The Uptime Blog
Last week I attended the Aircraft Commerce 3rd Annual Airline & Aerospace MRO & Operations IT Conference in Frankfurt, Germany. (Now, isn’t that a mouthful for a conference name?) Here are a few of my observations from the show:
- IT vendors are all reporting booming growth. In a vendor roundtable session, every representative stood up and spoke about how much recent business they had signed. If one were to add all the numbers the inevitable conclusion would be that there are hundreds of airlines in Europe alone and they are all buying new software! Be that as it may, the bottom line is that the MRO market is growing fast, so airlines and MRO shops are increasing their investment in IT systems to support this growth.
- The show was attended mainly by MRO management software companies, so the usual suspects were present: Swiss Aviation Software (AMOS), Ramco, Mxi, Trax. It was interesting to see IFS and Servigistics also present, an indicator that companies offering adjacent technology solutions are turning their focus to MRO as well. Conspicuous by their absence were the ERP players: SAP and Oracle (the show organizers mentioned that SAP has booked a space for next year).
- From a customer perspective, the show was mostly attended by 2nd and 3rd tier airlines. The only major airlines I noticed were South African, Singapore (SIA) and Malaysian (MAS). The organizers really need to attract more 1st tier airline delegates; having both SAP and Oracle exhibit would increase the chances of that happening.
- Electronic Flight Bag (EFB) was a hot topic, but the plethora of offerings around EFB and the wide variance between the different solutions indicate that this technology is still in its early stage. Handheld devices with EFB solutions were proudly demonstrated by some vendors, but several delegates questioned whether such contraptions would really be useful. The EFB solutions will need to mature before taking their place beside the more-established IT solutions for aircraft management.
On a general note, the show was well-organized, with the right balance between conference sessions and exhibition time. Unlike the Aviation Week MRO events, where the IT business takes second stage, if the Aircraft Commerce people focus on IT they can grow this event to become the leading event for MRO technology. This show could easily become the place to be for airlines looking for IT solutions that will improve their business processes.
It’s no secret that the amount of money OEMs spend on supporting sales of aftermarket parts and services is a fraction of the amount they spend on product design, manufacturing and marketing. (In fact, the aftermarket gets only a small fraction of the IT budget.) Yet aftermarket profits are significantly higher than those for new products.
Too often, the departments responsible for the aftermarket are overlooked during the budgeting process. This isn’t necessarily surprising; those of us who study the aftermarket are aware that new product development is what generates interest, both inside and outside a company. Furthermore, aftermarket sales rely on a steady stream of new products, but that doesn’t mean the OEMs’ current budget allocations are correct.
When it comes to IT budgets, it’s estimated that most companies spend less than 10% of their budget on supporting customers and dealers. In an extreme case, one automotive OEM told Enigma that although aftermarket parts generated 35% of corporate profits, less than 2% of the IT budget was allocated to this opportunity. Given the importance of technology for improving both customer and dealer support, this appears to be a misapplication of valuable resources.
In fact, the ROI for aftermarket technology is so high that a strong argument can be made for OEMs to increase this budget because even a small improvement in aftermarket sales has a large impact on profits. This argument remains true whether the OEM sells aftermarket parts and services directly or works through a dealer channel.
The question each company needs to ask is, “What is the right budget allocation?” As you might expect, there are no simple answers to this question. Much depends on the goals and strategy that each OEM adopts for increasing aftermarket revenues. As competition for the parts and services business increases, manufacturers have the ability to differentiate themselves—if they know how. Enigma has demonstrated time and again that wise investments in technology are the key to capitalizing on aftermarket opportunities.
This short podcast shows you how easy it is to use the InService Electronic Parts Catalog application to find alternate parts, part kits and part assemblies. Below is a description of some of the features you’ll see in this podcast:
Parts List The parts list displays information for the selected assembly, where each line contains one component. A variety of information can be displayed based on the detail of the part data and level of integration but most often includes: assembly item number, part number, description, and quantity of each part in assembly. The user can see additional information (if available) on each part via icons linking to supersession parts, up-sell/ cross-sell parts, service information, and eNotes (shared maintenance comments).
Alternate Parts The alternate parts feature identifies when new/different parts are available in place of the original component. Different relationships can be defined between the original and alternate parts including: direct replacement (one-to-one), multiple choice (one-to-many optional replacement parts) and kit replacement (one-to-many as a mandatory group of parts). The user can select which parts (original or alternate) to add to the active shopping cart.
Assembly Viewer The assembly viewer displays the proper illustration for the current parts list. The user may zoom or move the image to see the appropriate level of detail. The user can select parts in two ways: by picking item(s) in the illustration or in the parts list. To help ensure accuracy the selected parts are highlighted in both the viewer and the parts list. InService EPC supports most standard graphics and video formats.
Time after time, when we ask manufacturers about the value they see in Enigma’s InService EPC product, they tell us how frustrated they are with outsourcing the creation and publication of their parts catalogs. The outsourced/service-based business model for parts catalogs is offered by traditional companies such as ARI, Snap-On Business Solutions (formerly known as ProQuest), and InfoMedia.
Manufacturing companies are now realizing that the outsourcing approach has major disadvantages:
- It exposes intellectual property. All source content, which represents critical intellectual property, needs to be sent to the vendor so that it can be processed and loaded into the catalog application.
- It takes too long. Catalog updates, whether new part numbers, service bulletins or collateral, take too much time to be processed and released to the field. Updates can take several weeks to be distributed, even on the web, meaning that dealers are relying on out-of-date information.
- It costs too much. OEMs typically pay an annual fee to the outsourcing vendor and an additional fee for every catalog update, based on the amount of content being added/ modified. Updates to the field can get very expensive.
All this adds up to some major headaches—both financial and logistical—for the OEM, their dealer networks and, ultimately, the manufacturer’s customers.
That’s why OEMs are showing increased interest in our InService Electronic Parts Catalog (EPC) solution. Enigma’s business model is different; we provide a software application that allows the customer to automatically update the catalog, adding new and revised content, as they see fit. Furthermore, because the Enigma application integrates with the company’s back-office, the information flow with warranty, inventory and ERP systems becomes seamless and automatic. By licensing InService EPC, companies reap these benefits:
- They protect their critical data, keeping intellectual property in-house.
- They improve dealer/customer support, updating product offerings and service information as often as required, without any delays.
- They control costs, paying a one time license fee to purchase the software, with no additional costs to update the system or add new content (except for minimal software maintenance).
It’s no wonder that many OEMs are abandoning the old outsource model to bring their catalog creation back in-house.