“In-flight catering is 70 per cent logistics and 30 per cent cooking”
As the President of KLM Catering once said: “In-flight catering is 70 per cent logistics and 30 per cent cooking.”
The in-flight service supply chain is extremely complex, that´s why it offers so many opportunities for improvement.
The inflight service industry is a vast and complex activity. Near 2 billion passengers are served onboard each year. It is probably one of the most complex supply chain models in the world for a wide number of reasons.
Large international airlines operate between 500 and 1,000 takeoffs and landings every day. A single A380 or 787 requires thousands of items loaded onto it before it flies. These items range from meals to toilet paper, from newspapers to headsets. Food items in most cases are still produced fresh while inflight equipment for crew or passenger use, tend to be recyclable items.
When you multiply the amount of aircrafts in operation any single day, times the amount of equipment being used on-board per plane, times the different cabin configurations, times the number of locations they fly into, etc. the logistics complexity is very evident.
In-Flight Service Supply Chain major stakeholders
There are four major stakeholders in the in-flight service supply chain. (Five if we include the passenger, which I won´t cover in this post)
- The Airlines
- The Caterers
- The Suppliers
- The Logistic service providers
All of them have shared responsibilities for the total cost of supply chain ownership. In the lines below I will try and flag up some of the decisions adding cost to your supply chain, as well as what opportunities can be explored and further developed in order to minimize waste and achieve real efficiencies across the in-flight service supply chain.
Airlines are responsible for the design of the onboard service and, as a result, their decisions regarding food and equipment served onboard can drive an enormous part of the overall supply chain cost.
For some reason, the product development and marketing teams of each airline believe that differentiating their equipment from the equipment used by their competitors, is something that may affect the passenger decision regarding what airline they will fly with.
How important is logoed equipment to the economy class passengers?
Surveys over the years suggest that economy class passengers – 90%+ of the total No. of airline travelers in the world fly on economy class – appear most concerned about safety, on-time performance, seat and leg comfort and entertainment on-board and checking process and many other factors, but they do not seem to care much about whether a tray, cup or napkin is logoed or not.
This continuous search for customization of “low value added” items, causes increased cost of supply by individual airline, preventing the achievement of economies of scale which could be worth millions of dollars in savings.
Caterers have two main roles in the in-flight supply chain:
- Cook (Less and less though, due to the increasing need for budget cuts on the airlines side)
- Loading on board and to assemble trays and trolleys.
The caterer is often in an unusual and sometimes difficult, position. Although they are a customer of the supplier, the products used may not be of their choosing but may have been determined by the airline.
However, the caterer is most of the times responsible for keeping and accounting for all food and equipment served onboard and these products are usually delivered directly to the caterer’s store.
The challenge for caterers is that the products are the property of the individual airlines served by the caterer. Products belonging to one airline cannot be used for another, even if the two airlines use identical products.
This situation have forced caterers to expand their storage and logistic areas, to an extent where in some cases it represents up to 30% or more of the total space at the catering unit.
This is another good reason for the airlines to focus on the standardization of food recipes and most importantly, the harmonization of equipment used in economy class, across the entire industry.
Most of the complexity involved in running a catering unit for airlines has to do with the wide range of specifications that a caterer must be able to handle. In most cases the variances between recipes or equipment type is minimal, but it still forces the caterer to maintain both physical and data flows individualized by airline, increasing the amount of complexity, space and labor, plus widening the room for potential mistakes and extra costs.
The opportunities for economies of scale at caterer level are massive too, but as stated in the previous point, it requires full consensus from major airlines around the world.
Suppliers may supply the inflight industry in two main ways.
- Airline nominated product: The airline defines and negotiates product specs, amounts, price, etc.
- Direct sales to the caterer: The caterer buys the product based on what the airline specified to them during the menu design session.
These manufacturers can make these items in volume at a lower cost than the in-flight kitchen can. The cost of labor to mass produce meals is obviously cheaper a good distance away from large cities where airports must exist.
Today most equipment is manufactured in Asia and then shipped into catering locations around the world. The problem is that equipment manufacturers make separate shipment arrangements by airline, resulting in inefficient cost of transport and logistics, plus added complexity and waste across the entire in-flight supply chain.
Therefore, the opportunity for economy of scale resides in the consolidation of purchases and inbound transport flows at origin and by destination, which could generate huge opportunities for economy of scale and efficiencies at global level.
The logistic partners:
The logistic service providers in the in-flight supply chain are typically global logistics companies, such as Kuehne & Nagel, DHL, Panalpina, Schenker, Expeditors, etc.
Those companies are specializing in moving goods around the world, often in containers. Using global logistics service providers allows the airline and caterer to better manage the flow of materials from aircraft to flight kitchen and back again.
Logistics is concerned with adding value and reducing waste across the whole in-flight supply chain system. It is particularly concerned with non-consumable or non-disposable stock items (crockery, glassware, trays, etc.) as this is where the highest product values reside and therefore, where most of the airline´s capital is tied up.
In order to use equipment stocks effectively and efficiently, logistics is concerned with:
- Demand-supply planning and forecasting
- Managing purchase contracts
- Transportation (inbound and outbound)
- Inventory management of stocks and ‘dwell time’ (time not in use)
- Stock balancing across the network
- Galley and trolley planning
The airline business is increasingly competitive and most airlines have started to consider opportunities to improve their competitive edge through the achievement of cost efficiencies across their in-flight supply chains.
The opportunities in this field are bigger than in any of the previous opportunities covered in the sections above, this is why over the past years we have seen the airline´s supply chain departments getting increasingly involved in the airlines strategy design and execution process.
The most common opportunities for efficiency in the in-flight supply chain are related to:
- Rationalization of amount of product being purchased
- Reduction of No. of SKUs being managed
- Reduction of amount of miles traveled
- Reduction of storage space
- Acceleration of Customs clearance process
Current trends by stakeholder
Airlines: Acquisitions and merged operations between major carries by Region. Increased focus on procurement rationalization, product standardization and supply chain efficiencies as a key strategy drivers.
Caterers: Increased focus on continuous process improvement and efficiency. Application of well-known continuous improvement methods, such as LEAN and Six Sigma by all major caterers in the industry
Suppliers: Both food and equipment suppliers have begun to eliminate some elements of the supply chain so that they can supply airlines from wherever their factories are located, minimizing cost related to space and labor (food) double-handling and extra miles traveled (equipment)
Logistics service providers: Global logistic service providers have started to realize the opportunities within the airline industry. Major players such as DHL, Kuehne+Nagel, Schenker, Panalpina, etc. have begun to setup specialized teams to support airlines in their quest for supply chain efficiency.
Real efficiencies can only be achieved through:
- Relationship cultivation: From adversary style relationship management to partner relationship management. Better understanding of In-flight supply chain cost implications across key stakeholders. Focus on issue prevention and long , sustainable results.
- Supply chain strategy alignment: Focus on the identification of mutual benefits across multiple stakeholders. Shared objectives, incentives and rewards. Focus on the identification of synergies across supply chain networks.
- Data management collaboration: From supply-demand forecast to end-cast. Accurate data from all key stakeholders. Real time data, from everywhere in the supply chain network. Focus on improved data accuracy across supply chain networks.
- Inflight Service harmonization: Deeper understanding of passenger habits and behaviors through intelligent management of data generated along the supply chain network. Focus on economy of scale via standardization of economy class equipment and food recipes.
I hope you enjoyed the reading and wish you all success with the management of your in-flight supply chains.
Should you have any question or comment, you can contact me on +1 571 326 8252 or via email: firstname.lastname@example.org