Lisa Butters, is the General Manager at GoDirect Trade, a marketplace for used aerospace parts, part of Honeywell . Used aerospace parts is a $5 billion a year industry of which almost none of it is done online. Numerous emails and phone calls along with paper work is used to close a transaction. Blockchain was felt to be an applicable technology to manufacture digital trust between buyers and sellers in the used aerospace parts industry.
What is blockchain?
Honeywell uses blockchain technology in an enterprise manner. Lisa defines blockchain as a highly secure way to crowdsource a decentralised database. Traditional enterprises will have a centralised databased with a walled garden approach to data collection. With blockchain technology you’re using the technology so that you can get the data from various enterprises and parties in a secure manner.
Who is Honeywell?
Honeywell is a $40 billion company that operates in numerous industries. Lisa’s particular area is focused within aerospace. Within the aerospace industry Honeywell is an OEM, original equipment manufacturer, of components and piece parts all the way up to engines. Honeywell is the largest repair facility for aerospace parts across the world. Honeywell are also traders who trade used aerospace parts in the market.
Challenges of the used aerospace parts industry
According to Global Market Insights the global aerospace parts market will be worth $14 billion by 2025.
Lisa notes that there are some interesting parallels with the used aerospace parts industry to the used car industry. When buying a used car, buyers are compelled to negotiate on price, or else they don’t feel they’re getting the best price. In the used aerospace parts industry people don’t feel responsible if they’re not negotiating the best price on the parts.
There are fundamentally two reasons why that industry is so manual with emails and phone call:
- High dollar transactions – On GoDirect Trade transactions can go anywhere from nuts and bolts all the way to multimillion dollar engine, with the average transaction at around $10,000
- Safety – The parts being sold on GoDirect Trade have to be safe enough to reinstall back into an aircraft. This requires a very high bar of safety within the aircraft aerospace industry.
The combination of high dollar transaction and safety of parts to be reinstalled back into an aircraft are the two reasons why it has been difficult for buyers and sellers to move their transactions online. That are the reasons why Honeywell found blockchain technology so interesting for this space because it helps to manufacture that trust for people to start checking out online.
Guaranteeing the quality of use aerospace parts
According to NTSB data compiled and analysed by the NVC Bar Area Investigative Unit, unapproved aviation parts played a role in nearly two dozen crashes that killed seven and injured 18 others since 2010.
Lisa states that she has around 20 competitors in her space that list products for sale and facilitate some kind of online transaction. GoDirect Trade though is the only platform that requires price, product images, and quality documents for a product to be listed for sale. This ensures that the bar for quality standards is set very high and that all purchased products have their associated quality documents.
GoDirect Trade’s blockchain enables the quality documents to be scanned and listed with their associated products so that they’re easily searchable and accessible.
Lisa recognises that prior to blockchain technology there were attempts to launch marketplaces by ensuring the listings were transparent and that products had the right quality documents. However, she believes they’re failing was in not setting the “bar high on these kind of documentation standards and really keeping the bar high”. For example, they would enable their sellers to provide document to the buyers but it wasn’t required.
Lisa believes that transparency is really hard for sellers that are used to legacy approaches to selling that involves scanning documents and emailing them back and forth. These sellers aren’t used to having an ecommerce presence and managing an online storefront.
About GoDirect Trade
GoDirect Trade differentiates itself from its competitors by providing a great customer experience and by being transparent with the consumer with regards to price, product images and the paperwork (quality document). The 3 Ps. For Lisa that is the foundation, the key is in providing trust which is what blockchain technology will provide.
This however does require a multi-pronged approach to win over individuals who are stuck in the old ways of doing things;
- Introducing a technology that brings so much efficiency to the transaction that its users don’t want to go back to the old ways
- Win over sellers one by one in terms of bringing them onto a digital storefront and into the digital era and create that FOMO (fear of missing out) feeling within the seller community
Lisa believes that by bringing in the lowest price and efficiency in the transaction that will shift the industry. Once you see an increase in millennials and Gen Zs entering into that industry they won’t spend 15 minutes on the phone to try and get the best price when they can do that online.
To consortium or not?
Lisa wouldn’t characterise GoDirect Trade as Honeywell’s solitary approach to blockchain technology. She argues that Honeywell is a big cheerleader for collaboration and is working with mom and pop businesses and big businesses to try to collaborate on blockchain trials.
However, blockchain is still very much in its infantile stage within the aerospace industry and conversations of consortiums between OEMs is premature as the adoption rate is not big enough yet.
What Honeywell is focusing its efforts on is for big and small name companies to collaborate by creating a node and linking together or spooling up their own network and Honeywell acting like a chain of chains to connect them together. It’s also about going out to small repair shops, channel partners, aircraft dismantlers and having them understand how to use the user interface and load records after they’re authenticated.
Embracing data standards
When it comes to an aircraft’s airworthiness documents, 8130 and EASA Tags are always the standard. GoDirect Trade uses 8130 and EASA tags by having them scanned and added onto the blockchain with their associated aircraft part.
Honeywell is also a repair shop and it generates thousands of those documents every day which is recorded on chain so that customers who repair parts with Honeywell can reconstruct those documents.
Equally GoDirect Trade is setting some of its own protocols for the industry as it builds a record of an aerospace spare part via its serialised number. All events related to that serial number will be logged and recorded on chain so that any prospective buyer will have access to all of those events.
GoDirect Trade built on Hyperledger Fabric
There are two reasons why GoDirect Trade chose Hyperledger Fabric:
- Hyperledger Fabric provided Honeywell with an enterprise grade solution. It allowed them to develop multiple channels. One channel is for GoDirect Trade and other business groups within Honeywell can buid blockchain trails on separate channels
- Being part of the org community that is well organised and supportive really helped Honeywell connect with the right people and get the right support
GoDirect Trade and Honeywell Aerospace Trading
Lisa explains GoDirect Trade in a similar manner to Etsy, the marketplace for artisans and craftsmen. GoDirect Trade facilitates the creation of specialised storefronts in less than five mintures for the aviation and aerospace industry.
Honeywell Aerospace Trading (HAT) is just the trading arm of Honeywell. Similarly, to stock market traders who try to buy low and sell high, it’s the same thing but for aerospace parts. Before GoDirect Trade, HAT had no ecommerce and was like an old fashion trading desk.
When GoDirect Trade went live, HAT launched an ecommerce storefront and became one of the most successful store fronts inside of GoDirect Trade.
Moving beyond the trail
Honeywell uses SAP as its ERP (enterprise resource planning) system for its 100 OEM and repair shops around the world. Its ERP system is fully integrated within its blockchain ledger. Every time Honeywell manufacturers a part, every time it repairs a part, every time it generates airworthiness tags, all of that information gets written on chain.
That is Honeywell’s approach to doing an initial trial and then fully integrating it into what they do. Because now all of Honeywell’s manufacturing birth events will always be on chain with a provenance record attached to it.
GoDirect Trade’s plan for 2020 is about increasing adoption across its user base from its buyers or sellers community. That will inform the product roadmap features to help make sellers more successful and transactions easier for buyers.