Blockchain in aerospace and defense

The future of aerospace and defense (A&D)

This study introduces a solution for a globally accessible, digital platform of aircraft parts data that is created automatically via digitized operations, shared and accessible through ecosystem partners, and able to power new and innovative business processes and potentially entire business models. This solution allows part records, and thus the part’s chronological lifecycle, to be centrally stored with consolidated data from all distributed industry players that handle the part as it moves throughout the supply chain.

Today, each player has its own record of the time spent interacting with the part. This data is often in physical paper form. When the time comes to share data with the next player in the supply chain, only necessary paper documents are duplicated and shared with ecosystem partners. This often gives rise to great inefficiencies, poor quality, and slow-moving parts as they change hands. When seen against the backdrop of the full magnitude of the aerospace and defense supply chain, the implications are enormous for potential improvements in supply chain velocity, working capital, forecasting, and human resources.

This study argues that having full visibility to the part lifecycle in a secure, trusted, and easily accessible digital format could provide solutions to several of the key issues facing the industry today.

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Our findings: Why is blockchain in aerospace and defense desirable?

Blockchain massively reduces the burden of paper leading to digital traceability

The A&D industry is constantly under the burden of creating, processing, managing, and storing paper records. Much of this is to satisfy regulatory compliance and is a key contributor to aviation safety and IP protection, but much of it is a relentless and constant duplication of documents as they move across organizational boundaries. Furthermore, companies store years of part records in warehouses, third-party locations, and even newly acquired shipping containers as the sheer volume of paperwork overwhelms the organization.

It’s no wonder that multiple aerospace companies appear to be at least thinking about digitizing much of the paper they traditionally process as they manufacture or interact with parts, and integrate them into end-items or perform maintenance, repair, and overhaul (MRO) activities. The reasons for this are obvious: paper records are typically time-consuming to create, prone to error, difficult to search for, and even harder to extract meaningful information from.

As supply chain partners interact with parts, past records are consumed and new records are created. However, each party creates and stores their own view of the part—there is no "part-centric" perspective that provides a view from the part’s standpoint and gives insight into how that part performs over its lifecycle, whether in the supply chain or while operating. Until recently, there has been no facility to easily contribute to the part’s historical record. Furthermore, knowing where parts are and how they are moving through the supply chain is something that has been challenging the industry for many decades. Having traceability and visibility to where parts have come from and which end items they have been installed on is extremely important for safety and compliance with airworthiness directives as well as other reasons. There appears to be a valuable opportunity for industry players to better utilize this valuable information stream.

Blockchain increases the efficiency and quality of operational execution

Today, industry companies sometimes struggle with simple processes, such as receiving parts. The first pass quality rates are often not as high as they should be due to poor or missing paperwork. These paperwork issues can stop parts in their tracks, lock up parts in quarantine cages, and kick off the endeavor to correct the problem. In fact, at a large US airline carrier, Deloitte was asked to audit accessibility to part documentation. Deloitte found that greater than 60 percent of the issues with part receiving was due to poor or missing paperwork, and on average it took 34 days to correct the problem.

As parts slow down, capital generally gets tied up, and inventory levels increase to fill the gap. In the worst of cases, parts are scrapped (due to missing logbooks) or re-inducted into the MRO process to be completely overhauled at great expense. In the MRO world, customer orders without proper paperwork can disrupt the planning process, increase turn time, and reduce cash velocity—a situation where no one wins.

In an ideal digital platform world, the part would be shipped with an electronic advanced shipping notice (ASN), and all the required documents would be posted against the part record. Both parties would have access to the records before the part is even loaded on the truck. This helps give adequate time to correct poor or missing paperwork and greatly increases the chances that it will be smoothly received.

The same solution can be applied to any other interaction with the part during its custody. Whether a company performs a dimensional check or other quality inspection, or documents the MRO process steps and parts consumed, the events can be pushed to the digital parts platform along with any supporting documentation. That event will be owned by its author, encrypted, and only seen by select parties in the ecosystem. This level of chronological documentation of a part’s history is fundamental to maintaining an asset’s value, and greatly improves the level of effort involved in process sharing and managing records.

Blockchain increases collaboration with supply chain partners leading to greater forecasting accuracy

Future application of traditional MRP and other forecasting techniques will likely grow and extend beyond the four walls of the enterprise. Other ecosystem trading partners may gain access using the digital parts platform—creating an “ecosystem MRP” where the accuracy of ordering, fulfilling, forecasting, and executing supply chain planning will increase significantly.

Today, too many of the supply chain partners provide less than accurate inventory and lead-time data—mostly to avoid running afoul of service level agreements and other contractual performance metrics. The impact of this is greatly inflated lead times throughout the supply chain. By running MRP and other algorithms on a broader and more accurate dataset—one in which all parties are incentivized to provide this data—supply chain and economic performance can greatly increase and simultaneously reduce obsolescence, stock-outs, AOGs, and over-stocking of the wrong parts.

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Let's talk

Kerry Millar Principal | Deloitte Consulting LLP kmillar@deloitte.com
John Schneider Specialist executive | Deloitte Consulting LLP johschneider@deloitte.com
Ben Brooks Senior manager | Deloitte Consulting LLP bebrooks@deloitte.com