The Uptime Blog
by Jonathan Yaron
In the manufacturing world, electronic parts catalogs (EPC) are a critical business system because they hold the key to aftermarket revenues and profits. The strategic function of an EPC is to manage the parts and service relationship between manufacturers (OEMs), dealers and customers. A modern EPC includes complete parts information (BOM), drawings, and different types of maintenance and troubleshooting manuals. The EPC also contains a pick list that will populate a shopping center/order management system. This means that the EPC essentially connects the point-of-service to the supply of spare parts, which are maintained by an ERP system like Oracle or SAP. (Spare parts can be either mechanical or software components.) This blog post is the first in a series that will discuss the pros and the cons of deploying your EPC using a SaaS (Software as a Service) model or as an in-house enterprise software application.
When you compare a SaaS EPC to an enterprise EPC, the major considerations are: cost, time-to-market, return-on-investment (ROI), integration to OEM systems (ERP), integration to dealer management systems, IT involvement and software customization, protecting intellectual property, initial data migration and ongoing revisions/updates, and ongoing customer support to the dealers. The final topic in the series will be my recommendations for deploying an EPC strategy.
Cost, time-to-market and ROI are directly tied to the OEM business model. As a result, this is the first topic to be discussed. SaaS and enterprise applications are at opposite ends of the implementation spectrum; one is an outsource model, the other keeps things in-house. For a division-level EPC, SaaS allows a very fast deployment (a few months) and a relatively small initial investment. On the other hand, an enterprise EPC will be a significant investment and will take a longer period of time (minimum of 12 months). SaaS costs can be covered by the operational budget while an enterprise approach typically requires a CAPEX investment (with a long and tedious budget process). Over time, SaaS will cost more (5-10 years horizon) however, even in the short term the enterprise approach can have a lower total-cost-of-ownership (TCO). (It is important to compare apples-to-apples with regard to EPC functionality, integration, and recurring data update and transaction costs.)
In most cases, a SaaS EPC will only need approval from the business manager, and will not require significant IT involvement. (However, it comes at the expense of back-office integration and automation.) The SaaS approach may not require an RFP or a bidding process and can be implemented as a pilot project that grows into a larger rollout. Because there is very little IT involvement, there is no internal budget of any significance. The only involvement of IT may be the initial data migration effort and help setting the upload of ongoing data updates. (In many cases this process is controlled by the business as well).
An enterprise EPC will typically require a RFP, or at least a bidding process, with a well-defined requirement document. The enterprise approach will require a complete budget process including external budget (for outside vendors) and internal budget for project management, IT integration and hosting (including hardware and software related to enterprise apps i.e. web servers, web services, database etc).
Both SaaS and enterprise EPCs have advantages and disadvantages. Beyond cost and time-to-market, a critical aspect of success is achieving business goals for ROI and TCO.
In my next blog, I will discuss integration of the EPC pick list to OEM back office systems (including single sign-on), integration to local dealer management systems, and IT involvement and software customization.
The folks at Carlisle & Company put together a fascinating two-part series called, "58,976 - Transformational Objectives For 2010" (Part 1 & Part 2). While the article talks about Cat Logistics' successful efforts to improve warehouse productivity in 1995, the purpose of the story is to encourage OEMs to set (and achieve) aggressive, numeric goals that improve their aftermarket business. The authors argue that successful goals must be easily understood by everyone in the organization and that having too many measurements, or overly sophisticated ones, will fail.
They go further by recommending that OEMs not waste time looking for the "perfect" measurement, just pick one goal that supports a larger business objective and go. (As long as the selected measurement plays a role in achieving a business objective—like cost reduction, revenue generation, market share growth, etc—having a singular focus on a simple goal/measurement will have the desired effect.)
The authors then look at five focus areas within OEM aftermarket business to identify goals that meet these criteria, and to highlight best-in-class (BIC) results. (Keep in mind that the goal must be simple to understand and measure but, if achieved, has benefits that are deeply-felt by the business.)
It turns out that two of Carlisle's focus areas—Sales/Marketing and Service—can be significantly improved using Enigma's technology. Looking at the goals for Sales and Marketing the recommended measurements are: service retention; satisfaction with OEM support (for improving service retention); satisfaction with wholesale support (accessories, mechanical and collision); website capability; and dealer satisfaction with OEM marketing support. Looking at the goals for Service the recommended measurements are: owner service satisfaction; fixed-right-the-first-time [we call this first-time-fix-rate (FTFR)]; dealer service manager satisfaction; and technical support. (See the Carlisle blog for the specific goals and BIC measurments that should be targeted.)
To understand how this works let's look at the FTFR measurement in the Service category. FTFR can be a frustrating goal for OEMs to target because it is largely controlled by the dealer channel. (FTFR is tied to quality of maintenance execution.) However, Carlisle points out that technical support—another important objective—has a significant impact on FTFR. This is relevant because the accuracy and usability of technical support material is entirely in the hands of the OEM. And dealers rely on the technical support materials when they perform service. Therefore, if an OEM sets a goal to have BIC technical support materials, dealers will deliver better service and FTFR will improve. That means OEMs should make measuring and improving "satisfaction with OEM support" a focus objective. (It is simple to measure and has far-reaching benefits.) We can even carry the example further and show how improved FTFR delivers improved owner satisfaction (dealer loyalty), which drives improved dealer service manager satisfaction (brand loyalty), and so on.
See how this works? When you focus on improving OEM technical support, many other important aftermarket goals can also be achieved. A similar case can be built around the objectives in the Sales and Marketing category.
At this point, I hope no one is asking themselves, "So what?" Anyone responsible for aftermarket revenues should recognize that Carlisle has done you a tremendous service by sharing key objectives that, with the right organizational focus, can have a transformational effect on your aftermarket business. Carlisle provides the objectives that will have a significant impact on the bottom line of your aftermarket. Enigma provides the technology that simplifies your ability to achieve those objectives.
"Flying fortress" was the nickname of the Boeing B-17 WWII bomber, and indeed it was. It was a high flying, long range, durable, versatile, complex (and in many ways beautiful) piece of machinery.
Today's modern airplanes can be compared to a flying fortress, factory or retail store. They consist of multiple complex systems that must work seamlessly, and continuously, to produce value. Keeping airplanes flying is hard work. However, it's the word "flying" that makes airplane maintenance more complex than a factory or retail store.
Just like a large factory, airplanes need to be serviced and replenished so that they can keep generating revenue. For that, ERP (Enterprise Resource Planning) systems exist: managing inventory, resources, planning and scheduling. In simple words, the ERP determines "who does what, when, and where?" Unfortunately, the technical documentation provided by manufacturers, which describes "how" to fix the airplanes, is not built to support modern airlines and their ERP systems. Using the B-17 analogy, it seems that OEMs care less about the "flying" and more about the "fortress."
The OEM maintenance applications are built like a fortress, or a prison, designed to protect those critical user manuals. Boeing and Airbus assume that airline customers are willing to work inside their private little dungeons. In fact, even the very latest "tool box" by Boeing is a closed application that's difficult to break into, and even harder to break out of.
The problem is that most airlines have a diverse aircraft fleet including Airbus, Boeing and other brands. Airlines need a single maintenance system to manage them all, rather than a separate maintenance application for each fleet. Further complicating the situation, airlines use the OEM documentation as "reference only" with best practices constantly being written and implemented by the engineering department.
The reality is that each airline has different maintenance practices that reflect their own needs, and every airplane in their fleet is handled differently—different missions, different options, different repair history, different configuration. Airlines need to load the OEM information into their own ERP systems to manage inventory and maintenance processes across locations—including those provided by 3rd party MROs.
Outsiders may find it surprising to learn that airlines have better maintenance knowledge than the OEMs. Airline maintenance plans are based on the real-world experience of daily operations, as well as the heavy responsibility of ensuring passenger safety. Airlines need an easy way to connect or import OEM maintenance information to the ERP system so that they can quickly implement an "as maintained" view of maintenance requirements that augments the OEM data.
Unfortunately, the document fortresses built by Boeing and Airbus don't make this easy to do. Whether this stems from poor programming or is done as a way to force airlines to use OEM parts, the fact is that the data required for airlines' ERP systems is not readily available. As a result, it costs airlines a fortune (in money and time) to load maintenance data into their ERP systems, which creates a fragmented maintenance information system.
The ATA spec that governs the presentation of maintenance information covers most of the data needs for ERP integration. It's the ability to actually implement the OEM data according to these specs, and make it portable, that is the issue.
In future posts, I will discuss issues pertaining to ERP-based aircraft maintenance and how it is supported, or not, by the OEM documentation. We will cover maintenance requirements, maintenance tasks and equipment lists, forecasting and inventory management, as well as the lack of alternates (AIG) information, which is critical to the master parts list and drives every aspect of the ERP. Airlines need all of these processes to be based on "as maintained" practices, reliability, cost and distribution across multiple locations.
Maintaining a plane is a non-stop operation—around the clock and around the world. Unlike the B-17, the new "flying fortress" built by the OEMs is not a defender of liberty and freedom, it is a prison for maintenance information. In today's world, the complexity of airline operations cannot survive under such constraints.
According to Henry Canaday, writing in AviationWeek (MROs Race to Speed TAT), "The most important factors in an airline's selection of an airframe maintenance firm typically are quality, turnaround time (TAT) and price, in that order. Airlines usually rank TAT ahead of price because it can cost $10,000 a day to lease a narrowbody for each day of planned TAT, and several times that for a widebody, according to maintenance consultants at Oliver Wyman. Unplanned TAT delays cost even more in revenue losses."
This supports what Enigma has been saying for years, regardless of your industry when it comes to maximizing uptime and minimizing costs, maintenance quality and speed is critical. It's almost embarrassing to write something so obvious; however, what isn't so obvious is one of the key factors for improving quality and speed of service.
Maintenance consistency is a major driver for both quality and speed. In fact, lean six-sigma (LSS) shows that increasing maintenance consistency has a bigger impact on service cost than reducing mean-time-to-repair (MTTR). (You can look here and here for why that is.) In other words, when looking at the big picture, MTTR shouldn't be your primary concern.
Since quality and speed are not mutually exclusive, achieving both should be the goal—and service consistency drives both. Because Enigma's technology focuses on efficiency and consistency, we have been helping companies provide better, faster maintenance for years serving: airlines, MROs, automotive and industrial manufacturers and their dealers, rail and transit, and others.
Canaday writes, "KLM Engineering & Maintenance now leads the EU market in TAT for the 747-400, according to VP Base Maintenance Karel Bockstael. ‘We have to, to compete with Asia on labor cost.' D-check TAT on 747-400s [a complex maintenance event] can be as brief as four weeks, or 3.5 weeks without exterior painting. This represents a 30% reduction in five years through Lean and Six Sigma, identification of critical paths and other improvements, with no increase in manpower."
Interestingly, KLM went live with Enigma about five years ago. While we can't take credit for all of the savings—that would be unfair to KLM Engineering & Maintenance—Enigma's technology has contributed to their success.
At the dawn of this new decade, perhaps it's time for a fresh look at how your company supports and services equipment. When it comes to succeeding in the aftermarket, Enigma has the technology and the experience to help you fix it right and fix it fast.