Why Total Cost of Ownership is Your Secret Sauce to Aircraft Component Purchases

You’re always stuck on the purchase price. It’s the first and last thing you think about. It slaps you across the hand and says, look at me, I’m important. Sadly, you’re wrong. Money and time is lost by this way of thinking.

Total cost of ownership is a different story. It’s when buyers go beyond the initial price and develop a more holistic view of how much a certain asset will cost over time.

We can take this vary concept into our daily lives. Don’t be fooled when you bring a dog into your family. Whether you adopt ($0) or buy one for $2,500 you’ll spend way more over the course of it’s beautiful life. Or don't be fooled if you buy a car for $30,000 and think it’ll only cost you $30,000 over it’s useful life.

Aircraft component purchases must be treated the same way. Don’t be fooled spending $30,000 on an INU and think it’ll only cost you $30,000. What about freight costs, processing, holding costs and I’ll continue the list if you want me to. In fact, if they direct cost is fair market value (+/- 5-10%), then it’s the later you deserves more of your attention

The Total cost of ownership methodology will save you heartache and pain (yes, I just quoted this song). Acquisitions must be viewed in this way…always.

[Tweet "Don’t be fooled spending $30,000 on an INU and think it’ll only cost you $30,000 #NeverForgetYourWings"]

Determine the overall lifecycle cost of your aircraft components and save money

Looking at the direct cost alone is fool heartedly. You’re procurement activities are global and there’s a myriad of costs that you must consider.

For an airline or MRO logistics and procurement activities are direct costs, freight, processing, labor, installation, holding costs, comm unication, problem resolution, warranty, training and productivity losses.

By looking at direct costs, indirect costs, transaction costs, and disposal costs, you as a purchasing professional get a more co mplete picture about a specific financial investment. I don’t care if it’s 1 part or 100. Looking beyond the initial cost will shock you into what you’re actually spending.

Here are some real world examples we’ve encountered:

• An airline needs 10 components (a mix of rotables and expendables) and focuses solely on direct costs. They decide to purchase all 10 components from 7 different suppliers. Some suppliers are reliable while others have failed them in the past. The airline will incur 7 different processing and freight costs. They’ll be forced to resolve any issues that arise and be hit with productivity losses. They overlook the cost advantages of streamlining.
• A large MRO buys expendables from all over the world and becomes AOG for such small items on a frequent basis. They overlook the importance of TCO and the cost reductions an on demand or JIT strategy will create.
• An airline buys millions of dollars in inventory. They overlook the long term expenses associated with holding inventory. It eats away at their cash flow and ties up millions of dollars of capital on the shelves.

You now understand why I said “fool heartedly.”

Buying based solely on direct cost is disastrous to your bottom line. Get a more holistic view of what you’re buying and save big.

Do you focus all your attention of direct costs? Are you losing money by the day? We can help as we help hundreds of airlines, MROs, lessors, and military’s every week.Fill out the contact form below and we’ll be in touch in no time.

You're Crazy Focusing All Your Attention On Repair TAT

You put a ton of effort in shortening your repair turn around times. You, just like me, are crazy.

Everything you do pushes the MRO for an early completion. You yell, scream, beg and maybe even threaten.

When you have this approach is your effort in the right place? Is your time and money being allocated to the right cause?

Yes and no, but before you start throwing CMM books at my head trust me, I get it. Repair TAT is important.

It's crucial yet I urge you to not focus all your attention here.

[Tweet "Focusing all your attention on repair TAT is crazy. #avgeek"]

A wasting your time story

We recently received thrust reversers. We began inspecting them and soon realized that these beauties had more modifications done to them than a Los Angeles actor.

They were fitted onto a modified aircraft. They're literally the only thrust reverse's of their kind on the planet.

When we were preparing for this project, they took 12 days to get to us off of an aircraft undergoing a routine c-check. We scheduled our truck to pick the units up but we got a call that the thrust reversers we’re improperly crated and they had to bump the pick-up. It took 2 additional days to get them into transit.

Once they got to our facility they were inspected and the nozzle was beyond physical repair. We could save these units but the price of repair would become double the standard repair rate. Remember, these are the only two of their kind.

A lot of work will have to be done to bring these two units back to airworthy condition. After the initial quote it took 14 days for approval…and yes while the c-check was still in progress. No loaners, no exchanges, no replacements, we had to repair these units.

We still had 21-30 days after approval to get these units done and when they were approved, it was advised that we get these done fast. Yet, it took 28 days to get the thrust reversers to approve the quote.

And that leads me to my next observations…

Focus your efforts on internal processes along with reducing aircraft component repair TAT

From this story you can see where some of the problem occurs. Now, the fault isn't pointed at anybody. Some decisions are hard to make and yes, sometimes it takes multiple approvals to get things done. I get that.

In this situation there's nothing the MRO could do to rush as a large chunk of time was spent in processing and outbound logistics activities.

By focusing some of your time and effort on internal processes you can cut your aircraft component repair time dramatically. In the story I shared, half the time could have been saved.

Start to focus more attention on areas that create the longest drag, meaning where does the component do most of it’s sitting and waiting.

Here are some areas to start on:

• Component removal
• Transport to stores
• Quality control
• Outbound processing
• Logistics
• Inbound processing
• Installation

There's plenty of areas to focus on but start with one. It'll be less stressful and less bureaucratic to make small changes over time.

Reducing your internal process will help reduce your component TAT and you’ll see a dramatic improvement in your overall rotable cycle times.

Are you experiencing long repair TATs? Fill out the form below as we're very confident we can help.

What's the difference between AR, SV, RP and OH aircraft part conditions?

This is series 2 of our aircraft part conditions defined. In our last post we talked about FN, NE, and NS. From the feedback we got, this cleared up much confusion.

aircraft-parts

Now, were talking about unserviceable and airworthy conditions.

These conditions are looked at vastly different in various parts of the world.

Some people will never use a "SV" component while others prefer it. On both ends of the spectrum you have AR which is removed from the aircraft and deemed unserviceable and OH which is the closest thing you get to NE. We'll explain this a little more as we get into each condition.

When you think of these conditions you first must determine your primary objective, is it price or quality? Answering this will help guide you to the right condition for your maintenance goals.

[Tweet "With aircraft part conditions, first determine your primary objective #avgeek"]

As Removed (AR)

Skylink: As Removed Aircraft Part

This is a component that was pulled off an aircraft. Spoiler alert, that's where "as removed" comes from.

Sometimes she'll come with a reason for removal but often times in the part out world she'll come with nothing, just a removal tag and trace. It could be repairable or beyond economical repair (BER) for all you know.

These items must go to a certified MRO for functional test or repair.

Serviceable (SV)

Skylink: Serviceable Aircraft Part

This condition is intertwined with the repaired condition but there's minor differences depending on who you're talking to.

For a SV unit you'll know that the unit has been functional tested in accordance with OEM specifications and that it'll come with an airworthiness certification depending on what region you're in. Here as you know it's the FAA 8130.

Typically these units will not come with a teardown but only an airworthiness certification stating it passed functional test and it's able to be installed. This varies depending on MRO.

Repaired (RP)

Skylink: Repaired Aircraft Part

The repaired condition is a serviceable unit that requires a little more work.

With repaired units minor piece parts are used to bring the unit into serviceable condition to meet the functional test requirements. Gaskets, bolts, and small expendables are the normal piece parts used in repairs.

This condition will come with an airworthiness certification and teardown detailing what was done and what piece parts were used in the repair.

Skylink: overhauled aircraft part

Overhaul (OH)

This is the most work an aircraft rotable can go through.

Skylink: overhauled aircraft part

This is the "best" of all conditions and requires the most work. With an OH unit you'll be sure that your units will receive the 100% OH kit according to the CMM and any other components to bring it to such a condition. Overhauled units can also be painted and cosmetically pleasing so you know you're not getting a hunk of metal.

Warning: In some situations, MROs will tag certain components as OH despite the CMM not having proper OH specification and they should be deemed RP. It's primarily used for marketing to sell a higher priced unit based on it's classification. We use to see this a lot with pitot tubes and other accessories.

That's it. Those are your 4 rotable condition classifications.

Depending on your operation, make the choices that best fits your needs.

Are you in constant need for aircraft rotables? Fill out the form below and we'll be more than happy to help you out.

3 Incredibly Important Reliability Areas You Need To Know And Improve On

What is reliability? Since 1988 we’ve been playing the reliability game. The gamble of who to trust and what actions to take.

Today, much has changed. Everyone says and does the same boring thing, over promising and under delivering.

It’s common to run into reliability problems. It even gets to the point that some days you just want to run away.

Just ask our supply chain team.

Some days I have to peal them off the ceiling as they explode with frustration. I even have to peal myself off the ceiling some days.

Whether it’s logistics or even aircraft components, reliability is a game of chess. One wrong move and you lose time and money. With the right move you’re efficient. Time and money become your ally.

Many people talk about reliability, but unless you want to pay millions of dollars in consultancy fees, very little guides you in the right direction.

For now, let’s cover the basics…

Aircraft component reliability

The primary goal is to keep your components on wing for as long as possible. We’ll call this the dumbed down version of a much more complex issue.

At this point you’ll want to collect data and information about your aircraft components statistical analysis. This will give you valuable feedback on the data if irregularities developed in operation.

If you’re the type to geek out on this stuff, read this.

The key is to build a foundation for a component reliability program. Which ATA chapters do you have the most trouble with? Can you outsource solutions?

In order for you to answer these questions, having a firm understanding of your fleet and activity of components’ removals is very important.

[Tweet "Start slow and build your reliability program over time."]

Supplier reliability

It’s amazing how many people overlook supplier reliability.

I understand price is important, but it’s not the first or last decision. Your primary objective should be to work with people who can deliver and create the most value to you. 

When you look into your supplier reliability program answer these questions to help build your foundation:

• Who answers you back the quickest?
• Which company has an account manager that responds to you any day of the week, at any time?
• Who helps you resolve issues?
• Who provides solutions in addition to just selling you something?
• Where is the greatest value for every dollar you spend?
• Who solves problems without creating more problems?
• Who do you trust?
• How do their parts look when they’re delivered? Are they in good condition and packaged properly?

Answering these simple questions will guide you to building your supplier reliability program. You’ll avoid the people that over promise and under deliver.

Logistics reliability

If turn-around-times (TAT) keep you up at night then logistics is its angry step brother.

We live in a small world where we can get anything, anywhere in a short period of time and yet complications are still extremely common.

You may have experience with high import taxes, customs delays, airlines losing your packages, shipments being bumped and re-scheduled to a later date, damage parts, and the list goes on and on.

I have found the best logistics reliability program works with someone who is easy to talk to and helps you resolve problems. It’s really that simple.

I have worked with so many freight forwarders and 95% of them give me a massive headache. I feel one coming on now. We found 3 solid partners, one for routine freight, one for small parcel and one for AOG shipments and they are the only people we’ll use.

Build your logistics reliability program around your specific needs and the ease of communication should be very important to you.

Building a reliability program around aircraft maintenance and components, suppliers and logistics will help make your hectic aviation life easier.

Start slow and start now.

Do you have reliability issues? We would love to help you. Fill out the form below and we’ll tackle this together.

What's The Difference Between FN, NE, & NS For Aircraft Part Conditions?

It's shocking how many companies have different definitions for aircraft part conditions. From FN, NE, NS to RP, AR...oh my!

Right now, at this moment, I'm giving you the all time, go to resource for three commonly used conditions for NEW components.

Factory New (FN)

Skylink-Factory-New-Aircraft-Part

According to the ATA Spec 106 “Sources and Approved Parts Qualifications Guidelines” FN and NS (more to come on this) have no regulatory definition.

Generally speaking, FN is commonly used directly from the Original Equipment Manufacture. It hasn't passed through many hands to get to the end user.

A standard industry practice is that if it's more than 2 years old, it's no longer FN.

[Tweet "A standard #aviation component practice is if it's more than 2 years old, it's no longer FN"]

At Skylink we tend to think of it in terms of 6 months to a year. For certain components, 2 years on any shelf is way too long.

For FN items, they'll always come with a manufacture's material cert.

Here's an example of the FN supply chain cycle:

FN part (OEM) > End User

New (NE)

Skylink-New-Aircraft-Part

New is a regulatory definition for "...a product, assembly, accessory, component, part or material produced on conformity with approved data that is accompanied by a manufacturer’s material certification at the time of sale, and has no operating time or cycles."

With NE items, the manufacture date can vary. If you need a DOM, it's best to ask when given NE conditions.

New Part > Sold to a Distributor > Sold to another Distributor > The part is still represented as New

New Surplus (NS)

Skylink-New-Surplus-Aircraft-Part

New surplus parts can vary from how many people who have had it in there stock to how old they are. There's no definitive guideline.

Typically they're the least costly condition but again, this condition isn't a regulatory definition. NS is great for obsolete items and is a great way to service aging aircraft.

The few guidelines for NS components are:

• The part is new and has no operating time or cycles
• The owner was someone who had the potential to use the part; to install it, such as an aircraft or engine manufacturer, airline, repair station, or military operator.

New Part > Sold to an Airline > Sold to a Distributor > The Part is now represented to the market as New Surplus (NS)

These three classifications are used often. Save this link and refer back to it often. ;)

Are you often in need of FN, NE, or NS items? If so fill out the form below and we'd love to help you.

Super Easy Way to Reduce Aircraft Component AOGs With Insurance

Aircraft spare parts is a big deal. The aviation industry spends $5 billion, yes with a B, annually on replenish stock.

Stock is the insurance policy against unplanned removals and it's costly. No wonder so many people are stressed.

According to Oliver Wyman, this has a collective airline sheet balance of $19 billion. And yes, again with a big giant B.

Having the right aircraft components, at the right time, and in the right place is critical. Notice how I left out price?

Overstocking aircraft components isn't the solution

Many airlines have issues with over-insuring less critical and poorly positioned components and under-insuring highly critical components. Olivery Wyman estimates $175 million in similar inefficiencies for one major airline.

A lot of provisioning is organized from the recommended spare parts list (RSPL) from the manufacture. This is not a very bright idea. These lists often overlook the insurance nature of spare assets. It's a good starting point but not a gold standard.

They're typically conservative at best and over inflated at worst.

One solution for a good insurance policy is outsourcing

Airlines have begun relying on third parties to provision their spare parts needs. This improves access to aircraft components while reducing the significant amounts of capital tied up in inventory.

Aerotime explains it perfectly:

"Although maintaining a spare parts stock has long been a routine part of any airline’s life, it seems the situation has been gradually changing for a while now. Under competitive pressure more and more airlines have actually been abandoning the strategy of holding huge and expensive parts stock to support their operations.

In fact, according to the industry experts, the airlines have been reducing their stocks for about 10 years now, if not more. If such a pace remains, it is said that by 2020, the operators will abandon inventory stocking at all, thus switching solely to the offerings from third-party providers. Nevertheless, if this scenario in fact proves to be true, the industry has still a lot to do in order to improve the efficiency, transparency and reliability of such services."

Relying just on a third party isn't a good insurance policy

Outsourcing is a great way to reduce capital tied up on the shelves, but for an effective aircraft component insurance policy, it's not just up to them.

[Tweet "Focusing your efforts on internal processes can dramatically reduce your cycle time."]

Oliver Wyman states that for most airlines each day they reduce their cycle time amounts it can translate to $1 million in inventory shed from the balance sheet. Amazing!

In order for you to reduce your capital and AOG pressure, incorporate a better aircraft component insurance strategy into your operations.

Do you need better insurance to cover your AOG needs? Are you in need of spare parts provisioning? Fill out the form below and we'd love to help.

4 High-Value Benefits You’ll Adopt Today With A Flight Data Readout Solution

Let’s get it out in the open. Managing your flight data is burdensome. From you having to meet government regulations and managing the FDR to performing once a year flight data readouts and translating the data, things get costly. Even worse, it’s time consuming.

How much time do you really have?

You can drain excessive amounts of money into expensive programs and software but that’ll just make it more complicated and tedious for you. Now that’s no fun.

We’ve talked many times about outsourcing certain tasks and this is one of them.

Take advantage of a flight data readout strategy and win

When you outsource your readout strategy to a competent supply chain partner, here are the benefits you can expect to receive:

Reduce Costs

New and expensive software and hardware are required to accomplish readouts. The equipment has a steep learning curve that sucks more of your valuable time and energy from your hectic day. With outsourcing, you’re able to save the two most important aspects of your operation. Time and money.

Reduce Risk

If you don’t have time to learn and train on the new software, who is going to do the work for you? Labor and training costs are expensive. I’m sure they already take up a large portion of your operating budget.  Worst of all it’s risky. What if things change, someone leaves, new software comes out, are you prepared to retrain? You can eliminate this risk entirely.

Increase Productivity

With an outsourced and streamlined readout solution, it becomes one less thing to worry about in your busy day. This frees you and your personnel to focus on other main aspects of your busy workload. Since this is a task that’s infrequent, you don't have to tie up labor and bottleneck other operational activities. Keep your people for the critical activities.

Increase Efficiency

There is no excuse in failing your requirements for your annual and bi annual FDR readout if outsourced. Not only will you make yourself more efficient, you’ll also make your maintenance engineers more efficient by allowing them to focus on maintenance rather than analyzing flight data.

Forget managing your own flight data and forget having to spend bookoo bucks for OEM fees. Start looking into the idea of outsourcing this task to a trusted supply chain partner.

If you’re really interested, take a look at our flight data readout service here and see the many other benefits you can experience.

IF YOU PREFER TO TALK TO SOMEBODY ABOUT REDUCING COSTS, RISKS AND INCREASING PRODUCTIVITY FILL OUT THE FORM BELOW AND WE’LL BE IN TOUCH.

How To Accept Problems, Then Solve Them

In the fast paced, non-stop world of aviation, problems happen and they happen often.  Most people look at problems as a bad thing. They're afraid of them. It controls their every move. The more they're afraid of the problems, the bigger, more complex the problems will become.

This is the very reason we've adopted a core value here at Skylink, "Accept Problems, Then Solve Them." Sitting at our desk worrying about a problem does nothing. Getting to the root of the issue and solving it does. There are a number of ways we tackle problems.

Listening

We're active listeners. 

If it's a client showing concern, we listen. If it's a team member who has a problem, we listen. If it's a supply chain partner explaining a delay, we listen.

By listening, we hear the other person and can effectively translate what they are saying into solutions.

The art of listening is the first step to proper communication and problem solving.

If we're not listening, then we're not solving. And if we're not solving, we're not practicing what we preach.

Advice process

This concept isn't new for us but the methodology and practice will be a reoccurring topic in our daily communication.

We are a self-managed organization giving people autonomy to make decisions as they see fit. The only requirement when making a decision is to seek advice from the people who will be directly affected and people who have knowledge in the subject.

The advice process isn't the "manager" making the final decisions but instead it's the collective group working together for the best viable decision. The person leading the team then formulates the responses to output the right solution.

5 Whys

The simple question "why" is a great concept to actively engage a problem.

When a problem comes up at Skylink, we tackle the issue by asking "why."

Stubborn and recurrent problems are often symptoms of deeper issues. A "quick fix" may seem convenient, but it's really just a temporary solution and it may solve only part of the problem.

To solve it properly, you need to drill down through the symptoms to the underlying cause.

The 5 Whys is a simple, practical tool that is very easy to use. When a problem arises, simply keep asking the question "why" until you reach the underlying source of the problem, and until a robust counter-measure becomes apparent.

The 5 Whys uses "counter-measures," rather than solutions. A counter-measure is an action or set of actions that seeks to prevent the problem arising again, while a solution just seeks to deal with the situation. As such, counter-measures are more robust, and are more likely to prevent the problem from recurring.

Each time you ask "why," look for an answer that is grounded, in fact: it must be an account of things that have actually happened – not events that might have happened. This prevents the 5 Whys becoming just a process of deductive reasoning, which can generate a number of possible causes and, sometimes, create more confusion.

Keep asking "why" until you feel confident that you have identified the root cause and can go no further. At this point, an appropriate counter-measure should become evident."

Contingencies

We make hundreds of decisions every day.  One of the ways we expedite problem solving is by having contingencies in place at every level. Or at least know the worst case scenario.

A good example is in repairs. If we have a repair in process for a pooling rotable and the units goes BER, what's our backup? If we already have the contingency in place when the units goes BER then we've expedited the resolution process.

Contingencies are crucial throughout our entire operation. 

It's very important that everyone on the Skylink team knows and understands how to accept problems and solve them. We live and breathe this and when were all in sync, problems are a mere speed bump into the flow of the Skylink way.

Are you afraid of problems? Do you encounter problems on a daily basis? Fill out the form below and let's chat about how to get you to overcome these obstacles.

Why No One Is Listening To You

How does it feel, being ignored? You pick up the phone and get voicemail. You email and get no reply back. You text only to be ignored. In the world of fast paced jets, communication moves at the speed of idle dirt. Dealing with aircraft maintenance supply chain partners is a chore.

It's like babysitting a child that doesn't listen.

Nowadays, we have social communication mediums like Facebook, Twitter, Whatsapp, and the ancient phone, text and email. Yet, listening and communication skills are at an all time low. It's a mind numbing epidemic.

So why are people not listening to you? Why does it seem like nobody cares?

It's Not A You Problem, It's a Who Problem

When supply chain partners don't actively engage you in a conversation, it's not a you problem, it's a who problem.

It's very common to have a need and to have to pull teeth to work through a problem and find a solution. The person you should be relying on most is out to lunch with their phone turned off. They say "I-care-a-lot-about-you" but actions speak louder than words.

I'll give you a quick checklist to identify the who problem:

• They don't reply to your email for hours
• You don't have a cell phone number for them
• You leave voicemails and they never return your call
• You leave voicemails and it takes days to get a call back
• They don't accept your social media requests so you can build trust a rapport with them
• They are hard to find on the internet
• You have no way to text them
• They're never on Skype
• They don't have Whatsapp
• You can't call them after hours or on the weekends
• Every time you talk to them it always sounds like they have something more important to do

This is why we have 24/7 dedicated Account Managers.

You can contact them personally any time you want. People who we can create the greatest value for and who benefits from our solutions has entire access to their Account Manager. It's about creating a "WOW" experience.

When you're not being heard and you identify it's a who problem, look at your options and figure out another way.

The Downfall of Demands

Another big issue it the constant pressure of demands, it could be you doing the demanding or the other party.

Constant demands will have the other party running. Communicating and listening together is entirely different.

Here's a great example. We had a new customer contact us and every time we engaged them in a solution for their rotable RFQ needs, they would demand a "cheaper" price. It was never good enough and pretty soon we became disengaged. With the prices we were quoting they got 100% logistical support, 24/7 access to a dedicated Account Manager and unparalleled service.

They know that they can trust us and we do as we say. There's no having to babysit us. In this particular situation it was a matter of $100 that they demanded we come down to. It was a constant demand of lowering prices and a constant demand of shipping things faster than agreed upon.

Every time we worked with this client it was a demand. It was never collaborative.

Are demands sometime necessary? Yes, of course, but doing more demanding and less communication and collaborating gets most people nowhere.

Listening is much more productive than talking and it's a critical flaw in a lot of supply chain partners communication style. Know the who and watch out for the constant demands.

Do you feel like your constantly ignored? Do your supply chain partners have a listening problem? Well fear no more my friend. Fill out the form below and let's show you how good listening skills is done.

Skylink Teams Up With Embry-Riddle Aeronautical University

This week we invited the prestigious Embry-Riddle Aeronautical University to come in and take some retired spare parts off our hands for their classrooms. We were delighted to donate these parts as it provides a great hands on learning experience for the prospecting students attending the University. Moreover, it was great to team up with a well known university that has grown its roots from the first flight of the Wright Brothers back in 1903.