3 May 2018
Why a 'local first' approach to component MRO may cost more. By Christopher Whiteside.
‘Go local’ is one of the most common - and potentially costly myths - influencing the way operators manage their component MRO. It may seem logical that an airline requiring a component repair in Kuala Lumpur should seek help in Singapore, rather than Montreal, but in fact the numbers seldom stack up.
It's a small world
Firstly, there is the misconception that component MRO is all about the time it takes to process and service a part. In reality, parts are rarely repaired while the aircraft waits, so the ‘wing-to-shelf’ time between the part being removed and replaced is the metric that really matters. For example, an Integrated Drive Generator (IDG) can take over four weeks to repair, whereas it can be replaced in a matter of three hours.
When you consider that you are never more than a day away by air courier from all of the major MRO hubs across the globe, it’s clear that shipping parts to the geographically closest market may not make sense. The freight costs may be slightly more, but as a percentage of the total overhaul bill, they are negligible.
Similarly, it’s a false economy to ship a part to a nearby market that doesn’t have the expertise needed to complete the job efficiently. A shop with highly relevant capabilities and experience anywhere in the world is likely to offer better value than a supplier in close range that lacks specialist knowledge and tools. Likewise, a shop in a location with a reliable supply chain may be a better option than a nearby supplier without good part supply.
Of course, there will always be certain parts that are too bulky or hazardous that will need to be transported overland and therefore serviced locally, for example, escape slides. However, this is only a very small sample of the thousands of components that operators replace and repair every day.
Aside from generating direct cost savings and benefits by going ‘long haul’ rather than local for parts MRO, airlines and manufacturers are realising that there are a range of ‘hidden costs’ that can be avoided by taking a more strategic and international approach to their parts maintenance.
Taking an aggregated approach
Sourcing local providers on a case-by-case basis leaves operators with the headache of managing a whole host of individual relationships with suppliers within the region, potentially including negotiating language barriers and different customs regimes. This is very time inefficient, and it is also tough for operators to ensure competitive pricing due to a small number of regional suppliers.
Time and cost are heavily influenced by the enquiry, logistics, and approval process of sourcing a part, which can add to a minimum of at least six days if contracts and agreements are not in place. In response, airlines and manufacturers are increasingly outsourcing their component MRO to aggregators, replacing a web of different suppliers with a single point of contact. A good network, with a pre-agreed contractual framework, can do much of the hard work before a part even leaves the aircraft.
Adopting this approach allows operators to benefit from a standardised quality of service and more streamlined processes. Aggregators are better placed to select the right supplier and can also more easily offer exchange options, avoiding the need to wait for repairs to be completed.
We are increasingly seeing demand from operators for this type of arrangement as it ensures better customer service - in their preferred language - plus savings derived from the aggregator’s ongoing relationships with suppliers, where they benefit from economies of scale and can drive continual improvement and efficiencies.
Taking a global approach to MRO and working with an aggregator allows operators to spend wherever they are likely to see the best return — taking advantage of fluctuations in exchange rates. They can also spread risk by avoiding price spikes driven by regional natural events such as ash clouds and earthquakes.
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