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Thursday, April 16, 2015

Publisher’s View

Throwing More Money at Spares Inventories Isn’t the Whole Solution

Let’s face it. We have all become quite accustomed to the idea that we can get just about anything our little heart desires within a 24-hour period as long as we are willing to throw enough money at it to make it happen. With one glaring exception: aircraft parts.

The more we devote to the topic of finding hard-to-find parts, the more we realize how deep and complex the issue truly is. My tendency has always been to believe that parts availability – or lack thereof – is a problem for the OEMs and other MRO providers with a very simple solution … invest more money in spares inventory. And make no mistake, that would solve many problems.

But let’s also be realistic. There are a lot of different makes and models of helicopters out there, all equipped with a wide variety of parts and components that have been sourced over the years from all over the world. There is in fact, a large element of truth to the old adage that a helicopter is nothing more than a collection of parts, all flying in loose formation. And every MRO shop that supplies those parts to their customers is governed in some fashion by owners who tend to expect their managers to deliver a modicum of profit. So that sort of puts a damper on the whole rather simplistic just-invest-more-in-your-spares-inventory solution.

In recent weeks, I’ve been engaged in an ongoing discussion with some long-time industry friends about the many challenges to running a small aviation maintenance, repair and overhaul business - not the least of which is managing spares inventory and overall cash-flow in what is a very capital intensive business. Life is somewhat easier for the big MROs that make their living off contracts with large fleet operators who have reasonably projectable hours and maintenance schedules. Not so much so for the rest of the MRO shops who are left to not much more than visiting psychics at the county fair to try to accurately project their market’s flying hours and upcoming parts requirements. But as the OEMs try to right-size their own service center organizations and spares inventories, more and more of the burden to accurately project and stock those parts is falling to their small business MRO partners, and that is a very real problem for all of us.

The small maintenance facilities are a valuable part of the overall OEM support structure for the vast majority of helicopter owners and operators. But not only do they not have access to the data they need to be able to accurately project your parts requirements, the cost of simply becoming an OEM service center or quality MRO facility is significant, and the market is extremely competitive. Finding, hiring, training and keeping the best technicians possible at the going labor rates of $75 to $115 an hour is a real challenge when you consider that the going rate for high-end automobile service technicians is often more in the range of $125-$130 an hour. How does that even make sense? Why should you pay less to have your multimillion dollar helicopter serviced than you pay to service your $50,000 BMW?

Insurance and equipment costs are also problematic for the MRO community. If the owner wants to become an OEM service center there are requirements to purchase tooling, stock parts and attend training. All of this for the privilege to chase business within 300-350 miles of their location.

A number of MRO operators gathered at the recent HAI conference in Orlando to talk about these kinds of issues and potential solutions. Suggestions included creating a loosely formed cooperation to bargain for better insurance rates, speak as one voice to the OEMs and develop a closely knit supply chain to help reduce inventory costs and improve customer service by being able to more accurately project your parts requirements. Sounds logical to us. We welcome your comments and we will certainly stay on top of this and report back to you as things progress.

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