Monday, May 19, 2003
Guest Column: Understanding the Proliferating Parts Puzzle
Keeping an airline operating smoothly and efficiently is a matter of logistics. A major part of the logistics process is maintaining the thousands of spares required to keep the aircraft flying - while simultaneously not having hundreds of thousands of dollars tied up in excessive inventory.
With aircraft spares running into the thousands of line items and hundreds of thousands of individual parts, ensuring that just the right part is available at just the right time - or, under the worst case scenario, providing a desperately needed part under an aircraft on ground (AOG) situation - has become a critical requirement for logistic providers.
To find out what is being offered to the regional airlines in terms of logistical spares and service support, C/R News invited Robert Laino, director of sales for Huntington, N.Y.-based DatAccess, to discuss the spares support industry as a whole and provide information on what a company such as DatAccess can provide the regional airline industry in terms of comprehensive, and affordable, logistic support. Despite the ever growing sophistication of the world's aviation industry, the worldwide aviation parts and overhaul services market has evolved into a very disjointed marketplace, with few standardized methods for the purchase and sale of goods. The industry's parts and services procurement and supply chain consists of a myriad of diverse organizations - original equipment manufacturers (OEMs), major airlines, regional airlines, distributors, providers of airport maintenance, certified aircraft overhaul and repair facilities, independent airframe and power plant mechanics, traders, brokers, and government purchasing agencies.
In the past, the industry relied on information sources such as The World Aviation Directory, sales catalogs from manufacturers and distributors, qualified product listings, or the specific procurement knowledge from experienced personnel to obtain supply source information. Major airlines formed restrictive alliances to consolidate their purchasing power. Even government procurement information became a place to obtain sourcing information. But consistent and reliable supply source data remained fragmented and elusive.
Approximately 20 years ago, the Inventory Locator Service (ILS) began offering more organized sourcing information on a subscription basis. Today, ILS enjoys a prominent position in this information service industry. Unfortunately, until recently, much of the industry has been excluded from such services due to high membership costs.
Beyond the highly sophisticated sourcing capabilities of ILS, the aircraft industry's evolution produced few standardized methods for the purchase and sale of goods and services. The business-to-business (B2B) explosion of the last decade has created a plethora of e-commerce "solutions" for solving this dilemma. Leading defense and aerospace firms such as Boeing, Lockheed Martin, Raytheon, and BAe began partnering with e-commerce platform provider Commerce One, attempting to "re-engineer" the industry into a single on-line trading and procurement exchange for manufacturers and suppliers. Unfortunately, these current "solutions" also lack standardization, which has served only to further complicate the problem.
Big vs. Small Dilemma
While these options may become a viable cost saving concept for huge, well-capitalized industry leaders, they are not realistic options for mid- to small-size companies. Nowhere is this more evident than in the regional airline sector. The vast majority of companies that form this industry find these sourcing approaches complicated, time consuming and resource intensive.
Many companies have yet to advance from fax technology to the integration of e-mail into their quoting procedures. The National Association of Manufacturing reported in early 2000 that 90 percent of its members (mostly businesses with more than $1 billion in annual sales) could not process orders electronically. A Web site purchase meant that the order had to be printed out and then keyed into the transaction system.
Auction type solutions are complicated at best. They produce customer apprehension over security issues, pricing confidentiality and quality concerns. They do not allow for the traditional value that suppliers have built around their products, such as quality, service, stability of brand, traceability and warranties.
The expensive complexities involved in linking financial, order entry, inventory, and manufacturing systems of one business to another requires standardization, something most regional airline industry companies have yet to fully accomplish internally. Given the fact that many aviation companies do not have the technology, time, and funding required to integrate such solutions into their businesses, the current complicated service choices leave the majority of the industry with only fragmented options. For most companies this is no choice at all.
To provide a solution to the needs of the regional airline industry for better procurement procedures at acceptable prices, companies such as DatAccess are now bringing their expertise into the marketplace.
DatAccess provides ILS to the aviation, ground support equipment and turbine industries.
The one single message DatAccess has heard from industry participants is: "Go back to the basics." As a result, DatAccess employs a very direct philosophy:
- Provide a service that participants want.
- Make the services consistently easy to use.
- Make sure any company, no matter what their existing business processes or supplier relationships are, can use the services.
- Partner with industry firms to add value to their companies without need for excessive capital expenditure, or specialized personnel.
Partnerships, Not Panaceas
Through companies such as DatAccess, affordable ILS for obtaining aviation parts and services is now a reality for regional carriers and other aviation industry segments. The depressed state of the economy, and ever widening competition, demands new collaborative relationships and ideas that precisely target mid- and small-size market needs. No one source structure can answer supply considerations all the time. But by listening to industry leaders, by sponsoring industry trade groups, and creating strong partnerships, DatAccess has become a better focused marketplace provider that better serves its members.