I) Company overview

Ethiopian MRO Services is a division of Ethiopian Airlines and is established in 1957 to provide
MRO services for aircraft, engines and components of Ethiopian and third-party customers. At
present Ethiopian MRO has work force of over 1800 fully qualified technical staff and a facility
certified by competent regulatory bodies. (Ethiopian Airlines, 2022). This business unit is
responsible for the engineering and maintenance activity of Ethiopian airlines. Although it is one
business unit of the parent company, it is this subdivision that is responsible for taking the
highest share in purchasing and logistics when measured in terms of money and volume.

According to Ethiopian Airlines 2019 annual report, the Ethiopian MRO warehouse stock has
6.51-billion-birr asset which accounts 1.7% of the total asset the company owns (369.96 billion
birr).

1. Material management practice at Ethiopian MRO

Ethiopian airlines and its SBU’s material management functions are structured under the chief
financial officer (CFO). The whole structure could be seen on the company’s organization
structure shown below (Assefa, 2018)

1
And the material management division could also be further structured based on the required
activities. The material management section organization structure is shown below.

The function of material handling could well be expressed by following the sequence of events
that will take place through the whole cycle. We can subgroup the whole activity in to three
stages

1.1 Preparation stage

1.1.1 Determining the requirement

Material requirements planning (MRP): Responsible for calculating the materials and
components needed for the operation. The primary objective of MRP is to make sure those
materials and components are available when needed for operation. To perform the activity well,
this section is expected to work in coordination with aircraft maintenance planning and
production planning section.

2
Using the information obtained from aircraft maintenance planning section, the material
requirement planning section will ensure that materials required for a certain maintenance
activity are available before maintenance activity is initiated.

Therefore, this section will identify the material requirement,

 check if the material is available on warehouse,

 initiate the purchasing process ahead if the material not available at warehouse

1.1.2 Securing approval from quality assurance for the vendor

To ensure safety, there are requirements that ensure that the part manufacturer, supplier or
distributor is approved by international regulatory bodies. Additionally, the buying company is
expected to check the quality system, certification and need to follow the quality performance of
that supplier.

To do everything listed above, the purchaser is expected to request an approval from the quality
assurance section before preceding any purchase. This system is controlled by a system,

3
Maintenix, which ensure that Purchase order at one vendor couldn’t be activated unless the
approval is secured at the quality assurance.

1.1.3 Strategic sourcing

Strategic Sourcing is a process designed to purchase the best products and best services for the
best value. Strategic sourcing is a function between MRP and purchasing. It tries to gather data
from the MRP and previous consumption rate of each item on maintenix(software).
(Ramachandran, 2018)

This section tries to get the advantage of buying in bulk to get discount and gain bargaining
power over supplier on some items. By identifying items that are required in large amount an
agreement will be settled between this section and suppliers. The agreement could be for one
item or a group of item on a single agreement.

This would avoid the need have a repetitive purchase request and logistics cost.

1.2 Purchasing stage

1.2.1 Purchasing the item:

Purchasing is the function in a firm responsible for the professional management of a firm’s
interface with the supply market, to ensure its supply with the necessary goods and services
provided by other organizations, i.e. suppliers. (Schiele, 2019)

1.3 Inventory follow up

1.3.1 Differencing financial class

 Tracked item are items whose status, usage and history is closely monitored.
 Serial controlled parts are followed using serial numbers like tracked items,
but at lower level.
 Batch controlled: are parts that are not followed individually, but as a group.

1.3.2 Follow up at warehouse

I) Different room based on part nature
 Rubber material
 Aircraft battery
 ESDS parts
 Chemical
 Others
II) Use of FIFO principle

4
 III) expiry date follow up(daily, weekly, monthly, quarterly and
yearly)

1.3.3 Surplus management

 is a section that ensures surplus policy
 Items that haven’t been used for three years at warehouse will be sold. No
item shall wait stay for more than three years at warehouse.

1.3.4 Waste handling

 Collecting leftovers, perform chemical treatment to neutralize or sell the
chemical for companied that require those chemicals.

2. Competitive priorities at the company

Ethiopian airlines is continuing to strengthen the seven strategic business units / profit centers in
the three business segments operating under the umbrella of the Airline Group. Accordingly,
business strategies of each of these profit centers have already been prepared in line with the
overall objectives and strategies of the group.

2.1 Competitive priorities at Ethiopian MRO

Ethiopian airlines maintenance and engineering division is in fact trying to implement the four
competitive priorities to get the targeted market share. The four competitive priorities, Cost,
Quality, Time and flexibility have been included on the business strategy of the company.

Since each of the competitive priorities is interrelated, the company has interwoven those
priorities on the business strategy. This would enable the company to follow the implementation
easily.

a) Product/service strategy:
Ethiopian MRO shall offer to the African customer airlines MRO service packages
tailored to their specific needs from any of the MRO Services portfolio.
 Total care Support
 CAMO service
 Component Exchange Programs (CEP)
 Technical handling
 Mobile Repair Team

5
  Airframe base maintenance
 Engine/APU repair/overhaul services
 Component repair service
 Secondment of maintenance personnel
 Design and certification service
b) Pricing strategy
 Ethiopian MRO Services shall exercise preferential pricing schemes that encourage
loyal customers, airlines that commit to long term partnership, and airlines that bring
higher business volume.
 Ethiopian MRO Services shall offer its services at prices with adequate profit (cost
plus margin) but at the same time which shall always be much lower than prices
from other potential Service providers.
 Efforts shall always be made to keep the product/service pricing at reasonably low
level to attract new businesses and deter new entrants into the MRO service business
of Africa. As part of this effort, services shall be aggregated into unique packages to
provide unique value for money to customers and make it difficult for potential
competitors to match.
c) Promotion strategy
 Ethiopian MRO Services shall use the following channels to promote its services as
value for money MRO service provider:
 Advertisements on International and regional MRO publications
 Organizing and sponsoring MRO Conferences in Addis Ababa
 Attendance in international and regional MRO conferences
 Its own promotional publications
 Promotions made on the Ethiopian Airlines Group promotional media.
d) Distribution Strategy

Ethiopian MRO Services shall sell its services through the following channels:

 Direct Marketing: contacting potential customer airlines directly

through electronics means or personal visits to their offices
 Participating in bids floated by customer airlines

6
  Through aircraft manufacturers and other OEMs who would like to
sell their products,
 have responsibility to support these airlines, or commitments as part
of License agreements.
 Joint marketing and sell with partners under formal agreements.
 Ethiopian MRO Services shall avoid selling its services through agents
unless there are compelling reasons to do so which shall first be
justified to and approved by Group CEO.

Review:

 Flexibility:
 Tailored service for different customer will decrease the turnaround
time.
 The company is providing flexible pricing. Such pricing would attract
customers as they would benefit from the mutual agreement on those
flexible pricings.
 TIME/Place:
 The Company is providing a mobile maintenance for “Aircraft on
ground condition”. Such service is considered as a special service
that is obtained at the required time and place.
 COST:
 The cost for service is always targeted below the competitor price.
This is achieved through reduced labor cost advantage the company
has.
 Tailored and flexible service does also enable the company to provide
service at reduced cost compared to the competitors.
 Quality:
 Quality is obtained from a streamlined end to end process. Such
process could be achieved through long term agreements with
customers and preparing in advance for the job to perform.

7
  Additionally, details of the quality process are addressed on question
number 3.

3. Quality of product/service at Ethiopian airlines

Unlike other industries, there is no single metrics that can be used to measure quality of the
products and service airlines offer. But, the most known competitor for airlines is Skytrax.

3.1 Dimensions of quality measure

The dimensions that are used to measure the service or product are too many. Additionally, each
dimension has its sub parts that need to be evaluated.

 Baggage handling: on time delivery, no baggage missed per 1000 passenger

 On time performance: number of delays on departure/arrivals for the number
of scheduled flights.

According to world airline award some of the award methodologies used are

DDITIONAL COVID-19 SURVEY CABIN SERVICE GROUND / AIRPORT ONBOARD PRODUCT

Information about airline COVID-19 safety measures Boarding assistance Airline website Seat comfort
Social distancing at airport check-in Service friendliness / hospitality Online booking Cabin cleanliness
Hand sanitiser available at check-in Service attentiveness / efficiency Online Check-in Toilet cleanliness
Check-in staff wearing PPE correctly Staff language skills Baggage / Carry-on policy Cabin lighting / ambience
Social distancing at boarding gate area Meal service efficiency Airport ticketing Cabin temperatures
Boarding efficiency / social distancing applied Cabin presence through flight Check-in : waiting times Cabin comfort & amenities
Document handling by airline staff Cabin PA announcements Check-in : service standards Reading materials
Boarding gate staff wearing PPE correctly Cockpit PA information Self Check-in Airline magazine
Seat social distancing on quieter flights Assisting families Pre-boarding procedures IFE screen & interface
Supply of sanitiser / disinfectant wipes Problem solving skills Boarding efficiency Choice of AV programming
Visual cleanliness of seat area Staff attitudes Airport staff: friendliness On demand AV options
Visual cleanliness of table / armrest Staff service consistency Airport staff: efficiency Cabin Wi-Fi & connectivity
Visual cleanliness of IFE screen / controls Staff Grooming Airline Lounge : product facilities Quality of meals
Staff advice on facemask usage / rules Airline Lounge : staff efficiency Quantity of food
Service systems for food & beverages Airline Lounge : staff hospitality Selection of meals
Cabin staff compliance with PPE usage Transfer services Standard / choice of beverages
Washroom queue system / distancing Arrival services Selection of buy-onboard F&B
Staff handling of customer facemask non-compliance Baggage delivery Prices of buy-onboard F&B
Cabin staff control of deplaning process

Source: Skytrax (2022)

Using the above quality measure, Ethiopian airline was ranked 37 th internationally after
improving from the previous position 44. (Skytrax, 2021)

8
3.2 Overall evaluation
Ethiopian airlines is a four star airline based on the evaluation of the Skytrax measurement. The
4-Star rating represents where the airport / cabin staff service or product standards are meeting a
good quality level (but not the best) for the relevant rating topic item. (Skytrax, 2022)

3.2 Evaluation on the quality performance

3.2.1 Reason for the positive results

Ethiopian airlines have in fact implemented the idea of quality management system. This could
be seen by the fact that VP (vice president) of internal audit, QMS, SMS, compliance and
business sustainability division is formed and structured under CEO and reports to the GCEO.

 QMS and compliance: it is quality management system is a system that tries to optimize
process and ensure the compliance of the company to the defined regulations and
standards.
 Internal audit: is a means to continuously monitor and check the job process against the
standard, it is through this the company could ensure compliance and QMS.
 Business sustainability: ranges from proper use of resource to the idea of corporate social
responsibility by considering the environment (Nature).

The quality management system does interact with customers, and this will enable the company
to get feedback and take a root cause corrective action.

Additionally, each business unit at the company interacts with the other business unit as
customer for example flight operation is a customer for Ethiopian MRO. Such arrangements
have created accountability for a defect on the quality of product/service on business unit is
offering.

Additionally, each business unit have a quality assurance section that is run by managers, which
ensure that the system or process is functioning properly.

3.2.2 Improvement areas

According to Skytrax measure, there are currently 11 airlines with five-star ratings. Having five
stars or four stars mark by itself worth nothing if it were not associated with nothing. But, to

9
become a five-star airline, airlines need to improve many parameters which would affect the
quality of customer service/product. This would directly affect the customer satisfaction.

Increasing customer satisfaction would help a company have loyal customers which could be
used as the basis for making a profit. Therefore, the company needs to improve on the areas that
have poor performance and run a continuous improvement on areas that have achieved five-star
ratings.

Although human need could not be satisfied, because even five-star airlines have not achieved
full customer satisfaction, the airline shall work to satisfy the needs of its customer to the fullest
possible.

Recommendations

 Ethiopian Airlines already have a quality management system, it shall ensure the
implementation of the procedures, especially on section responsible for getting low rating
on the measurement.
 Ethiopian airlines should increase its MOR are to accommodate more business and
inventory.
 Ethiopian airlines should analyze the advantage and disadvantage of keeping large level
of stoke.
 The company does also have “R and D” section, this section shall also work continuously
to meet and exceed customer satisfaction.

10
Reference

 Assefa, M. (2018). The Effects of Outsourcing Logistics Activities of Ethiopian Airlines

on Its Logistics Performance. (Doctorate Thesis) St. Mary’s University, Addis Ababa,
Ethiopia
 Ethiopian Airlines. (2019). Annual Report.
https://corporate.ethiopianairlines.com/docs/default-source/annual-performance-reports/
et-annual-report-2018-19.pdf?sfvrsn=84e49858_2
 Ethiopian Airlines. (2022). MOR. https://corporate.ethiopianairlines.com/mro/base-
maintenance
 Ramachandran, Ramakrishnan. (2018). Strategic Sourcing.
10.13140/RG.2.2.30668.16006.
 Schiele, Holger. (2019). Purchasing and Supply Management. 10.1007/978-3-319-92447-
2_4.
 Skytraxt. World Airline Award (2022). https://www.worldairlineawards.com/worlds-top-
100-airlines-2021/ .

11