Andrew Doyle/HAMBURG
Airbus Industrie Materiel Support plays a key role in European consortium Airbus' growing sales success. As vice-president Peter Kloepfer puts it, the division is "never a deal maker, but we could be a deal breaker".
Materiel Support supplies proprietary spare parts manufactured by Airbus partner companies Aerospatiale, British Aerospace, DaimlerChrysler Aerospace (Dasa) and CASA, as well as parts data and provisioning support.
Proprietary spares make up around 25% of the total. Original equipment manufacturers and contractors supply the rest. Materiel Support oversees the quality of parts and related support services provided to Airbus customers.
Formed in 1973, Materiel Support last year employed 390 people and reported a turnover of $285 million.
Although Dasa holds a 37.8%stake, and therefore overall workshare, in the Airbus consortium, it manufactures around 60% of consumed proprietary spare parts by value. This is because it makes most of the parts for the cabin interiors, including floor panels and seat tracks, as well as much of the cargo hold and its linings, which are in high demand in the aftermarket.
The importance of cost-effective spares provisioning is underlined by the expenditure a new Airbus operator faces. Between $800,000 and $2.5 million per aircraft need to be spent on initial parts holdings before the aircraft enters service. Materiel Support usually advises new operators on spares provisioning around 18 months before service entry.
"The support we give to the airlines to save on that second-biggest investment is a big part of our job,"says Kloepfer. "Our strategic function is to support aircraft sales."
The business has undergone a revolution during the past six years, moving from "cost-plus" spares pricing to a market-oriented approach designed to overcome a perception that Airbus parts were not good value. Airlines frequently complained about high prices.
"We no longer set prices that nobody can understand," says Kloepfer.
The price of each individual part was reviewed by value analysis, beginning in 1995. An across-the-board parts price cut of 10% was also implemented. Subsequent reductions have helped to boost Airbus' competitiveness in the spare parts market.
In a recent, but separate, development, Airbus has indicated it will refuse factory parts and service to airlines buying used Airbus A340s acquired in trade-in by Boeing (Flight International, 28 July-3 August)
Three years ago, responsibility for supplying basic items such as fasteners was placed with contractors after Materiel Support realised there were "distributors that could do this job better than us", says director materiel market relations James Rutledge. "But we still manage the service level," he adds.
The organisation plays a key part in hangar maintenance of Airbus aircraft where it is the biggest single supplier of replacement parts.
The logistics of managing the huge inventory of spares at facilities in Hamburg, Washington DC and Singapore represents a major challenge, with each part carrying with it 100-200 pieces of data describing its identity, origin and attributes.
"The defining feature of our business is that it is complex," says Rutledge.
Airbus considered establishing an additional product support centre in Latin America after a huge joint order from LanChile, TACA and TAM for up to 190 Airbus A320 family aircraft, but has decided against this.
Easier shipments
Rutledge says most Latin American Airbus customers favoured taking parts from Hamburg, because shipments could be made more easily to their home bases, rather than having to transport them around the region.
Urgent, aircraft-on-ground (AOG) shipments to Latin America are made from the USA. "They were all very satisfied that we would deliver from Washington DC for those cases," says Rutledge. Latin American customers deal directly, however, with a Materiel Support representative in Miami.
Materiel Support guarantees to pick from stock and ship any spare part within 2h of an order being received, 24h a day. Extra priority is given to AOG and "critical work stoppage" during maintenance requests. Around 20%, or 20,000, of the total annual orders result from AOG situations.
A major initiative is under way to embrace the Internet for some functions, including parts ordering later this year. The move will have a significant impact on Airbus operators, only around half of which use the SPEC 2000 ordering system available via the SITA aeronautical telecommunications network.
Perhaps surprisingly, Materiel Support received an unenthusiastic response from airlines when it presented its Internet plans two years ago, but "went ahead anyway because you have to be innovative", says Rutledge.
"In the first month, November 1997, we had 900 people accessing it, but in June we had 11,000 hits. This is a strategic information tool for us," he adds.
The website (spares.airbus.com) has three sections, providing information on part numbers, pricing and technical data. It includes an on-line spares support guide, a list of open purchase orders and a vendor information manual. "By the end of the year we will have on-line ordering - e-commerce," says Rutledge.
The website can also be used by airlines in the process of ordering Airbus types to obtain basic information about initial spares provisioning. It also provides hyperlinks through which airlines can access websites operated by parts forwarders, to check on the status of deliveries.
The Materiel Support website provides easier, more transparent access to spares information for SPEC 2000 users, but, says Kloepfer, represents a "major new service for small airlines". Among the 167 Airbus customer airlines, 2,000 individual user identifications have been issued for access to the website.
"The major advantage lies in its availability to everybody," says Kloepfer. "Anyone in the airline can get access."
Kloepfer believes the Internet's role in the business will grow, but "gradually". Rutledge adds: "The aviation industry is very conservative - we've seen that with the Internet."
Materiel Support has devoted much effort since 1993 in finding ways of reducing spares costs for airlines, which can amount to as much as 11% of the aircraft purchase price per year.
The number and range of different parts that are held can be reduced without affecting the overall "protection level" against despatch delays, says Rutledge. This can be achieved, for example, by accounting for the fact that an aircraft will for "at least half the time" be operating away from its principal base, he adds.
Other cost cuts have come through the introduction of customised lead-times (CLT), guaranteed repair times and reduced initial provisioning, which Materiel Support claims together have led to an up to 2% reduction in operating costs.
Reducing inventory costs
Some 22 airlines and maintenance providers use the CLT service to plan for the provision of the 15% of annual spare parts production that are consumed during scheduled heavy maintenance of aircraft. Using CLT, the required parts are shipped just before the scheduled check is due to begin, allowing the customer to avoid the cost of holding the components in stock.
The guaranteed repair time for proprietary parts is 15 days, or the customer receives a replacement free of charge.
Since 1993, Materiel Support has managed to cut the cost of initial spares provisioning for new customers by 30%, with "no measurable increase in risk". This has been achieved largely through optimising the aircraft minimum equipment list, reviewing the minimum time between overhaul for each part and carrying out a spares protection/cost analysis. The focus on cost reduction is switching to other areas, such as how airlines can take advantage of global alliance membership by pooling their spares and managing the supply chain.
"We are looking more at the strategic approach of how airlines do their provisioning," says Rutledge. "Airlines don't have a good grip on the logistics of moving the parts."
Source: Flight International
