A Link in the Supply Chain

A Link in the Supply Chain

Views from Aircraft Parts Distributors

By Michelle Garetson

April 1999

Michelle Garetson This is the kind of day where I don't want to see the boss in the hangar," grimaces Pete Schroeder, director of maintenance for Wisconsin Aviation Maintenace Inc., in Watertown, Wisconsin. "We just so happen to have three of our own aircraft in here today in various stages of inspection and repair. It's Friday afternoon, and we need to find parts to get these planes back out and making money."

Schroeder's lament is probably not an uncommon one in maintenance shops. Aircraft need to be in the air to be profitable, but they also need to be inspected and maintained to keep them safely aloft. Many times, old or damaged parts can be the link that breaks in the chain between the sky and AOG.

Aircraft parts distributors are important facilitators in keeping operations flowing smoothly by providing necessary parts and components as quickly as possible. This relationship hasn't changed much over the years, but the process in which communication and transactions are accomplished certainly has.

PC Changes Parts
"The fundamentals of general aviation parts distribution have changed little, explains Jim Quinn, vice president of marketing for Dallas-based parts distributor, Aviall. "Certainly the aircraft technology hasn't been advanced — even the newest aircraft models are similar to designs of 25 and 30 years ago. The use of computers has enabled advances in order entry and communications technology."

The introduction of computer technology for communication, inventory tracking, distribution, billing, etc. to the aircraft parts distribution arena, has greatly enhanced the ways of doing business. Two important by-products of computerization have been a sharp reduction in errors in orders and inventories, and a reduction in lead time necessary for customers to order and receive items.

Aircraft Parts International (API) in Memphis, Tennessee has a sophisticated system that has really proved itself in tracking inventory and streamlining operations. "Our system is barcoded and works on real-time," states Phil Botana, API's executive vice president and chief operating officer. "When new stock comes in, our personnel uses RF (radio frequency) scanners to log items into the database making them immediately available. This system is also designed to track history of parts to spot trends in demand, which allows us to monitor shifts in ordering practices and it has certainly helped to increase inventory turnover."

Set Your Sites
Going further, the Internet has created another venue for parts distributors and their customers to access information and products. Customers worldwide can log on anytime, day or night, to search for parts, place orders, and be assured that their items will be sent out — sometimes in the same day.

"Aviall uses the Internet extensively," says Quinn. "We were the first aircraft parts distributor to offer online ordering capabilities back in 1996 through our web site (www.aviall.com). Our site continues to evolve as we add more information and services, and as we work to make our order entry function even easier to use."

AAR Corp, headquartered in Wood Dale, Illinois, offers two Internet-based parts support sites for customers and both can be accessed through the corporate web site (www.aarcorp.com). SuperSpares, at (www.aarsuperspares.com), is an on-line distribution channel for aircraft spare parts used mainly by commercial airline customers in AOG situations. The AAR On-Line Parts Warehouse (http://warehouse.aarcorp.com) was launched in November 1998 and offers more than 100,000 line items. It caters to those customers ranging from operators of general aviation aircraft, including piston and business turboprops and jets, on up to those in long-haul and regional airlines operations. It is not meant for AOG situations but more for those who order parts periodically. Ken Cooper, product support manager for AAR Distribution, a division of AAR Corp., sees these sites as tools that enhance their business. "They will not replace the people portion of the business," says Cooper, "but certainly help to facilitate orders for customers. Another use is to customize JIT (Just In Time) inventory management programs, which can be tailored to the specific needs of the customer."

API has been increasing its focus in recent months on its Internet site (www.apiparts.com). "Right now, some of our customers are being offered the opportunity to establish Internet accounts so that they can access the same databases as our salespeople," says Botana. "However, a majority of ordering is still done over the phone or in the field."

At Varga Enterprises in Chandler, Arizona, Internet focus has become more prominent in the last eight months. According to Varga's general manager, Marv Corsbie, the company took a look at the possibilities about three years ago and launched its site (www.vargaair.com) about one year ago.

"Overseas companies have been using Web for years and the U.S. has been behind in its utilization," says Corsbie. "In the future, we hope to offer technical-type information to cross-reference from the Varga site. Many times, customers will order parts and components, but would also like some technical information and guidance regarding those items."

While all agreed the Internet is not going away and should be embraced as another opportunity to service present customers and to court new ones, there still needs to be the human element to parts distributorship.

Press "5" To Speak With A Human
"In pre-computer days, the telephone was the tool," continues Corsbie. "Salespeople were and still are, on the phone, on the road, calling on customers. This hasn't diminished and hopefully never will. We try and get to know our customers as best we can to help them make the best decisions for them — you can't do that over the Internet."

Ken Cooper adds, "AAR's outside salespeople are key to soliciting new business and for maintaining customer relations after the sale. We are proud of the technical support group, which quite often receives calls from customers who had been referred to us from manufacturers."

API's Botana also praised his company's customer service and tech support personnel, but then brought up the subject euphemistically referred to as "challenging" customers.

"Challenging customers call for a lot of technical support information and cause us to do a lot of Ôlegwork' for a very small return." He did say that the challenging customers are in the minority and that typical customers are relatively easy to accommodate. Botana adds, "On average, a customer calls three places for price and availability. Obviously, they need the part; otherwise they wouldn't be calling. We want to build customer confidence in our operation so that we are ultimately their first call."

Unorganized customers create delays for themselves and the distributor. "I can't tell you how many times customers call us and don't know how their company is listed," says Cooper. "Customers who are not prepared with the information to get the parts and technical support they need can delay the whole transaction unnecessarily."

Aviall's Quinn warned of the pitfalls of chronic price shopping. "Although it is tempting to believe that the use of many distributors can help in lowering the price by fostering competition, this can often be a false economy. The most effective way to ensure strong support from a parts distributor is to focus on total cost reduction, not price. Customers and distributors should establish support partnerships in order to reduce the need for continual price shopping and allow the distributor to stock key components for them."

Kaizen and the Art of Aircraft Maintenance
With respect to keeping key items stocked and available for customers, parts distributors have had to adjust for the kaizen approach taken by many manufacturers and customers in recent years. The Japanese word kaizen, in short, means "continuous improvement." This business practice has given rise to the JIT (Just In Time) inventory management system in an effort to streamline operations and reduce costs.

"We try to keep a good stock of inventory because more and more, our customers as well as the manufacturers are not keeping large inventories," Corsbie explains. "This trend started about 5 years ago when FBOs and manufacturers went to the JIT method for parts. They rely on us to have the items or to be able to get those items without too much delay. We started tracking the types of items that we were getting calls for on a daily basis. That's where the good relationships with our customers really come into play."

Ken Cooper agrees. "AAR's small and midsize FBO customers are not carrying as much inventory. If they can get it the next day from the distributor, then they'll do that."

Botana adds, "We have to forecast with manufacturers and customers. Manufacturers may only be making a certain model or type of product in a certain month, so we have to know that to build in Ôcushions' to be prepared for customer requests."

Paper Cuts
The increased use of electronic trading for parts and components and an increase in customer requests for additional documentation is causing concern with parts traceability. Online documentation is not accepted by the masses yet, but hopefully will be in the near future. Original documents for parts are still the only salvo for customers, so in the meanwhile, distributors need to accommodate those demands.

"One of the most significant industry changes has been the rapid increase in customer requirements for additional documentation with each order, such as FAA Form 8130-3 and manufacturers' certificates of conformance," says Jim Quinn. "The customers ask for them to protect themselves in the current regulatory environment."

Varga's paperwork states that they need traceability documentation with all items. "We almost always get our stock from the manufacturer and those parts all come with certification," says Corsbie. "In those instances where we receive parts or components from other resources, if they are received without proper documentation, they will sit in Ôquarantine' until the paperwork comes through.

Quinn explains the consequences of asking for too much. " A key customer challenge is the continuing demand for documentation that is flatly not required in all cases. The need to generate unnecessary paperwork drives up the cost of doing business, and inevitably is reflected in the price of parts and in additional surcharges."

There is no escaping this question this year. While those in all industries are scrambling to avert any problems with first, the September 9, 1999 (9/9/99) conundrum, and ultimately the January 1, 2000 test; these parts distributors are confident that they are already, or will be, compliant and things will be business as usual when the calendar turns. Y2K statements are currently on all of their web sites, except Varga's.

"We've received letters on a daily basis as to what we're doing about the situation," explains Corsbie. "We also receive standard forms from customers to spell out our Y2K policies. Varga is implementing all new software and hardware in-house to ensure as smooth a transition as possible and to assure customers that we are concerned about the issue and are taking action."

ISO 9000
Parts distributors fall under the service category of ISO 9002 for certification from the International Standards Organization. There are other types of certification such as AS9000 — Aerospace Basic Quality System Standard, the aerospace version of ISO-9000, and QS-9000, a quality assurance standard specific to management; however, ISO-9000 is the darling of process standardization for those seeking quality assurance from businesses — especially in markets overseas.

"AAR is working towards certification and feels it's an important business decision," states Cooper. "It is certainly important for trade overseas and with the airlines."

Quinn agrees but also adds, "Aviall is ISO-9002 certified. Customers should realize that ISO certification has value to them in that it ensures traceability, and that all procedures have been documented and followed on a continuing basis."

API is in the process of getting ISO 9002 certified and did very well in its preliminary audit at the end of February. "We felt it would help us overseas and it has afforded us more opportunities with regard to large contracts, claims Botana. "The contracts we have received as a result have already outweighed the costs involved for ISO certification."

Varga's Corsbie gave a slightly different view. Varga is not yet rated, but will probably do so in response to customer demands. "Some large customers are requiring their vendors to have ISO certification, says Corsbie. "A company has got to become approved in order to be a player, yet it's not always enough. There are so many different types of certification, there should be one standard."

The Urge to Merge
"The parts distribution business should continue to be strong for many years to come, although there may be far fewer participants," states Quinn. "Consolidation is a fact of life in business, and as pressure on profits continue, many of the weaker players will drop out."

"Certainly, mergers will continue, says Ken Cooper. "Our own company is evidence of that with the acquisition of Cooper and AVSCO in the last few years. About 15 years ago, there was a shift where the manufacturer wanted to supply directly to customers and pretty much do away with distributors — that didn't happen. Today, the Distributor is stronger than ever in the supply chain."