Global MRO industry needs to change tech trajectory

The MRO market is set to grow around $35 billion in the coming decade. However, as it grows, new technologies will transform revenue streams in the background, a recent report from Oliver Wyman finds. These changes will be in, among others, predictive maintenance and new maintenance technologies. Disruptive technologies, like additive manufacturing, could also come in to play and radically change an industry that still lacks a drive to innovate.

In a recently released report, titled ‘Turning the Tide: a wave of new aviation technology will soon hit the MRO industry’, Oliver Wyman explores how technological advances in repair scheduling and disruptive technologies like additive manufacturing are set to change how the industry operates and spawns revenue streams. The report is based on a survey of 100 people, of which 46% are airline employees, 36% work for MROs, and 6% for OEMs.

The MRO market is set to grow from $67.1 billion in 2015 to $100.4 billion by 2025, with the market dynamics within segments expected to undergo significant transformation. According to Oliver Wyman, technological advances could cut 15% to 20% of MRO spending from the aftermarket, and spawn new business models and revenue streams. In total, this would amount to a redistribution of $10 billion to $15 billion of value among current industry players and entice new competitors to enter. 

Technological development
The survey respondents believe that new repair technologies (58%) and predictive maintenance (48%) have the most potential to upset current market dynamics. Of lesser concern are ‘composite repair capabilities’ (26%) and ‘live maintenance through wearable and mobile tech manuals’ (26%). The lowest concern comes from additive manufacturing, 3D printing, which was listed by 13%.

Predictive changes
Predictive maintenance has a considerable potential to transform the market by adding benefits of replacing parts before breakdowns occur. This decreases labour costs by reducing unscheduled repairs, out-of-service events, and costs for employee time-on-tools. One issue highlighted by the consulting firm, however, is that much of the data on aircraft maintenance requirements might, like passenger data, be in the hands of carriers, providing them with a considerable advantage in negotiating MRO agreements, as well as reducing the overall demand for MRO.

Additive technology
While data and the predictions from data are set to disrupt the market, other disruptions are also on the horizon, such as additive manufacturing. The survey shows that respondents are, however, not particularly phased by the coming of this technology, with only 1 in 5 saying that they expected the technology to affect the industry in the coming five years. Of the MROs only 11% think the technology will be good for their industry. As a consequence, few MROs are moving to engage with the technology, even in discussion. Over a third (34%) is not discussing the technology at all, while another 34% says they are engaged in internal discussion and assessment and for a quarter (24%) internal development is in progress.

MRO industry innovation
Innovation with new technologies remains elusive under respondents. As many as 73% of MRO survey respondents indicate they attribute 10% or less of forecasted 2015 revenues to products and services stemming from internal MRO-related research and development conducted within the last five years.

The reasons for the low level of innovation are multivariate. However the most prominent reason (50%) is budgetary or capital availability, followed by the lack of risk taking that the new offering would improve on current best practice (44%). The total cost-vs.-benefit was seen as an issue for 44% while organisation resistance ranked fourth at 35%. Organisations do see that there is a need for change, with only 6% citing staying the same as a reason to not innovate.

Innovation in the industry does happen however, yet according to the respondents, such developments come in waves. Just over a third (39%) say innovation is periodical, while 27% say it is sporadically. One in five (21%) believes innovation happens because of OEM innovation, while 13% say that it occurs frequently.

The authors note however that the next wave might well be about to cusp: “For a business managed through incremental innovations, this is a rational approach. However, disruptive change will challenge management to think beyond standard practices and commit time and resources to successfully pick and choose technologies and develop beneficial business models. Within MROs, there is a need for clarity, purposeful analysis, and selection. The time for placing bets is now.”