00:00:05 Introduction and Olivier’s background.
00:01:01 The mission of Olivier’s team at Air France Industries.
00:02:25 Challenges in monitoring vast numbers of references.
00:03:20 Downside of classic safety stock strategy in aviation.
00:04:37 Overview of aviation stock management peculiarities.
00:05:30 Discussing aircraft maintenance needs.
00:06:27 The peculiarities of aviation supply chain.
00:07:58 Air France Industries & Lokad’s half-decade partnership.
00:08:58 Lokad’s unique attentive approach to problem-solving.
00:09:58 Agility of Lokad and its problem-solving approach.
00:10:40 Practical example: asset management and stock level assessment.
00:11:35 Agile approach with Lokad during crisis.
00:12:45 Questioning Lokad algorithms’ understanding of crisis.
00:13:58 Ideal qualities for future colleagues at the company.
00:14:43 Discussion on changes in organization.
00:15:58 Predictions for the next five years.
Summary
In a Lokad interview, Olivier Pelloux-Prayer, VP of Assets and Outsourced Repairs at Air France Industries, shares insights on aviation asset management. He discusses the challenge of managing diverse stocks for global aircraft maintenance, highlighting the inadequacy of traditional safety stock approaches due to the high costs of aviation parts. The dynamic aviation supply chain and the unpredictable demand for components are also covered. He praises the partnership with Lokad, noting how their data-driven approach revolutionizes stock management, offering bespoke solutions and enhancing decision-making. Pelloux-Prayer foresees substantial advancements in asset management, including collaboration, customer service prioritization, and technological progress.
Extended Summary
In the Lokad interview between the host, Joannes Vermorel, founder of Lokad, and Olivier Pelloux-Prayer, VP Assets and Outsourced Repairs of component division, they explore the fascinating and complex world of aviation asset management.
Olivier introduces himself and his role at Air France Industries, where he is responsible for the assets and subcontracted repair division. He outlines his journey, transitioning from various supply chain roles in different companies, mainly within the garment industry, to his current position at Air France Industries. Olivier reveals the vast new world of the aviation industry that he had the opportunity to discover and learn about.
The VP’s role at Air France Industries is centered around supporting approximately 200 airlines worldwide, ensuring the availability of the necessary stocks for aircraft maintenance. His team is charged with guaranteeing the right stock, at the right place, and at the right price. They manage stock locations globally in more than ten countries, their main objective being to optimize total cost of ownership and respond accurately to supply chain disruptions.
Olivier provides some intriguing figures to illuminate the scale of their operations. Air France Industries manages more than 17,000 references for six different aircraft types and subtypes across 200 airlines. The overall stock is worth nearly a billion, with individual component prices ranging from a few hundred to up to two million for auxiliary power units.
The traditional approach to managing these stocks, called the Safety Stock, is explored. This concept generally focuses on maintaining enough stock to cushion against any possible supply chain disruptions. However, Olivier explains the limitations of this approach in the context of aviation. Given the astronomical costs associated with aviation parts, simply buying and allocating safety stocks everywhere is impractical and unsustainable.
Moreover, this approach doesn’t take into account the maintenance costs associated with these high-value parts. Olivier explains that the focus should instead be on identifying potential issues in the customers’ operations and investing wisely to maximize customer satisfaction while also keeping the stock at an optimal level. Hence, the traditional approach of safety stock isn’t adequate for the specific and complex requirements of aviation asset management.
Olivier elaborates on the circular nature of the aviation supply chain. When an aircraft component becomes faulty, an airline needs a replacement, or ‘serviceable component’, to install immediately. The faulty or ‘unserviceable’ component is then returned and re-enters the supply chain, being repaired either in-house or by a subcontractor. This model involves the customer in the supply chain turnaround, a unique aspect of aviation asset management.
Pelloux-Prayer then delves into the variability of demand in this industry. Factors such as technical updates to aviation standards, troubleshooting procedures on faulty aircraft, and reactive adjustments based on operational performance can all trigger peaks in demand for specific components. Not all these components are used; some, referred to as ’no fault found’ (NFF) or ’non-used stock’, are returned without being installed. This unpredictability in demand patterns complicates the task of forecasting future demand and managing stock.
The conversation shifts to the partnership between Air France and Lokad. Over the past five or more years, Air France has grappled with the challenges of optimizing stock management and improving purchasing accuracy, using their comprehensive understanding as an airline MRO (Maintenance, Repair, and Overhaul) provider to anticipate customer needs.
The partnership with Lokad introduced a data-driven approach to tackle these issues. Lokad’s data science expertise has helped Air France leverage the extensive amount of data they generate daily. With over 17,000 references to manage, the human capability alone is insufficient. Lokad’s tools enable a more comprehensive analysis and better utilization of this data, optimizing aviation asset management and providing a more accurate prediction of future demand, hence revolutionizing their stock management process. Pelloux-Prayer highlights that the unique value Lokad offers stems from their attentive approach to understanding business use cases and their ability to apply their extensive knowledge in data theory and algorithm building to solve specific business challenges. Their advanced analytics seem to significantly contribute to the success of their partnership.
Intriguingly, he notes that Lokad’s agility and focused problem-solving approach deviates from the norm in the AI field, making it stand out. Lokad offers bespoke solutions to specific problems rather than providing off-the-shelf products, with the use of advanced tooling, such as differentiable programming. This allows them to better predict demand, demonstrating Lokad’s unique operation mode.
Pelloux-Prayer provides concrete examples of the value Lokad’s approach brings. One of these is a shift in the way asset management is carried out. Traditionally, asset managers had to comb through data manually to draw out insights, which was time-consuming. However, Lokad’s system, which is integrated with built-in analytics, automates this process. It provides asset managers with readily available insights, enabling them to focus on strategic decision-making such as investment and global network placement.
Another example Pelloux-Prayer provides pertains to their response to the recent global crisis, likely the COVID-19 pandemic. He reveals that Lokad’s agile approach and predictive analytics helped them anticipate a slowdown in the supply chain and take necessary precautionary actions, such as freezing certain aspects of the supply chain. This allowed them to respond quickly and effectively, underlining the company’s adaptability in unprecedented situations.
Responding to Vermorel’s query on whether the relevance of historical data during the crisis, Pelloux-Prayer admits that Lokad’s advanced algorithms might not fully grasp the scale of a worldwide crisis. Nevertheless, the effectiveness of Lokad’s tools during the crisis wasn’t solely due to the sophistication of their algorithms. Rather, their success lied in the combination of their own data analysis with the concrete data and anticipated trends provided by their partner. This synergy allowed them to turn these trends into actionable steps, underscoring the importance of their partnership.
Pelloux-Prayer hints at the substantial evolution in asset management practices within defense industries, likely due to Lokad’s involvement. He presents two central ideas. Firstly, he emphasizes the collaborative nature of the supply chain operation. He acknowledges the numerous individuals and entities involved in the process, from within and outside the organization, including freight forwarders and partners. Pelloux-Prayer contends that for the operation to improve, it is vital to prioritize input from all these entities involved in the supply chain. In his view, the ultimate priority remains providing the best service level to the customer that will not hinder their operations. This approach demands the entire team to align in tackling objectives, even when encountering unanticipated emergencies. For this to happen, he suggests an organizational change that allows for more synchronized supply chain operations.
Pelloux-Prayer’s second point concerns technological advancements in asset management. Reflecting on the progress made over the past five years, he highlights the importance of an intelligent system capable of mapping the entire network. Ideally, this system should offer precise instructions on where, how, and why actions are needed to bring more intelligence to the asset management team. While acknowledging significant improvements, Pelloux-Prayer sees this as a halfway point. He anticipates an additional five years of progress, fueled by ongoing work in this direction.
Throughout the conversation, the emphasis is placed on prioritizing customer service, optimizing organizational structure, embracing collaboration, and leveraging technology for intelligent asset management. While the discussion is ongoing, these points stand as crucial considerations for the future evolution of the defense industry’s asset management practice.
Full Transcript
Joannes Vermorel: Let’s discuss Asset Management in aviation. We are here in the Air France Industries facilities. I am actually the guest of Olivier. Thank you very much for having me here. First, could you tell us a little bit about yourself? What were you doing even before joining Air France Industries?
Olivier Pelloux-Prayer: I’m Olivier. I’m here in Air France in charge of the assets and subcontracted repair division. Before that, I’ve been involved in several supply chain challenges in different companies, more dedicated to the garment industry. Since I joined Air France, I discovered a completely new world that I’ll be happy to share with you.
Joannes Vermorel: That’s the aviation industry. What are your missions at Air France Industries presently?
Olivier Pelloux-Prayer: Here in Air France industry, our team supports roughly 200 airlines around the world. We ensure that we keep stock and provide that stock to the customers so that they can service their aircraft during maintenance operations. Our team is basically in charge of ensuring that we have the right stock at the right place at the right price. We have stock locations around the world in more than 10 countries. The challenge is really to make sure that we optimize the total cost of ownership and focus on the right alerts from supply chain disruption to take the right decisions in terms of investment.
Joannes Vermorel: That’s in terms of the assets it takes to keep a modern fleet of aircraft operational. Could you share with us some numbers to have the orders of magnitude? What are we talking about in terms of parts, locations, SKUs, this sort of thing?
Olivier Pelloux-Prayer: These 200 airlines are operating six different fleet types and subtypes. We are managing over 17,000 references, which is a huge number. Our overall stock is valued at nearly a billion. The components that we manage range from a unit price of just several hundred to a unit price that can go up to 2 million. I’m thinking here of auxiliary power units, for instance.
Joannes Vermorel: The textbook approach to managing stock and having the right balance of stock, or having the right amount of stock at the right time, is the safety stock. Is this applicable to aviation? What is your take about how to even think about the optimization of the assets?
Olivier Pelloux-Prayer: This is the first solution that comes to mind, but when you really start digging further you see that it brings different limits. The first one, and the most obvious, is that the cost would be tremendous. We’re managing aeronautic parts which prices range up to 2 million. It’s not rare to have avionic computers that are in the hundreds of thousands of dollars. So, just buying and locating safety stock everywhere is not the solution. The second thing is, you don’t only have the initial investment, you also have the cost to maintain all that. The approach is more to understand what could create an issue in our customers’ operation. We are focused to deliver the best performance to our airlines, all the ones that sign a pool agreement with us. What we want to assess is where to invest better to make sure that we maximize that performance, the customer satisfaction, and meanwhile keep the stock at the best level. So definitely, just placing safety stock is not enough.
Joannes Vermorel: In terms of peculiarities or specificities of the aviation industry, especially when it comes to stock management, one of the unique aspects are the returns of non-used parts. I think there are plenty of things that aren’t quite like the mainstream view. The mainstream view being, there is a producer that produces something, then ships in large batches to a wholesaler, who then sends it to a distributor, with the end consumer at the end. It’s completely forward, very granular at the beginning, very detailed at the end. What are some of the key challenges or peculiarities of asset management from an aviation perspective?
Olivier Pelloux-Prayer: Let me clarify exactly how the support we provide to our customers is structured. Any airline that wants to maintain an aircraft has a need when a component runs faulty on the aircraft. They would call for what we call a serviceable component that they can install on their aircraft right away. Our supply chain structure is circular. We send a serviceable component, then they return an unserviceable component that we need to send back in the repair loop, either in our own shops or with subcontracting partners. The customer in this way also becomes engaged in the overall turnaround time of that supply chain, which is a peculiarity of the aviation supply chain. To address your question more directly, non-used stock isn’t the only challenge. What leads an airline to call for a component can be very diverse. It could be a sudden modification due to frequent changes in technical standards in the aviation industry. When that happens, you may have a peak of demand because there is what we call a service bulletin, or a modification that all the airlines want to apply at the same time on all their aircraft. You also have the issue of identifying the root cause of a failure onboard an aircraft. The troubleshooting procedures might suggest replacing multiple components. To secure their own operation turnaround time, they would probably call for all suggested components, use only what’s needed, and return the unused ones to us. As you can tell, the demand is difficult to analyze and predict, especially when trying to dimension the stock.
Joannes Vermorel: Lokad and Air France Industries have now been working together for more than half a decade. Could you describe in your own words what Lokad and Air France are doing together? What have you been doing together for quite a few years now?
Olivier Pelloux-Prayer: Air France has been facing different challenges while trying to pursue new ways to optimize stock and to be more accurate in what we need to buy. Given our understanding as an airline MRO of what airlines need, and what our customers need, that’s what Air France brought to the partnership. Lokad brought all the data science that has really helped us make much better use of the large amount of data that we accumulate on a daily basis. With 17,000 references, it’s definitely not something that a human can just handle one by one. What Lokad brought to us is first, a very attentive approach where Lokad tried to really understand the business use case, and then they brought us all the mathematical background, all the data theory and built algorithms that would fit our business needs. I think this is what brought so much success to our partnership. So, we are effectively using advanced analytics with Lokad, just as you would expect from a company operating in this so-called AI field or whatever you want to call those advanced analytics.
Joannes Vermorel: What surprised you the most, maybe, about the way Lokad operates?
Olivier Pelloux-Prayer: To me, what surprised me, and also pleased me a lot, is the agile way we had of working. So, really bringing a concrete use case and bringing the theory to solve that use case and not just an off-the-shelf product. It’s like all these differentiable programming, all these very advanced tooling that you have that allows us, in simple terms, to better predict demand.
Joannes Vermorel: Could you give us some concrete examples of the value that could be uncovered by going for this sort of approach with Lokad?
Olivier Pelloux-Prayer: I would have tons of examples that I could choose. If I focus on pure asset management and to assess really stock levels, I think in the past, asset managers were spending quite a lot of their time to run through the data and try to get them to tell them something. And the reality of their work today is that with the Lokad system, they now get everything available with some analytics built in, so they spend much more time focusing on what should I invest in and where should I put it in terms of worldwide network, rather than just extracting data. The second example I could bring to mind right away is referring to the recent crisis we all went through, the COVID outbreak. When the outbreak happened, we took a very agile approach with Lokad to try to freeze whatever we could in the supply chain, anticipating that the demand would suddenly slow down, which happened to be the case. And just reintroduce it into our supply chain slowly. That really made us very agile, very fast. We could have taken such an approach, but not as precisely or as quickly.
Joannes Vermorel: This case is quite interesting because it was a completely unprecedented situation, I mean, worldwide lockdowns everywhere. Lokad, as a company, tries to do predictive optimization leveraging historical data. The question is, how is that data even remotely relevant to the sort of crisis that this industry went through?
Olivier Pelloux-Prayer: Again, I think I’m coming back to the principle of the partnership. We, our team, came with a use case that was very concrete. We had an idea, and we brought the data that we were expecting in terms of impact on our customers. That wouldn’t come from Lokad as such, but what Lokad brought us was the tool and the brain to turn that anticipated trend into concrete action. That was the key to the success of that operation.
Joannes Vermorel: You’ve witnessed a significant evolution in the asset management practice at defense industries recently. How do you envision the future, let’s say, a decade from now? What kind of qualities will the industry seek among its newer colleagues who will join the company? Where are you heading, and what type of individuals do you wish to onboard to accompany you on this journey?
Olivier Pelloux-Prayer: I have two aspirations here. The first one, which has already begun turning into reality, involves the creation of our supply chain. To make this supply chain work, we have numerous people involved, not only our own employees, but also our freight forwarders and partners. We have such a vast network of individuals that if we want to improve, we must ensure that any input we receive from Lokad is prioritized. Keeping in mind that our utmost priority is to ensure our customer receives the best service level that won’t impact their operations, everyone should align to meet that objective. This was part of some organizational changes we made recently. However, the vision is to not see the supply chain as independent steps where everyone just does their best within their roles, but to also establish a contingency plan for emergencies or unanticipated scenarios. How do we manage through our organization to activate all these teams, who are passionate about their jobs, to make that single priority happen? That’s one aspiration. My second aspiration is closely associated with the tools we use. We have made significant progress in asset management over the past five years, but ideally, the system should be able to map the overall network and provide us with clear instructions: where, how, and why we need to take action, to bring even more intelligence to the asset management team. We’ve made great strides, but I believe we are destined for an additional five years of new advancements together.
