MRO - AviTrader

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Cover Story - Managing Efficiency and information, more standardized workflows and ultimately shorter and more stable throughput times. The company has also implemented MRO In- Takt, a Lean Just-in-Time production philosophy derived from the car industry and based upon four principles: flow, takt (cycle), pull and zero defects. The first of the four principles, flow, calls for the use of a FIFO system, with synchronized processes, optimized flow and smaller batches, leading to shorter waiting times and reduced TATs. takt involves streamlining shop activities across all work areas and establishing constant speed for all processes, resulting in improved predictability, higher transparency and the elimination of workload ‘waves’. pull implies the production of only what is needed, and at the right time, leading to pre-defined buffers, no overload and again, higher transparency, while zero defects, as the term implies, demands that any defects are identified and eliminated, thus improving quality and reducing trouble shooting. The adoption of MRO InTakt, supported by a fully-integrated IT support system (see following page) has led to a reduction in TATs of 30% at MTu’s hannover plant while lead times at the Berlin MRO plant have shrunk by over 40% on the CF34 engine line since 2009. Furthermore, the company has seen an increase in TAT stability and predictability and in reliable order-to-delivery (OTD) rates. The company has also dealt effectively with rising cost pressures. Material costs typically represent 60% or more of the overall cost of an engine shop visit. Funk says that the pressure derives from both OEM price escalation on material and the customer desire to lower costs by saving expensive parts - either through repair or sourcing used parts. “Our goals are therefore twofold,” he says. “We look to lower scrap rates by increasing in-house repair capabilities, especially for TAT-critical parts, by performing intelligent parts inspection and work-scoping and by analyzing scrap rates and trends using data from our SAP-based ERP system.” The second part of the equation is to improve used parts sourcing through B2B systems that allow for efficient ordering and online tracing of parts and direct links to the company’s supplier base where orders are placed. Funk notes that over the years, MTu has put an emphasis on streamlining all its processes. “We are a very process-driven company, so it’s easier for us to plan, report, control and analyze AviTrader MRO - November 2011 efficiencies and plan any counter-measures in case actual figures deviate from our original plans.” Targets for the year are carried out based upon Management by Objectives (MBO), aligned across all management levels and permanently monitored. Armin Heinfling SR Technics Over in neighbouring Switzerland, SR Technics also has an active Lean Management team working across the whole organization. One of its most effective innovations is Forward- Driver, a web-based open-source database to manage and trace employee ideas for continuous improvement. “Over the years, MTU has put an emphasis on streamlining all its processes. As a very process-driven company, it is easier for us to plan, report, control and analyze efficiencies and plan any counter-measures in case actual figures deviate from our original plans.” Dr Martin Funk, MTU Maintenance “Any employee can submit an idea that would save costs, time or unnecessary resources,” says Armin Heinfling, the company’s head of the Office of Continuous Improvement. “We receive up to 600 submissions each year from all departments, and around 70% are implemented. These ideas bring annual savings of close to CHF 4.7m, internally as well as in benefits to our customers.” “Any employee can submit an idea that would save costs, time and unnecessary resources. We receive up to 600 submissions each year and around 70% are implemented. These ideas bring annual savings of close to CHF 2.7 million.” Armin Heinfling, SR Technics Other practices which contribute to improving efficiency include weekly Management Waste Walks, designed to identify and eliminate waste within the organization, Value Tower and Balance score cards, which assess performance in each area against KPIs, published weekly on SR Technics’ Intranet for full transparency, daily production meetings ‘on-site’ on the shop floor and regular Kaizen workshops. Additional Lean practices are broken down by business area and function. Within Component Maintenance, for example, heinfling 10 notes that the creation of the Centres of Excellence project, covering hydraulics, pneumatics, nacelle and mechanical accessories, brakes and wheels, avionics, fuel and hMu, emergency and electrical, together with other moves such as placing computers at every workplace and having developed processes, have resulted in significant efficiency improvements. TATs for heat exchangers have dropped by five days from 26 to 21 days (a 25% reduction) as a result of insourcing composite repair in pneumatics, while turnarounds on VBV flappers have fallen by up to 50% to 35-40 days, compared to an industry norm of 50 to 60 days. SR Technics has also taken Lean practices beyond the shop floor to other areas of the business, including facility management. At its headquarters in Zurich, the company has established an energy efficiency program to reduce utilities bills and bring in new technology for on-site water treatment, resulting in a 14.7% reduction in costs year-on-year between 2010 and 2011. It’s clear that MROs like LhT, MTu and SR Technics have taken Lean principles to heart, and in many cases have achieved astonishing results and significant cost savings, for both MRO and customer. Much of the impetus for these measures has been the need to maintain their competitive edge in the face of growing competition from lower-wage areas on the eastern and southern fringes of Europe and beyond. But it’s interesting to note, from a low-wage area perspective, that lower overheads may not always translate into a cheaper alternative. Darius Saluga, chief executive of FL Technics Jets, a business jet service provider in Vilnius, Lithuania, says that while MROs in Eastern Europe can still offer savings of up to 30% to 35%, espcially for labour-intensive airframe maintenance, the price on the final invoice for a common C-check carried out in Bulgaria may look practically the same as one from an ‘expensive’ Western European provider in Germany or Switzerland. “Due to elaborate Western European IT systems, those MROs can perform C-checks within five days; the same service in an Eastern European MRO can take up to eight days”, he says. IT solutions for the MRO industry are wideranging and comprehensive. There is a solution aimed at optimizing every area of the business and at every budget. And that takes us to the next section of our discussion - what does software do and how can it improve an MRO’s bottom line?
Cover Story - Managing Efficiency Software, software everywhere... As in any other industry, managing and increasing efficiencies within an MRO cannot be achieved these days without recourse to sophisticated data management systems. But Anant Sahay, an aviation IT expert at IBM Aus- Anant Sahay tralia, said that there are two unique areas where the MRO sector literally ‘bleeds’ - overtime and parts shortages. “These two areas together account for more than 50% of cost overruns,” he says. “The root cause for both is the inability to forecast failure rates of components. As of now, SAP tries to solve this by using MRP techniques, which work on the principles of “demand of consumption” not “failure rate”. Other systems use Double Exponential algorithms and so on, which also are unable to forecast “failure rate”. The current software available in the market seem to be skirting this issue. They are all focused on the classical techniques of efficiency gains, learned from the manufacturing industry. “ Sahay, whose book “Leveraging IT for Airworthiness” will be published early in 2012, states At MRO Europe in Madrid earlier this fall, AviTrader MRO sat down with Todd Lewis, president of Component Control, the MRO and logistics software developer and creator of MRO solution Quantum Control to talk about its products and its aircraft parts e-marketplace, StockMarket.aero. Todd Lewis AviTrader: Can you explain how Quantum can help users achieve greater efficiencies? Quantum Control MRO and Logistics is an ERP system providing a complete software solution for OEMs, airlines, MROs and other aftermarket service providers. Our most successful customers are those that use Quantum to bring efficiency through discipline. In this business, discipline must also be combined with flexibility. Another common theme is that our successful customers are those who operate with multiple profit centres; those with multiple product lines, or those with distinct activities such as a combination of large hangars and various shops, for example. Clear accountability at lower levels is the objective. Bigger companies break their business into smaller profit centres and use software to track business unit performance. To give you an example, we have one customer that that overtime happens “mainly because of unexpected defects found during the scheduled maintenance or out of schedule aircraft arrival due to unexpected defects.These arisings push the schedule off and the technician ends up performing extra work, which ends up in overtime”. Parts shortages, meanwhile, happen for the similar reason, when the newly identified defect requires an item, which is not readily available. These two occurrences can “bleed the most efficient of MRO organisations”, he says. “A general manager of a large MRO organisation expressed in exasperation to me if only he could cut the overtime by half, he would be minting money left right and centre.” Sahay says that the “basic hygiene of productivity improvements have been incorporated in most of the standard software that cater the MRO industry - which differ from other industries only from a compliance point of view. The most gains that I have observed are in process streamlining by the use of these software”. “Whenever and wherever I talk to people in the hangars, I find them extremely efficient and process oriented. After all they follow the prescriptive processes due to the safety require- took repairable units in through its main facility and sent them out to its various other repair centres, one of which was a metal machine shop – a machine shop that did external work (funded) and internal work. The customer started losing money and couldn’t figure out why. Through the use of Quantum, they were able to measure performance at all levels for funded and non-funded work, and discovered that the weak link was the metal machine shop, which had poor TATs because of an unhealthy mix of un-funded work. They were able to use Quantum as a performance indicator and turn the metal machine shop around. Our software allows our customers to do automatic invoicing, a very complicated procedure, which was previously done long after the fact and offline. Some of the customers we’re taking from old legacy systems are still doing invoicing and other procedures offline. This is partly because an MRO company may have many different billing agreements with their customers. Automating this complex process provides huge efficiency gains. The software generates a quote at the beginning of the process, using billing rules specific to the customer, monitors the repair progress and sends alerts if the part is going over the quote, and then generates an invoice immediately at the end of the job. It’s all done in real time. It’s all about smart logistics. If you’re doing this offline, it’s too slow and too late. 11 ments, which set the standards for airworthiness very high. It is the “unknown unknown” (read failure rates), which they want to know better to achieve real productivity gains.” AJ Walter’s John Avery believes that for an MRO to achieve optimum efficiency, there are three fundamental elements that must be considered: systems, data accuracy and expert knowledge. A J Walter runs Quantum from Component Control as its core operating system and says it is “very heavily tailored to support our business model, based on component exchanges and sales. Even a small airline or MRO requires a robust and functionally rich system so the complex and detailed nature of its businesses can be clearly managed in the most effective way possible. For AJW, where we carry out the equivalent volume of transactions for a fleet of 800 aircraft, we have the opportunity to become even more efficient, benefitting from economies of scale.” Data accuracy, as Avery says, is clearly one of the fundamental pillars of efficiency. By their very nature, the range of next-generation bestof-breed (BOB) and commercial off-the-shelf (COTS) systems tailored to the aviation MRO Component Control‘s Todd Lewis: “Doing things offline means it’s too slow and too late.” AviTrader:Tell us how the StockMarket differs from other products on the market? StockMarket.aero is a repository of inventory items for both our Quantum Control users and other customers who send us listings. It’s an open community – anyone can log in. It’s a completely different model from others in the industry, which use a subscription-based revenue model. Our model is like the Google model: our revenue comes in large part from advertising. Customers can advertise their company, and they can advertise or sponsor parts. StockMarket.aero is an open and free community, and that’s why it’s growing; our customers get a lot out of it. In September, we achieved a record 37 million qualified line items of available inventory and services in our StockMarket.aero system, listed by our more than 2,300 customers and aircraft parts vendors. What’s particularly significant about our system is that we tell our users what’s available on the StockMarket in real time. That’s a major efficiency right there, it’s a clear example of lean logistics. The system allows users to have a very quick reaction time to any parts that need repair or replacement. If a customer needs a part they can’t find, they can broadcast a RFQ, and get that RFQ in front of multiple vendors quickly. AviTrader MRO - November 2011
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