This article is published in Aviation Week & Space Technology and is free to read until May 30, 2024. If you want to read more articles from this publication, please click the link to subscribe.
Many airlines and MROs lack the staff to handle large-scale surplus disposition.
Inventory support specialists at DASI are emphasizing the importance of creating an efficient spot market for spares and providing access to materials at all tier levels to improve the MRO supply chain.
Traditionally, a “spot market” has meant a marketplace where commodities and financial instruments are traded for immediate delivery. DASI, a Miami-based inventory support company, has borrowed the term to describe its vision of an optimally efficient market for aircraft spares.
“We envision and strive to provide a digital marketplace with a very wide storefront where nearly every requirement can be fulfilled on one platform, on a single invoice, and delivered within 48 hr. to anywhere in the world,” DASI CEO John Dziuba says.
To put things in perspective, he lays out the evolution of retail sales. Fifty years ago, customers had to travel to multiple stores to purchase household goods. This was inefficient, expensive and time-consuming. With the development of online marketplaces like Amazon, consumers today can buy just about everything on a single online platform, directly from their homes.
“We see a similar commercial evolution happening in the aerospace parts market today,” Dziuba says. “Airlines and MROs are on a constant drive to operate more efficiently, and managing their parts inventories effectively is a key component of that mandate.” Additionally, he says stakeholders want to carry less inventory and maintain smaller sourcing and administrative overhead.
In the aftermath of the COVID-19 pandemic, Dziuba has noticed a younger cohort that is completely comfortable with and expect e-commerce solutions. By developing a digital spot market, he believes, DASI is facilitating that evolution.
“Our concept is not only for surplus and end users,” he says. “We partner with many of the major airframe and component manufacturers to offer direct access to OEM new inventory, often at the same cost as going direct to the source.”
Dziuba explains that DASI provides OEMs with secure access to underserved customers and market segments that otherwise would be ignored. “We also provide customers with direct access to inventories at the OEMs that they otherwise would have to rely on a broker to access for the—directly helping their bottom line,” he adds.
DASI has nearly 2 million rotable and expendable part numbers on its platform, and it places an emphasis on expendable availability, Dziuba states, as sourcing practices for these spares align well with what its platform delivers.
The company says it has an extensive offering of surplus alongside new OEM inventories, with options and opportunities to average down acquisition costs by taking advantage of higher-quality, lower-priced surplus inventory.
It will be interesting to see how a potential spot market may influence investment in spare parts services, especially in the current high-cost environment. Dziuba says managing inventory levels always has been one of aviation’s biggest challenges and least efficient endeavors.
“Parts are expensive, and inventory levels quickly build in scale and absorb free cash flow in the process,” he says. “The trend has been and will continue to be toward less inventory held on hand and more just-in-time sourcing. By providing a hyperefficient spot market, we facilitate that trend and enable end users to carry less inventory.”
AI Parts Planning
Debate persists about artificial intelligence (AI) augmenting or replacing parts planning and investment decisions. In such an unpredictable spares environment, DASI does not consider AI a cure-all to efficient inventory planning.
Though Dziuba says AI may provide marginal gains over historical consumption-based inventory planning, at the end of the day, he expects all forms of inventory planning to provide only recommended stock levels. “Inevitably, given the dynamic nature of the maintenance and spares environment, this results in a higher inventory carry, generating more surplus and consuming more cash,” he says.
So why not mitigate the inherent faults of inventory planning with an efficient spot market to fill any need in a timely manner? “Whatever AI eventually brings to the industry, there will always be a place for spot buying to complement predictive modeling,” Dziuba says.
In terms of access to surplus inventory, the pandemic and resulting supply chain stress proved a serious shock to the system. Dziuba lists two key outcomes that will take many years to return to equilibrium.
First, nonessential staff were furloughed to cut costs—and exactly the kind of staff who would typically manage the disposition of surplus inventory. “Now airlines and MROs simply do not have the people on hand to manage large-scale surplus disposition in many cases,” he notes.
Second, the stresses on the supply chain caused a wave of panic-buying. “Airlines and MROs all tried to increase their safety stock at the same time,” Dziuba says. “This caused an artificial surge in demand, which further fed the frenzy and increased supply chain stress, ultimately causing end user inventories to further bloat with surplus.”
Following this period, DASI is seeing a natural rebalancing in demand as the market strives for equilibrium and supply chains return to something close to normal.
Dziuba believes more of the surplus stock that built up in this process is beginning to make its way to the market. “However, the labor shortage continues, and it is difficult to acquire large surplus inventories as a result,” he says.
There are also increasing calls to expand access to materials for all tiers in the market to improve the MRO supply chain further. However, Dziuba does not see many systemic challenges that are not in the process of resolving themselves. “The role that DASI wants to fulfill is to provide improved and frictionless access to both materials and their consumers regardless of market tier, and we believe we are delivering on that goal,” he asserts.
Industry has been notoriously slow to embrace change, but DASI is certain that this kind of marketplace is the future of sourcing—and it wants to be on the cutting edge of the evolution.
