Collaborative MRO Value Chain: Are you Ready? Passionate about creating sustainable value Author Dr. Dieter Bölzing Subject Supply Chain Best Practices Created Date 7/13/2011 3:24:47

▪ J&M Management Consulting ▪ www.jnm.com13.07.2011Copyright

Collaborative MRO Value Chain: Are you Ready?Jacques BeauchesneSenior Manager @ J&M Management Consulting

Airline & Aerospace MRO & Operations IT Conference – EMEA

July 13th 2011, Darmstadtium, Darmstadt (Germany)

13.07.2011 ▪ J&M Management Consulting ▪ www.jnm.com ▪ Page 2Copyright

Before we start

Ask yourself the following question

When thinking about your MRO Organization, do you ask yourself:

« I need to reduce my cost, so what activities should I outsource »?

OR

« I need to make my MRO Organization more efficient, should I implement a

Lean Culture? Where to start, how can I make it happen»?

OR

« I want to focus on my core business, so who should I pick to take care of my

maintenance »?

OR

« I need to find a partner that can help me increase my aircraft availability, so

on what activities should I collaborate »?


Presentation Objectives

1. Key Trends Leading to Increased MRO Collaboration

2. The MRO Value Chain: Where it Starts

3. The Roadmap to Value Creating MRO Collaboration


Key Trends Towards MRO Collaboration

The MRO Value Chain

The Roadmap to Value Creating MRO Collaboration

Conclusion

1

2

3

4


First things first

General data on surveyed companies*

* “Using IT to Collaborate in Optimizing Aircraft Availability” Survey conducted in 2010 in cooperation with Aircraft Commerce, with 26 respondent companies


First things first

Fleet composition of surveyed airlines

* According to Steve Udvar Hazy, 2010

Year% of World Fleet

Owned by Lessors

2000 25%

2010 34%

2020 45%

The proportion of aircraft leased by airlines is on

the rise

Lessors offer wet leases that include MRO


The more complex the activity is, the more Operators

outsource it

Source: AeroStrategy 2008: MRO in 2018

… And the trend for

Airlines is to

outsource more in

the future in order

to focus on their

core business


Another Trend for Airlines is to move further away from buying

spares & subcontracting work towards “Full Services”

Military Performance-Based Logistics Contracts

A variety of services are offered to Airlines by various Third Parties:

TSP (Total Support Packages)

PBH (Power-By-the-Hour Contracts)

Engineering Services offered by Third Parties

Fleet Management Services

...


Operators are very happy with their current Maintenance

Organisation…

… But 42% are improving or want to improve it ... mainly through collaboration


… almost ⅔ of all Operators report wanting to improve their

Logistics…

… mainly through Process

changes, increased

Collaboration or IT

Implementation / Improvements


... and the MRO Ecosystem is moving towards cross-enterprise

collaborations, incorporating strategic partners

Discrete value chain processes and data flows well documented and understood

Resources managed at department level and performance measured at functional level

Company-wide process and data model continuously measured at the company, process and diagnostic levels

Resources managed at both functional and cross-functional levels

Strategic partners throughout the global value chain collaborate to:

Identify joint business objectives and action plans

Enforce common processes and data sharing

Define, monitor and react to performance metrics

IT and eBusiness solutions enable a collaborative value chain strategy that:

Aligns participating companies business objectives and associated processes

Results in real time planning, decision making and execution of responses to customer requirements

Functional Focus Internal IntegrationExternal

Integration

Cross-Enterprise

Collaboration

Va

lue

Ch

ain

Pe

rfo

rma

nc

e

Stages of Operational Capability


For ¾ of all Operators, storing, structuring & sharing A/C data

would simplify their MRO processes…

… in


Key MRO Trends leading to increased MRO Value Chain

Collaboration

Lessors offer wet leases that include MRO, as the proportion of aircraft

leased by airlines is on the rise

Airlines are outsourcing more M&E in order to focus on their core

business

Airlines are moving further away from buying spares & subcontracting

work towards “Full Services”

The MRO Ecosystem is moving towards cross-enterprise

collaborations, incorporating strategic partners in order to improve MRO

efficiency

Airlines believe that sharing data with other MRO Stakeholders would

simplify their MRO processes



The MRO Value Chain


Conclusion

1

2

3

4


Subcontractor

OEM

MRO(Internal or External)

Parts Trader

Airline

Base/Line

Station

Equipment

Owner

MRO SERVICE PROVIDERS

AIR

LIN

E C

US

TO

ME

RMRO Stakeholders

AIR

LIN

E(A

ircra

ft O

pera

tor)

MRO VALUE CHAIN


Suppliers &

Partners

Customers &

Channels Plan Source & Procure Engineer & Maintain Sell Operate

Enterprise Management & Support

Operations PlanningNetwork Planning and

Flight Scheduling

Airline ProcurementSelf-Service Procurement

Service Procurement

Sales & MarketingMarketing

Loyalty Management for

Frequent Flyers Reservation and Ticketing Contract and Commission

Management Service Sales & Marketing

Customer CareCustomer Service

OperationsFlight Operations

Ground Services

Catering Flight and Ground Crew

Scheduling

Airline Financials & AnalyticsRoute Profitability

Revenue Accounting

Cargo ManagementCargo Fulfillment Operations

Maintenance, Repair & OverhaulMaintenance Engineering

Maintenance & Service Planning

Maintenance Operations

Parts & Tool Management

Define your MRO Value Chain (an Airline Example)

Airline MRO Value Chain

* Based on SAP’s Airlines Solution Map


Suppliers &

Partners

Customers &


Maintenance Engineering

Maintenance Program Management

Document Management

Quality Engineering

Development Collaboration

Asset Life-Cycle Management

Document Management

Asset Scrapping

Phase-In Equipment

Change and Configuration Management

Reliability Management

Reliability Centered Maintenance (RCM)

Failure Mode and Effects Analysis (FMEA)

Maintenance, Repair & Overhaul

Analyze your Value Chain activities & identify collaboration

opportunities (in Maintenance Engineering)


Suppliers &

Partners

Customers &


Definition of Maintenance

Requirements

Maintenance of Maintenance

and Service Planning

Simulation of Maintenance

and Service Plan

Transfer of Planning Results to

Production



opportunities(in Maintenance & Service Planning)

Maintenance & Service Planning


Suppliers &

Partners

Customers &


Maintenance Operations

Line Maintenance

Dispatching / Scheduling

Preventive Maintenance

Corrective Maintenance

Quality Assurance and Control

Refurbishment Processing

Maintenance Cost Budgeting (MCB)

Resource and Time Management

Inspection

Heavy Maintenance

Maintenance Cost Budgeting (MCB)

Project Planning and Scoping

Shutdown Management

Project Execution

Dispatching / Scheduling






Inspection

Engine Maintenance

Project Planning and Scoping

Shutdown Management

Project Execution

Inspection






Component Maintenance

Request for Repair

Component Receipt

Component Inspection and Scoping

Work Order Planning and Scheduling

Production Control

Work Order Execution

Subcontracting

Component Assembly

Work Order Completion

Component Delivery

Settlement and Billing



opportunities (in Maintenance Operations)


Suppliers &

Partners

Customers &


Parts & Tool Management

Warranty Management

Product and Warranty Registration

Product Service Letter Management

Service Contract Management

Service Order Management

Escalation Management

Service Confirmation Processing

Billing

Service Contract and Quotation Analysis

Warranty Claims Management

Warranty Analysis

Tools & Equipment Management

Physical Inventory

Sales Order Processing

Outbound Processing



Document Management



opportunities (in Parts & Tools Management)



The Collaborative MRO Value Chain


Conclusion

1

2

3

4


Successful steps towards a “Best-in-Class” Value Chain

4-step approach to a Best-in-Class Value Chain

Realign the

VC Strategy

1

Enhance internal

processes

2

Getting closer

to customers

3

Integrate

Partners

4

“Building-up theStrategic Fit“

“Become fast, flexible and efficient“

“Excellent fulfillment andcollaboration”

“Activelymanaging partner

relationships”

Key Performance Indicators (KPI) Value Chain Collaboration & Benchmarking


Effective value chain companies put their value chain

strategy at the center of their business strategy

Key questions:

• Where to compete – defined by corporate strategy

• How to compete – competitive advantage based on VCM

• How to manage – process features and performance KPI

Customers Customers Customers



• Business strategy defines products and markets, target customers and the service

offerings to create customer value, market entry, and product making processes.

• Innovation strategy defines the objectives, processes, and approaches for new product

conception as well as for the product portfolio rejuvenation

• Sales and marketing strategy defines how customers are approached and attained, and

where and how products are positioned in the markets to make them attractive for customers

• Value Chain strategy defines how products are physically made available to customers

according to their needs as well as own process requirements

Key

strategies of

the company

Customer chain

Key

questions for

effective

Value Chain

management

Realign the

VC Strategy

1



Leaders create advantage investing in integration,

organizational excellence, and intelligent use of IT

ExternalFocus

HumanResources

&Organization

Informationand

KnowledgeTechnologies

4%

34%

Others

Leaders (Top 10%)

30%

Customer/SupplierInterface

ValueAdded

Processes

14%

98

127

60

86

47

63

119

136

7781

Value Chain leaders focus more on creating the appropriate enablers

44%

Enhance internal

processes

2



Complete

On-time

2-4 days

24h

Others

Leaders

31%

43%

20%

29%

6,9

6,8Logistics cost (1998)

Delivery time

for % sales

Quality level

to customer

94%

84%

93%

86%

Value Chain leaders focus more on creating

customer value

Leaders do not strive to reduce their cost but to improve their service quality

Getting closer

to customers

3

“Excellent fulfillment and collaboration”


Value Chain strategy addresses integrative &

holistic solutions to improve overall performanceIntegrate

Partners

4

“Actively managing partner relationships”



The Collaborative MRO Value Chain


Conclusion

1

2

3

4



4-step approach to a Best-in-Class Value Chain

Realign the

VC Strategy

1

Enhance internal

processes

2

Getting closer

to customers

3

Integrate

Partners

4



“Excellent fulfillment andcollaboration”

“Activelymanaging partner

relationships”

Key Performance Indicators (KPI) Value Chain Collaboration & Benchmarking


To design Value Chain improvements, different levels of detail

need to be considered

Employee

Involvement

Micro-Value Chain

Process-Value Chain

• Board

• Div. Management

• Product Management

• Marketing

• Plant Management

• Supply units

• Factories

• R&D Departments

• Departments

• Operators

Value Chain

Strategy and

VCM Design

Processes

and overall

workflow

design

Individual

workflow

design

Disposition SpeditionSystem Außen-läger

Versand-läger

ZentraleLogistik

Etikettenerstellen

Verladung

neueVerfügung

Lager BA u.Etikettennein

Verladung

Schein 2BA

Schein 3BA

Schein 3BA

Abwicklung/Verfügung

Prüfung Ver-sanddaten

AVIL BA

BA

nein

Lagerja

AufhebungBereitstellung

Disposition SpeditionSystem Außen-läger

Versand-läger

ZentraleLogistik

Etikettenerstellen

Verladung

neueVerfügung

Lager BA u.Etikettennein

Verladung

Schein 2BA

Schein 3BA

Schein 3BA

Abwicklung/Verfügung

Prüfung Ver-sanddaten

AVIL BA

BA

nein

Lagerja

AufhebungBereitstellung

Level Stakeholders

Macro-Value Chain

Focus area for VCM strategy

projects

During the initial phase of the project, the required scope needs to be defined jointly with project

and business management


1. Thinking in « end-to-end » value chains

2. Develop the value chain from the customer backwards

3. Establish collaborative interfaces and relationships wherever possible

4. Use a balance of customer oriented and internal performance indicators

5. Establish continuous improvement as underlying program

6. Achieve overall cost reductions based on integrated performance improvements

7. Strive towards predictability and reliability of all process elements, and at the critical steps along the chain

8. Continuously improve forecast reliability to align processes along the entire chain

9. Establish IT systems for seamless availability of relevant information along the entire chain

10. Establish lean principles in manufacturing and supply to increase flexibility

11. Synchronize own operations with the customer operations

12. Provide transparency about order and delivery status

13. Develop logistics and transportation partnerships to leverage own competences

14. Increase perceived customer value by including value-adding elements for the customer

15. Use segmentation and differentiation techniques to taylor the service offering and service levels to targeted customer needs

Value Chain Excellence –

What the leaders do different?

Mindset

Enablers

Customer

orientation

Leaders analyse thoroughly – and then decide and implement fast and passionately


Value Chain Champions: Since 1997 J&M has provided

consulting support to Aviation clients at the highest level

Independent, management-owned corporation,

Chairman of the Supervisory Board:

Prof. Dr. h. c. Lothar Späth

250 Employees

Integrated consulting

approach: Strategy,

Processes & Organisation

and Technology

Pragmatic Implementation Expertise

Value Orientation

Best Management Consultancy

for Value Chains*

* No. 1 SCM – Internal Supply Chains and Processes, No. 3 SCM – Distribution Logistics and After Market Services, Source: Hidden Champions des Beratungsmarktes 2009, WGMB Prof. Fink, in CAPITAL 06/2009;

No. 2 Supply Chain Strategy, Source: Best of Consulting Competition 2010, WirtschaftWoche.

Aerospace &

Defence

http://www.safran-group.com/?lang=en


As a Value Chain Champion, J&M stands for integrated

consulting along the entire Value Chain

Sourcing &

Purchasing

Marketing

& SalesPlanning

Pro-

duction

Logis-

tics

Distri-

bution

Product Development &

Innovation

Finance & Controlling

Supply Chain Operations

Supply Chain

Management

Pro-

ducts

Sys-

temsServices

Spare

Parts

Managementof Change

Processes & Organisation

PerformanceManagement

IT & Enabling Technologies

Strategic Direction Setting


We constantly monitor the leading companies of the world, and

assess their practices and performance levels

Systematic monitoring of supply chain leaders

Performance levels

Performance enablers

J&M RESEARCH


Based on our understanding of the Value Chain Leaders, we

systematically collect trends & best practices in the Value Chain

Value

Chain

Excellence


We use our wide project experience as well as our specific

methods to guide companies towards VC Excellence

Quantitative

Analysis on

efforts and

improvement

potential

Process

mapping on

key VC

processes

Organizational

structures,

similarities

and

differences

Challenging ideas and thinking with best practices and benchmarks

Activities conducted as preparationMethods and Content expertise

provided by J&M


J&M stands for value-oriented consulting:

J&M returns investment – 7 times over!

1 Euro invested in J&M consulting = 7 Euros in client value

Reasons for the above-average value

generated by J&M projects:

1. The integrated, value- and

implementation-oriented J&M consulting

approach

2. Consistent, client value-focused project

measurement and control

3. Professional J&M project management

based on PRINCE2

Source: Cardea Study, Return on Consulting, 2007;

J&M Management Consulting calculations, 2010.

Each Euro invested in consulting delivers

the following value (Return on Consulting):

4,15

6,83

Ø J&M


We create Value Chain Champions

J&M Management Consulting SAS

24, rue de Londres

75009 Paris

www.jnm.com

Jacques Beauchesne

Tel. +33 1 56 02 62 40Fax +33 1 56 02 62 41Mobile +33 6 88 45 03 73Mail [email protected]

Visit our booth in the Exhibition Hall for more information

Documents

Collaborative MRO Value Chain: Are you Ready? Passionate about creating sustainable value Author Dr. Dieter Bölzing Subject Supply Chain Best Practices Created Date 7/13/2011 3:24:47