00:00:05 Introduction and setting.
00:01:23 Role and importance of supply chain in Air France.
00:02:08 Explanation of the maintenance and supply chain support.
00:03:00 Impact and costs of flight delays.
00:04:09 High cost implications for the company.
00:05:08 Maintenance program development and unpredictability of needs.
00:06:20 Introduction to biggest challenges in aviation supply chain.
00:07:26 Role of data and analytics in inventory management.
00:08:49 Shift in supply chain approach for maintenance success.
00:09:56 Discussing optimizing supply chain experience.
00:10:49 Surprises from partnering with Air France Industries.
00:11:55 Future vision for Air France Industries’ supply chain.
00:13:01 Relevance of value creation in the new approach.
00:14:01 Speculation on employees becoming AI experts.
00:15:01 Decision to partner with AI experts.
00:16:04 Future value for Air France Industries’ clients.
00:17:01 On-time, competitively priced product availability.
00:17:35 Closing remarks and thanks at Air France Industries.
Summary
Joannes Vermorel, founder of Lokad, interviews Jacques Dauvergne, Senior VP Supply Chain at AFI, discussing his career progression, AFI’s operations, and the challenges of flight delays. Dauvergne explains his role in developing AFI’s supply chain directorate, which supports both Air France-KLM and third-party airlines worldwide. He addresses the complexities of the aviation supply chain, emphasizing the balance between operational robustness and cost. Dauvergne speaks positively about Lokad’s innovative supply chain solutions, which help optimize inventory levels. Their partnership, renewed and expanded, aims to identify and resolve AFI’s supply chain issues iteratively. Dauvergne asserts that partnering with entities like Lokad allows AFI to remain focused on maintenance mechanics.
Extended Summary
Joannes Vermorel, founder of Lokad, conducts an interview with Jacques Dauvergne, the Senior Vice President Supply Chain at AFI, onboard an aircraft at Air France Industries. The conversation offers insights into Dauvergne’s career progression, the operations and mission of AFI, the magnitude of their operations, and the implications of flight delays for airlines.
Dauvergne describes his professional journey before joining Air France. He has a long history with the company, having previously managed operational domains such as the maintenance of the AC20 fleet. He has also overseen strategic projects, including the transformation of entire departments. Moreover, he has been tasked with supporting operations, demonstrating a more transversal role in contrast to his previous ones.
In his current role at AFI, Dauvergne leads the development of a supply chain directorate, a role he has held for approximately a year. Previously, the supply chain was amalgamated within another department of Air France Industries. His current task involves the creation of a global organization for the Air France industry supply chain.
Dauvergne then elaborates on AFI’s mission, highlighting that while the general audience is familiar with Air France as an airline, they may not understand AFI’s role. Alongside KLM, AFI is responsible for maintaining both airlines’ aircraft, a responsibility that extends to third-party airlines worldwide. Their services range from maintaining aircraft and engines to providing supply chain support, including component maintenance and access to their inventory.
He further provides a sense of scale regarding AFI’s operations. The Air France-KLM group operates over 400 aircraft, making more than 1000 flights per day. Additionally, they support more than 200 third-party companies globally.
The discussion turns to the issue of flight delays, which, while frustrating for passengers, is also costly for airlines. Dauvergne explains that the customer’s negative experience is their primary concern. Moreover, the cascading effect a delay on the first flight of the day can have, causing subsequent flights to also be delayed, results in significant reprogramming challenges. The financial implications are also substantial, with the company needing to provide direct remedies to customers while also dealing with the operational repercussions of the delays.
Dauvergne highlights the high cost of supply chain mishaps in the aviation industry, not only in terms of direct compensation to the customer but also in terms of indirect costs within the supply chain and maintenance departments. He compares the aviation supply chain to that of the automotive industry, suggesting that the aviation industry faces more specific challenges. The volume of demand in aviation is very low compared to manufacturing sectors and forecasting demand can be difficult due to its unpredictable nature.
Maintenance is a pivotal issue, with the need for a proactive program to anticipate the parts needed. However, when unexpected issues arise, the industry has to be highly responsive and procure necessary parts within a very short time frame. Dauvergne emphasizes the time-sensitive nature of this operation, as airlines work around the clock, seven days a week. This challenge is tackled by implementing a 24-hour sourcing desk that can source parts from anywhere in the world at any time.
When asked about the most significant challenges in the aviation supply chain, Dauvergne refers to the balance between operational robustness and cost. To ensure a high level of inventory, companies might feel compelled to buy a significant amount of parts, thus running into hundreds of millions. This practice, however, is economically challenging. Therefore, the key challenge becomes optimizing the balance between inventory levels and the service level they want to achieve.
Dauvergne suggests that the solution lies in developing smart algorithms to optimize inventory levels, which he views as a universal issue for airlines globally. This optimization, he believes, is where data, analytics, and enterprise software vendors play a crucial role.
Vermorel then shifts the discussion towards the state of the aviation supply chain and the changes over the past five years. Dauvergne indicates that the aviation industry, particularly the maintenance sector, traditionally focused on ensuring flight safety, regulation compliance, and the quality of parts. These priorities have created an industry culture centered on making sure that the aircraft parts are of the highest quality and fit for the purpose. He suggests that the conventional supply chain culture within the aviation industry was primarily centered around these priorities.
Dauvergne acknowledges that traditionally, the culture of supply chain and logistics at AFI had not been prioritized in terms of investment in smart tools and software. However, in recent years, they have come to understand that the supply chain is crucial to success in their industry. Consequently, they have decided to shift their perspective and approach, recognizing that their previous methods were obsolete.
The relationship between Lokad and AFI started over half a decade ago. Dauvergne expresses his gratitude for the collaboration and explains that they first discovered Lokad through one of their subsidiaries based in Germany. The subsidiary had already seen success using Lokad’s solutions for optimizing its supply chain, specifically in inventory management. This prompted AFI to explore the opportunity of working with Lokad in order to accelerate their transformation.
Dauvergne highlights the way Lokad brings a fresh perspective to supply chain management, one that differs from the more traditional or mainstream approaches. What stood out for Dauvergne was Lokad’s open-mindedness, not adhering to any standard model but instead focusing on understanding AFI’s specific needs. Dauvergne contrasts this with the approach of some consulting companies, who, according to him, sometimes apply an inflexible automotive model that doesn’t necessarily align with AFI’s needs.
Dauvergne is also impressed by Lokad’s ability to deliver customized solutions in an efficient and effective manner. The decision to adopt this new approach was a risk, but Dauvergne expresses satisfaction with the significant added value it has brought, terming the results as “amazing.”
Recently, AFI and Lokad have decided to renew and expand their partnership. Looking to the future, Dauvergne says that their objective is to build a joint roadmap for the supply chain at AFI. While they previously worked on specific initiatives, there wasn’t much coordination. The new approach involves the two organizations collaborating to identify the pain points in AFI’s supply chain and create more value in these areas. Rather than setting a clear vision for several years ahead, they aim to approach it in a more iterative fashion - addressing issues, creating value, moving on to the next topic, and so forth.
Dauvergne emphasizes this is a departure from their previous method, where different departments within the vast company would have their own visions. This new shared and dynamic strategy represents a significant shift in their supply chain management approach.
Dauvergne indicates that a shift is taking place in the industry. Some companies are abandoning rigid long-term plans, accepting the risks associated with being agile rather than having a high level of certainty over the next three or five years. They acknowledge the proliferation of complex and advanced technologies like machine learning, which they believe are being effectively utilized by Lokad at Air France, albeit not visibly.
Vermorel questions the extent to which these advanced technologies will impact the roles of employees in supply chain management. He asks whether the industry should expect all employees to become experts in artificial intelligence (AI) or what the day-to-day operations would look like.
Dauvergne provides a candid response, recounting past attempts to train their employees to become experts in statistics and data management, and create their forecasting rules. This strategy, Dauvergne admits, was a failure. Instead of attempting to internally cultivate expertise in statistics, data, and AI, AFI’s future vision involves partnering with external entities who already possess these skills. This approach allows AFI to focus on their area of expertise: understanding the mechanics of maintenance and what is essential in that domain.
With regard to safety in the supply chain, Dauvergne confirms it as a given and a constant factor, asserting that their processes are incredibly safe and will remain that way.
When asked about the added value for Air France Industries’ airline clients, Dauvergne emphasizes that their clients share similar concerns with AFI. He suggests that their shared understanding of the challenges they face is a key reason why these clients select AFI as their supplier. Jacques explains that their customers, often airlines, are not only aware of these constraints but also select AFI precisely because of the company’s capacity to handle these complexities. He suggests that one way AFI manages to distinguish itself is through its well-sized inventory, which the company can offer its clients access to. This inventory accessibility is described as an optimized value offering that is finely balanced to ensure the most efficient investment.
A critical element of AFI’s value proposition, as per Jacques, is their competitiveness. Jacques asserts that not only is AFI competitive as a supplier, but also their pricing strategy is seen as competitive within the industry. AFI’s clients trust that they are not only receiving parts that are available at the right time and place, but also that they are paying the appropriate price for these components.
Jacques further illustrates the monetary implications for AFI’s clients if they were to invest in similar operations independently. He throws light on the considerable investment airlines would have to make for an equivalent operation, which could reach sums of over 10, 20, or even 30 million dollars for a limited number of tasks. By contrast, AFI, through its supply chain optimization, offers a solution that mitigates such hefty investments, saving the airlines a significant amount of money.
Finally, Joannes expresses his gratitude for the opportunity to visit the aircraft engine repair facility of Air France Industries and to have this insightful conversation with Jacques. The latter echoes the sentiment, thanking Joannes for his visit and interest in their operations. The interview suggests an intricate and well-strategized operational methodology employed by AFI to ensure efficient, cost-effective, and competitive supply chain optimization for their clients in the aviation industry.
Full Transcript
Joannes Vermorel: We are in an aircraft repair shop of Air France Industries. It’s not quite like the Lokad office. It’s a pleasure for me to be with Jacques Dauvergne. Could you tell us a little bit about what you were doing before joining Air France?
Jacques Dauvergne: I’ve been working for Air France for several years. In the past, I’ve been in charge of very operational domains like managing the A320 maintenance fleet. I’ve also overseen strategic projects like transforming entire departments of up to a thousand people, and supporting operations, which was a more transversal role compared to the previous ones.
Joannes Vermorel: What is exactly your current role and your missions at Air France Industries?
Jacques Dauvergne: For about a year now, I’ve been in charge of building a supply chain directorate. In the past, the supply chain was mixed within another department of Air France Industries. The idea was to put a focus on the supply chain itself. Now, my role is to build this global organization of Air France Industries’ supply chain.
Joannes Vermorel: For a general audience who may not specialize in aviation, could you tell us a bit more about Air France Industries? Everybody knows Air France, the airline, but what about Air France Industries? What is your mission and what do you do exactly?
Jacques Dauvergne: Air France Industries and KLM Engineering and Maintenance group manages both the maintenance for Air France and KLM airlines, our first mission. Over several years, we’ve developed a range of contracts for third-party airlines based around the world. We can offer maintenance for aircraft, engine maintenance as you see in the shop today, supply chain support, component maintenance, and access to our inventory. It’s quite an extensive set of operations.
Joannes Vermorel: To get some orders of magnitude, what are we talking about? How many aircraft and to what extent are the operations for the Air France-KLM group?
Jacques Dauvergne: We operate more than 400 aircraft. We’re talking about more than 1,000 flights per day, not per month. Regarding the third-party companies we support, we’re talking about more than 200 companies.
Joannes Vermorel: For those of us who are lucky enough to enjoy some air travel as passengers, we’ve all been confronted at some point, at least probably once in our lifetime, with a delayed flight. Companies aren’t delaying flights on purpose. It’s a major inconvenience for passengers, but also costly for the companies themselves. Could you share some insights about what is at stake with the supply chain that keeps all those aircraft in the air?
Jacques Dauvergne: If we have to delay a flight or cancel a flight, our first concern of course is the impact on our passenger because the customer experience is negatively affected. The other concern is the cascading effect it’s going to create within our flight program. For example, if the first flight of the day is delayed, all the other flights during the day will be delayed. This creates a huge concern about reprogramming the flights. The cost for the company is also very high. We have to pay direct remedies to the customer and there are a lot of indirect costs within the supply chain or within the maintenance domain. To maintain the aircraft, we need parts and those parts are quite a lot bigger. However, what makes the aviation supply chain quite different from let’s say the automotive supply chain is the flow and volume of demand. Our demand is very low compared to the manufacturing area. It is also very difficult to make forecasts. Forecasting models are very complex because we have to manage a maintenance program that is organized around preventive maintenance and curative maintenance. We operate 24 hours a day, seven days a week and have time pressure on our shoulders. It’s very difficult to source a part, even during the weekend at midnight, for the next day’s flight. To handle this, we have implemented a specific organization like a 24-hour sourcing desk.
Joannes Vermorel: What do you see as the biggest challenges for the aviation supply chain in general and maybe for AFI Industries in particular?
Jacques Dauvergne: The key challenge is to optimize the economics. To ensure 99% availability of any kind of parts on the aircraft, it will be very easy to buy hundreds of millions of parts. But then we are talking about a huge amount of inventory, more than 100, 200, 300 millions of spare parts. So the key topic is how to dimension your inventory while comparing the level of service you want to achieve. The one who wins the battle will be the one who can optimize the inventory level with smart algorithms. This is a key issue for any airline in the world.
Joannes Vermorel: This is supposed to be the role of data and analytics, things that were supposed to be solved by enterprise software vendors since the 80s. Where do you see the current state of the aviation supply chain and if we were to go back a little bit in time, what was the sort of practice that you could observe in this industry maybe half a decade ago?
Jacques Dauvergne: Before the advent of Lokad, from your perspective at Air France, I would say that the aviation industry, specifically the maintenance area, is heavily reliant on industry culture. The key point was to ensure that aircraft were operational, and our primary focus was on regulations and the conformity of parts. Of course, flight safety is our utmost priority. So, our main goal in the past was to guarantee that the part which would be fitted on the aircraft met 100% quality standards. In terms of traditional supply chain culture, logistics was not the main investment priority in terms of smart tools and software. However, in recent years, we have become acutely aware that an efficient supply chain is crucial for succeeding in the maintenance area. We have shifted our mindset and we understand that we need to advance. We aim to adopt a new approach and discard the obsolete one.
Joannes Vermorel: More than half a decade ago, Lokad and Air France started to collaborate. Could you describe, in your own words, how you perceive the Lokad initiative at Air France Industries?
Jacques Dauvergne: We discovered Lokad a few years ago when they began working with one of our subsidiaries based in Germany. We understood that it was an exceptional experience in terms of optimizing the supply chain. We also recognized that we jointly created value around inventory management. This presented a great opportunity for us to accelerate our transformation, especially considering that our model was somewhat obsolete. Working with Lokad gave us a chance to explain our concerns and see what solutions they could offer. Moreover, it was fascinating for us to see a completely different perspective on our supply chain, which was a significant departure from our past practices.
Joannes Vermorel: I believe that the Lokad approach to supply chain is somewhat unique, certainly compared to the mainstream approach. What surprised you the most about the way Lokad operates with Air France Industries?
Jacques Dauvergne: We were quite surprised by the open-minded approach of Lokad. They didn’t approach us with a standard model in mind, which is typically the case when you engage a consulting company to manage your supply chain. Lokad’s ability to deliver a customized solution in an efficient and effective way, with a relatively short lead time, was also impressive. Taking this new approach was a risk, but ultimately, the results were amazing.
Joannes Vermorel: We recently renewed and even expanded our partnership. What is your vision for the future of the supply chain at Air France Industries?
Jacques Dauvergne: Currently, we are working on building a roadmap. In the past, we tried to collaborate on specific initiatives, but there wasn’t really coordination between them. Now, the goal is to create more value. We believe it’s feasible to align ourselves on a joint roadmap, and to together identify the pain points of the supply chain where we can create more value. Our approach doesn’t involve having a clear vision for the next few years, but rather focuses on value creation through addressing one topic after another. This is a departure from our former approach, where, being a large company, there was an expectation of a three to five-year plan with a clear projection of value creation every three months. Now, we’ve chosen to embrace agility and accept its associated risks, rather than stick to planning with a high level of certainty for the next three to five years.
Joannes Vermorel: In the industry, many companies are touting advanced and buzzword-ish things like machine learning or optimization algorithms. I believe that Lokad is effectively implementing these at Air France, even if it’s not that visible. What’s your perspective about the future of the supply chain and the roles of these tools? What do you anticipate will be the perception of people working in supply chain at Air France towards these tools? It’s a relatively abstract question, but essentially, do we expect everyone in the supply chain at Air France to become AI experts, or what does it look like on a day-to-day basis?
Jacques Dauvergne: In the past, we tried buying various tools and training our people to be experts in statistics, data management, and building their own rules to simulate forecasts. The goal was to have our teams become experts in forecasting and statistics based on data. We have to admit now that this approach has been a failure. Moving forward, we intend to steer away from this vision and instead partner with someone who can manage this complexity. We don’t want to be experts in statistics, data, or artificial intelligence. It’s not our goal or vision. Our aim is to partner with someone who can manage this area while we bring in our expertise in how maintenance is made, what is at stake, and what is essential. We want to merge data intelligence with our approach based on our expertise, but we don’t intend to become experts in artificial intelligence ourselves.
Joannes Vermorel: As a parting question, with this new vision for the supply chain, obviously, maintaining safety in the audit process is a given. So that will remain a constant in the future. But what do you see as the future added value for the airline clients of Air France Industries? What’s at stake in having a superior supply chain?
Jacques Dauvergne: Our online clients have the same concerns we do as an airline. We understand our constraints perfectly, and that’s why they often select Air France Industries or Calimium as a supplier. The value we offer, for example, is access to our inventory, provided it’s well-sized. It presents an optimized value or the best return on investment.
Joannes Vermorel: So, your customers understand the value proposition and see your competitiveness?
Jacques Dauvergne: Of course. If we can manage costs effectively, our customers benefit too. We strive to be competitive, and this underlines the trust that they have in Air France Industries and Calimium to support them. They are aware they are paying the lowest price on the market when we are competitive. We ensure the parts are available at the right time and place, and the cost they pay for it is reasonable.
Joannes Vermorel: So, it’s more than just the price. You also offer them peace of mind by managing the inventory and ensuring the availability of parts?
Jacques Dauvergne: Yes, that’s right. They would otherwise be obligated to invest in these solutions themselves, which would mean more than 10 million, 20 million, even 30 million dollars for perhaps only a few parts. We’re talking about a significant amount of money.
Joannes Vermorel: Thank you very much, Jacques. It’s always a pleasure to be in this aircraft engine repair facility from Air France Industries.
Jacques Dauvergne: Thank you very much, Joannes.
