An aerospace parts marketplace flies high with blockchain

Blockchain is one of the internet technology applications that will transform digital commerce by making transactional and supply chain information easier and faster to manage, according to industry analysts covering information technology and ecommerce.

For many B2B ecommerce organizations, blockchain applications have yet to make a big difference in how well they manage information.
But in Phoenix, a B2B marketplace that links together buyers and sellers of aerospace parts is out to prove that blockchain technology can make a difference in making digital commerce more efficient.

GoDirect Trade, a four-year old marketplace that operates as a unit of Honeywell Aerospace, has developed and implemented a new blockchain feature that displaces the reams of paperwork and time needed to list certified aerospace parts for resale. Blockchain is a critical tool helping GoDirectTrade end the use of paper and manual procedures in the $4 billion aerospace parts market, the marketplace says.

A ‘game changer’ for aviation parts commerce

“For those familiar with the challenges around missing aviation paperwork, this solution should immediately scream ‘Game Changer,’” says GoDirect Trade general manager Lisa Butters. “We’ve invested heavily in technologies like blockchain to digitally manufacture trust between the buyer and seller.”

Blockchain is an open, distributed ledger that can record transactions between two or more parties efficiently and in a verifiable and permanent way, according to Harvard University. A digital blockchain ledger can be programmed to trigger transactions automatically—a process Honeywell is using at GoDirect Trade.

Last June, Honeywell Aerospace linked its enterprise resource planning system to a newly developed blockchain ledger. The goal was replacing the weeks of manual procedures and paper forms needed to document, re-certify and list refurbished aerospace parts for resale with a more fast and efficient digital process.

Honeywell Aerospace and GoDirect Trade also had an ambitious goal: Using blockchain to list an excess parts inventory valued at more than $1 billion on its marketplace. “This was Honeywell’s commitment to store all critical events related to the manufacture and repair of aviation parts on the Blockchain ledger,” Butters writes in a recent blog posting. “In addition, we took it one big leap further and also integrated quality form data to the ledger as well.”

It took six months to develop the blockchain procedures and programs to list the parts inventory.

A better way to list 25,000 parts

Without blockchain, the project would have been nearly impossible—or impractical—even for a big organization the size of Honeywell Aerospace, a $10 billion division of Honeywell International Inc.

Doing a $1 billion parts inventory in any way less than fully digital would have taken 2,916 hours, or 365 workdays, Butter says. “$1 billion in inventory equated to roughly 25,000 listings, and each listing would have required at least seven minutes in quality paperwork touch time,” she writes. “That’s over 2,916 hours we would have spent on the ridiculously manual process of downloading and re-uploading quality paperwork.”

With its new blockchain ledger in place, GoDirect Trade now has the tools in place to immediately list parts with images, specifications, product descriptions, certifications and needed paperwork for about 25,000 parts.

Without all the needed paperwork in place, listing refurbished aerospace parts can be a very expensive process.

Saving millions in processing costs

For example, Honeywell cites an incident where the cost to a parts seller to manually replicate all the necessary paperwork for the sales of 39 refurbished aerospace parts was nearly $2 million.

When an older aircraft such as a cargo jet is retired from active use, a common industry practice is stripping or “harvesting” the jet of all reusable parts.
Before any part can be put up for resale, it first must be refurbished, and a long series of forms known as Federal Aviation Administration 8130 forms must be meticulously filled out. The forms contain parts and maintenance histories among other federally mandated use and certification requirements.

If the paperwork can be supplied during each stage of the resale and refurbishing process, the seller must manually recreate all the forms. In the case of the one seller, that process cost was $1.9 million.

“The reality is that the lessor goes through each document and, in the end, inevitably finds missing paperwork—say, the lessor discovers that over the course of the five-year lease term, multiple repairs were completed among the thousands of components and piece parts on the aircraft,” Butters writes. “Say that 39 FAA Form 8130 tags are not accounted for, which is code for missing paperwork on 39 parts—sure enough, the lessee has a very good story as to why all thirty-nine forms are missing, but if you’re missing quality documents, all 39 parts are required to be re-certified, repaired or overhauled.”

With blockchain, the process could have been fully digital and, in the process, save the seller and the buyer time and a lot of money completing their deal, Butters says.

GoDirect Trade does not expect blockchain to immediately do away with all aerospace refurbished parts paperwork and manual procedures. But it does want to make blockchain more of a universally accepted technology going forward.

“Remember, to list anything for sale on GoDirect Trade, it requires price, product images, and paperwork,” Butters writes. “It might seem like a no-brainer to require these three simple things for ecommerce, but in a $4 billion industry where virtually none of it is transacted online, sellers simply aren’t set up to collect and organize these digital artifacts.”

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