transformation, there is something going on…… and not only for the aerospace logistics sector. We think the supply chain in aerospace will be transformed because of digitisation and the world being a global village. Every location can be reached at any time (bit of overstatement but rapidly moving that way). And with data every aerospace part will be globally visible for use anywhere. Therefore we think digitisation and connectivity will create a breakthrough in supply chain thinking. Old models with regional hubs, local hubs and global hubs might not work anymore. In one example with and aircraft OEM we integrated the IT systems and redesigned the inbound supply chain. Result; stock in supply chain from 37 days to 7 days. As such nice for the balance sheet….however even more important with real time data management. If an aircraft needs a modification after introduction, it would have taken half a year before the first aircraft rolled out of the production line with the new mod. Now this is a matter of weeks. So data, connectivity and……….time is of the essence
Q - A recent study shows that huge gaps exist between desire and reality of collaboration in many areas of supply chain. How will digitisation help in bridging these gaps?
A - Digitisation, connectivity and time do allow bridging these gaps already. The key question is to the companies and business leaders in the aerospace supply chain: do we allow and encourage this to happen or do we put roadblocks on and arguments to avoid. EDI integration is just a basis however also that is nowadays already sometimes a bottleneck. In my view the aerospace logistics industry can play a catalyst role in collaboration. Key bottlenecks are trade barriers or ''trade wars'' and the hesitance to share data by parties to have the industry benefit as a whole. Like with introduction of cellphones, it took a while but was unstoppable. Same for open data sharing and supply chain integration.
Q - What are the looming challenges about to hit the aerospace logistics sector in next five years? What measures should the industry take right now?
A - We have seen key challenges already and they will not change in the upcoming 5 years creating complete new challenges in supply chain management. To mention a few
- Technical issues with aircraft and engine introduction
- The need for more frequent interior refurbishment to cope with passenger demand
- Keeping downtime down (still not measure as an overall supply chain KPI, only fragmented)
An overall topic is the gap in certification in the industry. The technical part is highly certified and all kind of licenses applicable. However the logistics part is far behind. Look at ground handling agreements, part 145 and others; what is about logistics? Even AOG, which is aircraft on ground-, is a purely technical and operational terminology. That has been copied to logistics however without definition. What does AOG, hot AOG, real AOG, schedule OAG and all the logistics' terminology mean in transparent industry accepted definitions?
Our Kuehne Nagel mission is to provide certified aerospace logistics and create a new foundation in the industry
Q - In spite of companies recognising the importance of digitisation in Aerospace MRO sector, the response is lukewarm. What according to you are the reasons and how can companies overcome the barrier to achieve digital efficiency?
A - Like mentioned, the openness to change. The willingness to make it happen (soon) or to let it happen (later). You see the different market segments acting, The OEM's using the data of aircraft, engines and components to digitise for that specific element, the MRO's struggling with the need to make use of OEM data and at the airlines still a split between commercial and technical data. Let's take as a reference the need to digitise from an airline to individual passengers and what the pressure and urgency there is in that segment to what we do ''behind the door of the passengers''.
Q - Authentic and reliable data is the key to efficient digitisation. How has Kuehne Nagel incorporated the intelligent analysis of Data?
A - We can say it was a long term strategy since the beginning. And in fact it was. Kuehne Nagel leadership always was convinced on having one global IT system for operational and financial purposes, both externally and internally. Because of that we have data of decades which allows us now to combine with overall trade data and……..predict. Predict in logistics reliability as well as in sustainability. If you look at our recent announcements, our ambition to become carbon footprint neutral can only be at that speed because of data. We can measure, show on each invoice of the customer and as such contribute to the environment…by data. Our backbone provided the basis to work with real (and I mean real being now, on the second) data and integrate the latest technologies like robotisation, artificial intelligence, automation (e-touch) and others. We have 3 innovation labs over the world to keep this leadership and lead the transformation of the logistics industry
Q - Data analysis and Data-enabled intelligence leads to forecast the of logistics needs of a client thereby giving an edge to managing client expectations. Can you explain any interesting experience you have had with Data analytics and client demand?
A - Many examples. In the end it results in new ways of integrating supply chains and predictability. Standard examples are what stock levels of parts are needed all over the world based on historic and current data. New is that complete layers of stocking locations can be taken out. Visibility of engine stands all over the world and managing the calibration on behalf of customers
These are the ''standard'' examples. Just on the basic level we are able to provide customers information on their spend and KPI's before they can do themselves. Because of real time data, we nowadays have business reviews with customers using their live data and presenting in a format they would like to see; online and real time. This enables continuous improvements and cost reduction efforts which will not fit in any standard pricing sheet but will make the difference in lowering total cost and creating predictability.
Q - Logistics require multi-level paperwork and payments along with 3rd party certification. Logistics is therefore seen as an ideal sector for the use of Block chain. Your views
A - Also here still a lot but not because it must be that way. It is purely due to the willingness, bureaucracy around. In small examples, also in personal business life. We don't need no hard copies of hotel bills or so anymore. Electronic and without manual involvement (except for checking) create to payment. The industry is adapting more and more and recent examples in the cargo industry are mentioned as well. The technology is available and no need for paper. You mention BlockChain as something specific. It is already part of daily life and in use. It is more on the countries and companies willing to implement and accelerate. Nothing new anymore.
Q - New digital companies are breaking into the highly competitive logistics market. How do Kuehne Nagel deal with market competition?
A - Interesting topic! We can all start and e-based company tomorrow and penetrate new markets. And there are many start-ups related. Once live a few things can happen, being
- Cease to exists as expectations for one or another reason could not be met
- Be acquired by a bigger company because of unique technology
- Grown exponentially and become a global massive provider
The third alternative happens, although rarely. And if you grow so fast to global level, the need for a physical global infrastructure increases. We see that happen in companies approaching us. And very new types of relations rising out of that, with the company being a customer, competitor and supplier depending on the environment.
In aerospace we see many initiatives related. Aerospace however also needs dedicated attention by aerospace professionals and as such a global physical infrastructure. In global acting also compliance and certification is a key element. Therefore we will be a leader in implementing new technologies on our ''datalake'' of unmatched global data, we will acquire or work together with start-ups or campus's to accelerate digitisation elements. In the end, the more you digitise, the more the need for knowledgeable and dedicated aerospace logistic professionals working closely with our customers.
Q - Digitisation demands more robust business models to retain market position. What happens then to the traditional big players of the aerospace logistics sectors who are slow or unwilling to make a switch to digitisation? Does survival of the fittest come into play? Your words of caution to such companies...
A - Digitisation requires level of investments which only some companies can cope with. We over the year launched fully digitised and certified logistics solutions for engines and interior refurbishments (KN EngineChain and KN InteriorChain). These solutions take multi millions of (digitisation) investments before launch. There will be further consolidation in the market and the global digitised backbone will be the basis for companies to ''survive''. Survival of the fittest? Yes for sure. The companies need to be financially solid, however even more fit in listening to the customer and tuning business models related. In the end, customer centricity resulting in supply chain integration and innovation. Always having the final customer in mind; you, me, the passenger who want to fly when the airline promised to fly……………..
Q - And lastly Data can be a both a boon and a curse when it comes to digitisation. The most uncommon challenge of digitisation is cybersecurity. How does your company deal with this challenge?
A - It is essential that Kuehne Nagel protect itself against threats and damages arising from the usage of information assets. Kuehne Nagel perceives Cybersecurity or Information Security as a vital part to achieve its strategic business goals; to guarantee Information Security is classified as one of the prioritised goals for all business and functional units.
We have established a Chief Security Officer, who takes care of the safety of our critical infrastructure and compliance with the GDPR, together with his team. They determine the Information Security principles of KN in support of governance objectives and enterprise values. These enable KN to implement and live a standardised approach on the protection of KN's paper-based and digital business processes, applications, IT systems and IT components.