2008 Articles
June 16, 2008
Airline Procurement: "Post-Sales Service: the Hidden Profit Lever"
Exorbitant fuel prices, a decline in consumer and business spending, a reduction in new finished goods manufacturing, an increase in performance-based service contracts and product commoditization have placed enormous pressures on A&D companies to continue growing profit margins while at the same time maintaining increased service demands and expectations. Maximizing asset uptime, optimizing the spare parts supply chain across disparate business units and geographies, effectively gauging and managing pricing and capturing service-related knowledge is becoming a top priority for best-of-class companies.
The current economic and business pressures in Aerospace, such as long-term sustainment programs, or Power-By-The-Hour contracts replacing “time & materials” agreements, are. shifting the responsibility of system availability. The shift can be seen moving services organizations from a traditional aircraft and part sales relationship to a more complex and cooperative environment where vendor incentives are structured to increase system up-time and reduce the overall investment in parts.
The traditional techniques of planning and managing operations will need to be modified and updated in order to work in the emerging cost sensitive service for sale environment. The days of selling parts in support of massive inventories are gone as the costs are no longer sustainable. Military and civilian support can no longer move “iron mountains” of materials. This forces supply chains to improve throughput, reduce lead time between network echelons and increase reliability of the network itself. Economic and business pressure is creating similar effects by pushing airlines to spin off maintenance operations, reduce routes and speed aircraft turnarounds.
However, manufacturers need not view this as a loss, but rather as an opportunity. A&D companies can leverage the strategic value of service and turn these pressures into competitive advantages by delivering higher levels of service at reduced operating costs by leveraging key technologies designed to support such an environment.
Roger Dycus, senior director of operations, Rolls-Royce Corp, agrees that service is an important driver of corporate performance. “Service is key and strategic to our business,” he says. “It actually is the biggest part of our business and will continue to be, and we spend as much time developing new services as we do developing new products.”
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