For an industry that relies on precision engineering, aerospace does not have a great reputation when it comes to getting the right replacement part quickly to a customer who needs it urgently. Stories abound of aircraft grounded for days for want of a widget, as inefficient distribution operations struggle to send it from A to B.
But that is changing, as aerospace manufacturers abandon methods that have served the sector for decades and adopt a more novel approach adapted from the automotive, medical and grocery retailing industries.
Raytheon Aircraft’s vice-president customer service and support, Ed Dolanski, came to the company from US retailing giant Wal-Mart in 2001 and has revolutionised its parts distribution operation, drawing heavily on his experience in supplying a nationwide chain of stores and introducing a “retail-based logistics and transportation concept”. The company shifted from a traditional model where stock replenishment was done manually, to a system in which customer needs can be forecast and stock levels maintained appropriately.
More and more suppliers are also taking part in Raytheon’s Vendor Managed Inventory (VMI) scheme, which allows them to see which parts are being used at Raytheon’s maintenance centres and replace them without waiting for an order. The company hopes 80% of its suppliers will be taking part in the scheme by the end of 2007.
Since 2001, Raytheon has been able to cut the value of its parts stock and the cost of storage by 38% while increasing fill rates from 57% to 94%, says Dolanski. But he is also looking beyond the retail model and benchmarking Raytheon’s activities against the medical sector, another industry where the speed at which a piece of equipment can be serviced and up and running again is crucial.
Honeywell is also investing heavily in researching technology that allows “pre-positioning” – pre-empting when its parts will be needed by customers and getting them there in advance – and “improves the efficiency and utilisation of aircraft”, says Jeffrey Smith, director global asset availability, customer and product support. The company is carrying out trials, with a number of customers, of a sensor-based system that predicts when equipment such as auxiliary power units and avionics products will require servicing or replacement. Ensuring the accuracy of the sensors is vital, says Smith. “It would be as bad for our customers to tell them prematurely to pull an engine as it would be not to tell them and have a failure.”
Smith also believes Honeywell can learn lessons from other industries, borrowing ideas from companies such as FedEx and UPS in tracking packages, and from retailers such as Wal-Mart in the use of satellite technology to manage stock replenishment. “We see investing in this area as a prudent and appropriate move forward to match what the market is requiring,” he says. The company is also studying a telematics-based system that draws on technology used extensively in the automotive industry. In Honeywell’s existing “store front” system, parts are located at customer sites and managed through a web-based system, but belong to Honeywell until they are used. Although the system still accounts for only 10-15% of Honeywell’s aftermarket spares business, interest is growing, says Smith, who thinks uptake “could easily double within one to two years”.
In parallel, Honeywell is shrinking lead times on its conventional model of spares support to a point where more than 80% of parts are with the customer within five to 10 days from the request. This is a significant improvement on 10 years ago, when the wait would have been 30-60 days, says Smith.
Boeing’s Integrated Materials Management (IMM) scheme has been running for two years to manage the supply of expendable parts from suppliers to seven customers. Through the scheme, Boeing forecasts customer needs and manages the logistics of parts supply, passing on cost and efficiency savings to the customer. IMM’s global operations manager, Jeff Waterfall, says Boeing is in talks with several other customers about their inclusion in the scheme, and plans to extend it. “Within 12 months we should have a rotables programme in scope and being developed,” he adds.
One of the biggest challenges facing Airbus in aftermarket parts distribution has been the growing spread of its fleet throughout the world. The manufacturer has regional parts centres in Beijing, Dubai, Frankfurt, Hamburg, Singapore and Washington, allowing airlines to save on inventory costs by not having to store parts themselves. Under Airbus’s Customised Spares Logistics (CSL) scheme, the airframer takes care of all the transport of parts.
Pierre Steffen, Airbus’s vice-president material support, predicts the company could have 30-35 users for the service by 2006 as customer mentality shifts, with new takers for CSL services coming from operators already using Airbus’s just-in-time Customised Lead Time (CLT) services. However, Steffen concedes that airlines may be wary of giving up their own expertise in managing a parts operation and relying on this service.
Just-in-time distribution has already been so successful that, despite not marketing it for the past two years, Airbus still receives customer requests for it, he says. Flexibility is crucial too – Airbus customers can choose from a range of modular services, including local support, process changes, supplying and sourcing all parts or just proprietary parts, leasing tools, and carrying out or subcontracting repairs. “Our strategy in spares is not to be a profit centre,” says Steffen, “it’s a totally different approach as a service centre. The customer comes first. To us it is not a money-printing machine, but a service.”
Supporting a global customer base is key for Raytheon, too. The company now employs a “hub-and-spoke” model for its aftermarket parts distribution activities, with hubs in Dallas, Texas and Liege, Belgium, and spokes in the form of 102 authorised service centres worldwide. Raytheon is likely to set up a third, and probably final, hub “in the Singapore area” in 2007, says Dolanski.
Honeywell is firmly convinced of the need to globalise its spare parts distribution activities with regional distribution operations. “Following the Sun and servicing the customer base is not a luxury,” says Smith. Honeywell is getting its components closer to the customers that need them worldwide through a “store-front” concept, in which customised spares packages are placed at customers’ sites. ■