Enterprise-wide IT solutions are winning increased acceptance in airline maintenance operations, but there is still work ahead
During the mid-1990s, airlines took a long, hard look at enterprise resource planning (ERP), with its promise of integrating their maintenance IT under a single umbrella system - from supply chain management through to finance and human resources. Most came away still sceptical, but since then the systems solutions have become a little more convincing.
There is no question over the need for airlines to get a firmer grip on costs and efficiency, especially as more in-house maintenance operations are set up as profit centres, chasing third -party work. Peter Goebbels, vice-president for aerospace and defence at market leader SAP, argues that ERPshould be a perfect fit. "Airlines have an opportunity to get rid of their old consumption-based planning, get rid of inefficiencies and become more profitable," he says.
Where there have been question marks is over whether a systems approach designed for assembly industries such as automotive manufacture, could be re-engineered for a specialist disassembly sector such as airline maintenance with its added complexity over safety regulations.
Carriers initially shied away from big ERP solutions for these reasons, preferring to rely on tailored software from specialist vendors. "We seriously considered ERP solutions, but there were limitations in terms of the systems on offer. There were no solutions that matched our requirements," explains Kevin Middleton, general manager of engineering systems at British Airways Engineering.
However, for those with a tangle of aging legacy systems, the crunch came with the need to address the Y2K issue. The review process at BA uncovered 220 systems, of which it was able to switch off 50 that had become virtually redundant, says Middleton. Along with others, it took the opportunity for another look at ERP.
Matthias Malina, head of ERP systems management at Lufthansa Tecknik, which had already started the move to ERP, says that Y2K would have been much more painful without ERP. "In the old legacy landscape, with its complex structure, we would have had enormous problems - and costs," he says.
Against this background, ERP started to gain ground within the industry. In particular, the aerospace and defence ERP solution offered by SAP started to make headway. The German IT supplier has been working hard to overcome the initial scepticism and has built up a healthy maintenance client list among the major airlines, with many of the most significant players in Europe and the Far East adopting SAP's ERP solution to some degree. There has been less headway made in North America - partly due to SAP's European pedigree and the fact that there is less focus on third-party business in this region. Delta Air Lines, however, has opted for SAP's ERP solution.
First mover
The first carrier to adopt SAP's ERP solution was Air New Zealand Engineering Services (ANZES) which went live with a system based on the SAP platform in 1999, with the systems integration carried out by Ernst & Young. Other airline maintenance departments - wary of being the market leader in this relatively untried field - have been keeping a careful eye on the ANZES project.
Among them is BA Engineering, one of those to review their IT requirements in the run up to 2000 Although there were still some gaps in the SAP system, the UKcarrier decided that enough progress had been made to go forward. Middleton points out that if BA had come to the conclusion that ERP was still not up to scratch, it would have been forced down the road of pursuing individual solutions from myriad specialist vendors.
BA also looked at products from Peoplesoft and Oracle before opting to go with SAP, which, as Middleton notes, was starting to emerge as the market leader. Indeed, one of the issues facing airline maintenance managers is the fact that SAP has developed such a strong name for itself in the sector that it is the only serious player in the market.
BA started to re-engineer its systems in late 1999, using SAP's existing R/3 package, having agreed that the new version would be implemented as it became available. This allowed BA to keep to its original timescale, with a final rollout at the carrier's worldwide maintenance sites in 2004.
BA has learnt much from the ANZ experience. As can perhaps be expected from such an ambitious, pioneering project, there were problems along the way, although Middleton points out that the end result "proves that the solution works and that it is worth the pain." BA has liaised closely with their colleagues at ANZES, and has learnt two key lessons, says Middleton.
First, he says, in terms of implementation, it is important to take a careful look at the lifetime costs as well as the initial purchase price. Second, the cut over from the old legacy systems to the new software is a high-risk exercise.
"ANZES got away with it, but it would be much more difficult for a carrier the size of BA," Middleton warns, adding that the whole exercise should be treated as a process of change management.
Air France Industries (AFI), which is also moving much of its IT over to SAP, joins others in emphasising the importance of change management. "The project team decided to embark on a highly-structured, very intensive change management programme, notably in terms of leadership, training and communication. We felt that this was a culturally and socially important approach."
Lufthansa Tecknik's Malina warns, "We've learnt that introducing new systems covering all parts of your operations is a very risky business. It is important to pay great attention to risk management. Manageability and availability are big issues."
He points to the difficulties associated with the need for planned shutdowns for software upgrades in a business that operates 24h a day, seven days a week. As a result of these difficulties, Malina emphasises that nobody is going for the big-bang approach. However, he echoes Middleton in emphasising that it is all worth it in the end. "It is the price of progress," he says. "There are enormous savings in IT costs."
Lufthansa Tecknik introduced its first SAP module in 1997, covering finance and accounting. Many other areas have since gone over to SAP, although not maintenance planning. "This is a very complex and specialised part of the business," says Malina, pointing out that SAP is still "quite young" in this area, and there are issues about possible bugs and the need to cover each specialised process requirement.
However, Lufthansa is looking at this area and points out that SAP is making improvements in this field all the time. They are also discussing the issue of in-flight diagnostics. However, Lufthansa has decided to select a specialist vendor for its labour planning needs.
Delta Air Lines has also decided to keep back its maintenance planning from the SAP ERP programme, choosing a package from Xelus - an IT vendor which works closely with SAP. BA's Middleton also notes that this is one area that has required the most work, mainly due to the complexity involved, and has caused delays in the carrier's ERP project.
Robust solution
Walter Taylor, managing director of maintenance process technology at Delta, believes that working with more than one vendor is not a problem. "I agree that there only needs to be small number of players. If one solution can do it, great. But we've got to make sure that it is a robust solution." In common with his peers in Europe, Taylor is full of praise for the SAP team: "They are incredibly responsive. We talk all the time." He also notes that progress is constantly being made.
With the aid of this close co-operation, many airlines are convinced that SAP is close to developing an industry-wide ERP solution covering most aspects of maintenance.
If there is a complaint, it seems to be that carriers would be happier if SAP took a more proactive role in the integration process, which has generally been left to consultancies such as Ernst & Young in the case of ANZES, and PricewaterhouseCoopers at BA. Middleton, while emphasising that after-sales support is excellent, warns that in the early stages SAP is in danger of being seen as a "sell-the-software-and-run" company.
However, all carriers are clear SAP is getting better at providing a solution for maintenance activities and that the benefits outweigh the costs. For instance, BA is not only expecting the operational compliance process will be faster and clearer, but also that it will become easier to produce and sign off documentation when it sells aircraft.
Similarly, lower inventories and increased productivity in the back office are obvious benefits, but better asset utilisation through more predictable maintenance operations should also mean increased fleet utilisation - and fewer aircraft. While ERP still has issues that need to be addressed, the benefits - whether tangible, or intangible - are clearly not to be dismissed out of hand.
Source: Airline Business