Opportunities Exist: You have to know where to look

Nov. 1, 2002

You have to know how to look

Brandon Battles

For those that are old enough, how many remember the Smothers Brothers? I saw them during the closing-night banquet at the recent NBAA show in Orlando. (They were funnier than I remembered when watching them on television years ago.) During their never-ending humor, one of them quipped, "I hate to beat a stick with a dead horse."

At the risk of doing the same, I would like to explore a subject that I have alluded to in previous articles but change my approach by appealing to a different audience. If you are from the maintenance department, perhaps you will show this article to your executives to help them better understand the importance of maintenance to your overall organization.

How important is the maintenance department?

How many remember the old joke where a number of organs in the human body are trying to convince each other that their role is the most vital to the continued functioning of the body. Each organ certainly has a compelling argument as it becomes apparent that without one, the others and, as a result, the body will cease to function.

I can make the same case for an aviation organization and its various departments. Without pilots, aircraft cannot be flown. Without schedulers, aircraft availability and location are difficult to determine. Without accounting, organizational performance is difficult to measure and long-term success is endangered. Without finance, critical cash flow may not be available. It quickly becomes apparent that each department within an organization is important. It must be or it shouldn’t exist.

The maintenance department offers the overall organization the best opportunity to control and reduce its current costs.

Conspicuous by its omission in the list of departments is maintenance. In most organizations some form of a maintenance department exists. Some have capabilities that can include heavy maintenance, refurbishments, and avionics, while others may have a lesser role by serving as coordinators for outside contractors. Regardless of its form, the maintenance function and its related costs do exist, therefore it must be important. But how important?

Without maintenance, aircraft would not fly, if for no other reason than failing to meet regulatory requirements. (And there are certainly more reasons.) While its relative importance cannot be questioned, unfortunately and frequently the maintenance department suffers an undeserved reputation when viewed by other departments. For example, uninformed accounting and financial departments can view the maintenance department as a consumer of many resources. In other words, the maintenance department exists but at a significant cost. Most would probably agree that aircraft are expensive to operate when viewed from a dollars-consumed perspective. (Judging a department based upon only the cost does not consider the whole picture. Don’t forget to consider the value of a department.)

What department has the most discretionary costs?

Despite this costs-to-operate situation, an opportunity exists for the organization and more specifically the manager of the maintenance department. Unlike many of the other departments’ costs, the maintenance department has a large amount of discretionary costs. Stated simply, the department has a certain level of control over whether or not it will incur a cost or, at the least, can influence the amount of a cost. This is not the situation for most costs in the other aviation departments.

An example: If a hangar cost is reviewed on an annual basis, the aviation department has some control over the amount of the rate once a year. The department could decide to change locations, negotiate, or extend the rental period to obtain a lower rate. The department has some discretion over the amount of the cost. However, during the year the aviation department has a very limited ability to change the negotiated rate. The cost during this period becomes non-discretionary.

What type of discretionary costs does the maintenance manager encounter? Listed are some of the more significant or frequently overlooked costs that the maintenance manager has the opportunity to influence.

• The costs associated with carrying inventory are often hidden and therefore overlooked. Nevertheless they are real and can become quite expensive. Examples are insurance, storage facilities, personnel, taxes, and security. Another significant cost is the use of an organization’s resources that could have better uses. Generally accepted estimates of inventory carrying costs are around 25 percent of the total value of the inventory.

These costs are discretionary because the maintenance manager can decide what items will or won’t be carried in inventory. The maintenance manager ultimately decides how this asset will be managed. It frequently boils down to managing the inventory or simply taking orders, which leads to increased inventory.

• A cost related to the inventory issue but one that deserves its own attention is shipping. Shipping costs take the hidden and overlooked concept to another level. The discretionary part of this cost is normally tied to the urgency of needing a part and correctly identifying the part required for repair or replacement. Too frequently, technicians demand that vendors supply parts as quickly as possible. Urgency on the maintenance department’s part will increase shipping costs. Or if technicians order incorrect parts due to incomplete research it increases costs to send parts back and await the correct parts.

The maintenance manager can control and reduce shipping costs by establishing shipping policies, determining which alternatives are available, and making technicians aware of overnight delivery costs. In our company, just slowing down and determining the actual need for the item or information is enough to reduce the reliance upon expensive shipping costs.

• Probably the largest category of discretionary costs is the cost associated with maintaining the aircraft. This category can vary from organization to organization based upon factors, such as the age of the aircraft, experience of the technicians, and the type of aircraft. Regardless of the variables, maintenance costs are significant and should catch any manager’s attention.

Some mechanics may be parts changers and not troubleshooters. Thus they replace whole components or parts without troubleshooting the problem. This philosophy certainly will add to the maintenance costs of an aircraft.

The maintenance manager can influence maintenance costs by understanding the variables that affect them. This requires a feedback system that summarizes maintenance costs and their behavior. Training for technicians is a must as it supplements experience and will shorten the learning curve. And finally, the manager should communicate the goals, objectives, and policies that are in place to reduce and control maintenance costs.

What department has the largest cost opportunity to help the organization?

The types of costs mentioned above are not all of the discretionary costs in the maintenance department, nor are the suggestions for controlling those costs all encompassing. Most managers already know about the control they have over the discretionary costs. However, most of the maintenance managers in aviation come from technical backgrounds. (Over 90 percent of the students in my classes have come from technical backgrounds without any prior management training.) And, technical skills are different than managerial skills.

The maintenance department offers the organization the best opportunity to control and reduce its current costs. This can only happen if the manager receives the proper management training.

Recognize that the maintenance function is just as vital to the success of your aviation department as the other functions. It also holds the most opportunity to improve current and future costs with the proper training. AMT

Brandon Battles is a partner with Conklin & de Decker. He has spent more than 15 years in aviation working with maintenance organizations in areas of cost collection and analysis, systems review, inventory analysis, and management training.