Securing a Supplier Base for Maximum Efficiency / by Jason Reed

Author: gatelesis

Much of the spotlight in our industry is geared towards the airline community since they are front and center to the daily traveling passenger. A significant factor in the success of the global airline community is the technology of the components on board, the entire supply chain distribution channel, and the maintenance facilities that support the airlines.  There are thousands of companies around the world that perform parts distribution and MRO services, so it’s understandably difficult for airlines to choose which partners to work with strategically and on a one-off basis during their operations.  Once suppliers and MRO’s are on board, there needs to be a constant system of management of that supply base. Otherwise, one misstep can cause the dreaded AOG, or worse, create a systematic chain of events that drag down airline operations and overall efficiency.  Here are some great tips to look for, in both good and bad times, when choosing your strategic supply chain partner.

Selection

When choosing any strategic partner, various factors go into supply chain selection. Still, one thing is for sure, safety, quality, and reliability need to be the top three and in that exact order.  Passenger safety is paramount and on-wing performance is key to efficiency.  If you are looking for a long term strategic partner, the next critical factor needs to be strong financial backing and the ability to continue distribution or maintenance services at any time of the day through any economic period.  Don’t forget that potential partners may have an entire supply chain network under them as well, so it’s essential to know how the full spectrum will function.  As we have seen with COVID-19, this has become incredibly relevant.  My team and I have fielded hundreds of calls from around the world asking us if we were still ok financially, if all of our staff are still in place, if distribution is still moving, if our repair shops were open, and if we still have parts to sell.  Being able to say YES to all of those items brought a remarkable sense of pride to the GA Telesis team.  And it was incredibly refreshing to the airline community.  We took valuable steps in recent years to make sure we are dealing with dependable suppliers and repair stations so we would continue to function in even the most difficult times. Beyond that comes the usual discussion around technology, repair shop processing time, on-time delivery guarantees, customization capabilities, flexibility, and overall ease of services provided.

For short term partners, beyond safety and quality, the route to selection can be somewhat easier.  Airlines may need a short-term to a mid-term solution or face a possible one-off AOG situation.  Fit, form and function, shop processing time, and on-time delivery are usually the quickest selection criteria along with pricing factors coming into play much sooner.  Some people may contend that price is everything, but the price is very generic, and many factors determine the price and what you ultimately get for that price.  But that’s a whole topic on its own for another day, which my friend Alex Tuttle will give insight to during his next blog.

And of course, in today’s world, there is always the discussion around OEM, PMA, DER, or other options, but that is more of a function of airline philosophy before arriving at supplier selection.

Management

Once supplier selection is complete, you’ll want firm commitments in the form of a contract or GTA.  These commitments create the framework for future dialog between all parties to ensure success.  But from there, what gets measured gets managed.  It can’t be said any better than that.  Our entire operation is measured in different ways on a daily, monthly, or quarterly basis.  We find things real-time or systematically, and we address them regularly to ensure minimal to no failures.  It’s even more relevant for an airline, whether you are transporting millions of passengers a year with over 1000 aircraft in a fleet, or a couple hundred thousand passengers with a fleet of three aircraft.  With generic framework contracts in existence, such as the Airbus SSC or the Boeing PSAA, many airlines expect supply chain partners to perform without detailed KPIs in place.  That type of idealistic logic saves money on staffing, but ultimately, it will become a loss.  I have heard of so many canceled supplier contracts due to non-performance.  What that means is, they caused too many AOGs, and the airline had to work twice the amount of time for double the cost to solve their problems without that original supplier.

On the flip side, I have seen some of the best airline supplier managers out there.  Routine KPIs, scorecards, quarterly on-site business reviews, incentives for overperforming suppliers in the way of additional business, that’s the key to success.  Years ago, I reviewed a financial demonstration of how an airline suffers financially simply by non-performance of a single repair station on a single part number.  The numbers were astonishing.  If that supplier didn’t achieve a 15 day shop processing time on their components, the airline would have to spend an additional $10M on spare parts per year to make up for that lack of repair station efficiency.  Now multiply that by 30,000 parts on an airplane, and you’ll understand how painful that becomes and the attention it gets from an airline CFO, COO, or even the CEO.  Getting on their radar is NOT something I wish on anybody, but I’ve seen it happen, and it’s a looooong recovery from there.  Not to mention the PR nightmare it creates for both the airline and the supplier in question.

Even the best of suppliers get in a jam from time to time for no fault of their own.  Sometimes a supplier benefits from a substantial input of repair components simply because other suppliers failed.   In that particular example, pure manpower is the issue to catch up to the problem.  Whatever problem may exist between you and a supplier, you must have a robust recovery action plan system.  Ensure there are documented commitments and KPIs for the supplier’s recovery to ensure they bring their performance back to your expectations.

We’re about to go through the most substantial reset of airline operations in quite some time. What better time to take a look at your supply chain to see if it’s in step with your needs today, tomorrow and for years to come.  Until then, stay safe, and I look forward to seeing all of our airline and supplier friends as soon as possible.