Simplifying the Procurement Process
By David Dundas
When you realise that in an Airbus A320 there are roughly 340,000 parts and approximately 367,000 in a Boeing 737, is it any wonder that the procurement process is such a key element for those involved in the maintenance and upkeep of such technologically complex aircraft. In fact, procurement is only one aspect of the many challenges faced by MROs who rely on efficiency and cost effectiveness to remain competitive. However, in this particular instance we wanted to learn more, in particular, about today's procurement processes, and we approached two companies who are in an ideal position to answer our questions – VAS Aero Services and Werner Aero. Their input into this article is greatly appreciated.
Is it much more difficult to search for such parts than to get the material directly from the manufacturer or authorised dealers?
USM and surplus new parts are very attractive in the aftermarket due to their substantial cost savings versus new OEM parts, particularly when manufacturing lead-times do not meet customer operational timelines. There are a few key considerations that make sourcing these parts more challenging, such as the condition and certification status, traceability paperwork, and regional access locations. Mike DeMicco, Senior Vice President Sales & Material Management, VAS Aero Services explains further: “All of these are solid reasons for establishing a close relationship with an aftermarket USM supply partner such as VAS who has the resources, experience and inventory to meet an operator's needs, saving time and money in the long run. We do the upfront due diligence on parts validation and conformance, including rigorous inspection; we make sure that part histories, certification and documentation accompany each part we sell, and we enforce a strict Suspected Unauthorized Parts (SUP) policy to protect aircraft safety. Thanks to our active airframe and engine acquisition and teardown programme, VAS has strong inventory coverage of critical USM parts covering most platforms.” Tony Kondo, President & CEO, Werner Aero, LLC. adds that in relation to any difficulty: “This must vary by parts number. Lead times for new parts from manufacturers can sometimes be too lengthy, prompting customers to turn to USM suppliers like Werner Aero.”
Are there IT solutions that help source spare parts, and can these be integrated with typical mainframe systems?
Tony Kondo makes his thoughts very clear on the matter, underlining the benefits and effectiveness of direct person-to person contact. “There are several web-based platforms available to help customers find USM (Used Serviceable Material) in the market. However, the most effective way for customers to actually purchase parts is still by reaching out directly via email or phone to a reliable contact. This personal approach ensures faster responses, better guidance, and a more tailored service,” he states.
Mike DeMicco on the other hand has a very positive attitude towards the benefits of IT-related solutions. He points out that: “There are definitely IT solutions that facilitate sourcing spare parts, and many of these can be integrated with mainframe systems through APIs, middleware, EDI, or custom interfaces. The integration allows for more efficient procurement, better inventory management, and greater transparency in sourcing used or surplus parts, ultimately reducing costs and improving operational efficiency. VAS works with customers to provide a seamless process of inventory search and pricing, request for quotation, sales order agreement, and parts fulfilment.” He then adds that the company “…has invested over US$30 million in dedicated IT infrastructure and enhanced capability for aftermarket business solutions. For example, our customised SAP system seamlessly integrates with customers' systems for aftermarket programmes, automated quotations and inventory management, and programme management.”
We wanted to find out what was considered the most important material master data that must be made available to the buyer.
Any parts procurement system can only work smoothly if both the buyer and the seller can access a very accurate material database as an accurate and comprehensive material master database is critical to sourcing spare parts and covers a range of vital data points, including: the part number and description, manufacturer information, material specifications and technical data, condition/serviceability status, pricing (including any additional charges or applicable discounts), lead time and availability, certification and traceability documentation, packaging and shipping details, plus any warranty and returns policy. According to Mike DeMicco, “These data elements help ensure the buyer has access to all the necessary details for evaluating, purchasing, and receiving the right part. Maintaining this material master database with a high level of accuracy is a significant task requiring in-depth platform knowledge, a keen understanding of market trends and a team of experienced parts evaluation specialists. That's the added value that qualified USM suppliers such as VAS offer the aftermarket, helping clients reduce procurement errors, optimise inventory, and meet operational and financial goals.” As Tony Kondo succinctly puts it: “Accurate availability is crucial. Without it, searching the database for parts becomes an ineffective use of time.”
We wanted to know more about elements of the procurement process which can be automated, and which should be carried out manually.
The procurement process begins with the identification of demand and ends with the successful receipt of goods in the system. Assuming that all information and data is available to buyers and sellers, should the process be fully automated, except for the receipt of goods? Are there any control points which should not be automated? In response to these questions, Mike DeMicco suggests that: “In an ideal scenario with accurate data, many steps of the procurement process—from demand identification to part selection and availability verification to purchase order creation and tracking—can be automated, significantly reducing the need for manual intervention. However, control points where exceptions occur, regulatory compliance needs to be verified, paperwork validated, and custom shipping is required will still require manual oversight.” Tony Kondo once more gets straight to the point when he says: “The KYC [Know Your Customer] process cannot be fully automated.”
What do you generally recommend that will make the procurement process faster and more efficient?
We know that every manager is interested in having a procurement process which is both efficient and cost effective. However, the challenge is to identify what is primarily required to achieve this and then identify and overcome any particular obstacles that could hinder the process. Werner Aero's Tony Kondo is very clear in his opinion, and particularly in relation to knowledge and experience. “Buyers should be equipped with proper education and experience to make informed decisions. For example, they need to understand the differences between Overhauled (OVH) and Serviceable (SV) conditions, particularly in terms of price, warranty, and overall value,” he says.
At VAS Aero Services, Mike DeMicco expands further on the matter, advising that: “To make the procurement process faster, more efficient, and cost-effective, several strategies and best practices can be implemented. These focus on automation, process optimisation, supplier relationship management, and data integration. However, there are also common obstacles that can hinder procurement efficiency, which need to be addressed to ensure smooth operations.” He then adds: “Automating routine tasks, such as establishing reorder thresholds, can assure continued parts availability and uninterrupted maintenance cadence. Leveraging AI for predictive analytics and demand forecasting aids planning and reduces supply gaps. USM leaders such as VAS rely on Electronic Data Interchange to facilitate customer ordering and invoicing, reducing manual intervention and speeding up the procurement process. Working closely with a strong aftermarket parts supply partner will alleviate bottlenecks and result in more efficient and cost-effective parts procurement.”
From what our two respondents have had to say, it would seem that while there is a place for automated systems in order to improve efficiency in the procurement process, we are still a long way off fully automated ones as there is still a (beneficial) reliance on person-to-person contact, as well as a required manual input into the packaging and dispatching aspects, along with receipt and distribution of ordered products once received.
