The emergence of enterprise-wide IT systems with customized reporting capabilities and web-based software with features such as at-a-glance status updates has not changed the fundamental metrics airlines track when their aircraft are in maintenance hangars. But technology-enabled analytics are changing how operators and MRO providers benefit from metrics measurement, often leading to more mutually beneficial relationships.
Measuring an airline maintenance procedure’s effectiveness has long boiled down to some combination of three factors: turnaround time, cost, and quality. While different airlines and MRO providers have various ways to measure them or place varying degrees of emphasis on each one, everything that is being measured ties back to these core metrics.
“At the end of the day, those are the three areas that matter most to the customers,” says Brian Hirshman, president of airframe MRO specialist Aviation Technical Services (ATS).
In the decades before third-party MRO services became a prominent feature of the aftermarket landscape, these metrics were central to airlines’ internal maintenance departments. As contract maintenance grew, airlines adapted the same measurement tools they relied on internally to their new partners, while mining additional ways to reduce costs internally. As one major U.S. airline’s director of maintenance explains, the carrier has “squeezed every bit of optimization between visits,” relates Carol Giles, former FAA maintenance division chief and president of The Giles Group. “They’ve narrowed down their discrepancies to the point where they are now performing de facto just-in-time maintenance.”
As a result, many carriers are at the stage where the search for more maintenance-related efficiency extends beyond their walls.
“In the past 12 months, operators have been asking for a bit more visibility into an MRO than you might traditionally expect,” says James Elliott, product marketing manager at maintenance software provider Mxi. “How much are you willing to share with me about the inner workings of your organization, rather than just the promises you give me on turnaround time? As outsourcing increases, this is part of [airlines’] own risk-mitigation as they look to offload costs to a more consistent model and ensure they are choosing the right partners.”
Alaska Airlines is among those asking for more from its supply chain—and offering something in return. In the past several years, the carrier has revamped the way it views its vendor relationships. It is moving away from strict performance-based deals in favor of dynamic partnerships that both tap the airline’s experience and share benefits. Central to the plan are deal-specific metrics that help the carrier evaluate its partnerships.
For instance, Alaska gives MRO providers the opportunity to use cost-saving parts manufacturer approval (PMA) parts on the carrier’s equipment, but places sourcing and product-validation burdens on the provider. “Because you did the work, we’re going to share in that,” Ken Newton, Alaska’s director, supply chain operations, told an MRO Americas audience earlier this year. “That’s reasonable risk. I want to incentivize you to save money for me.”
As Alaska evaluates potential deals, it emphasizes two goals: long-term partnerships and shared benefits. If incentives are central to the deal, the supplier must be “able to financially show the value of the incentive,” Newton says. Such approaches help the carrier “look at the total value of a deal, not just the price,” he adds. “The more sophisticated we become on our side of the business, the better we’ll become as an industry to truly understand the deal and what the intrinsic value is.”
Alaska’s strategy shift is changing the way it evaluates partnerships. The carrier, which does not have a dedicated supplier performance team, has relied on traditional periodic reviews to evaluate vendor performance and provide feedback. It is moving toward a more iterative approach that gives its internal buyers access to dynamic scorecards that help facilitate “a continuous discussion” with suppliers, Newton says.
Southwest Airlines, which has a dedicated supplier team that started in the carrier’s tech ops division, shares vendor scorecards as part of regular reviews. So-called Tier 1 suppliers—determined either by revenue or criticality—are reviewed at least yearly, Alex Gorinsky, fuel supply chain management senior manager, explains. Gorinsky, who spent three years in Southwest’s airframe supply chain management organization, says the carrier is among those that work with suppliers in search of opportunities.
“We might work together to drive costs down, and we should expect to both share in the benefits,” he says. “I might buy more from you or pay a higher-than-market price in return for higher value,” such as a customized service bundle or faster turnaround.
In many cases, benefits like shorter turnaround times or more efficient materials management must first be quantified over time. Once proven, they can be incorporated into the carrier’s detailed planning, and the resulting benefits can be shared.
But proving them is the key first step if an MRO provider is to convince a customer to change its planning. ATS’s Hirshman notes that unlike lower-than-projected costs and higher-than-expected quality ratings, a faster-than-planned turnaround time is usually not helpful—at least not on an aircraft. Airlines plan heavy checks down to the hour, from when aircraft are removed from service to when they can return to a gate. If a check scheduled for 30 days takes only 25, the airline may not have another aircraft ready to be pulled from service to keep its maintenance line flowing, or may not have crews scheduled to fly the aircraft that came back early.
Similar challenges will plague the MRO provider. While moving suddenly idle workers to a different check line is possible, it decreases efficiency, which increases costs.
Materials-planning improvement follows a similar pattern, Hirshman notes. “If you can show the customer detail down to, in some cases, the smallest part level about what you’re charging for materials, that adds a lot of trust and predictability for both the airline side and vendor side,” he adds.
Demonstrated reductions over time can be factored into planning, which can reduce inventory levels—and save money—for everyone, notes Gorinsky.
“If you can turn parts in a more expeditious way than what we normally expect and that ends up, longer-term, to decrease our inventory investment, that’s an example of value that can be measured,” Gorinsky says.
It is also an example of why the aftermarket grows ever more competitive, particularly for independent providers. While airline-owned MRO shops have internal workflow to fall back on and OEMs can bundle services as part of new sales deals, an independent MRO provider has only its performance to leverage as a differentiator. As airlines chase ever-lower unit costs, the pressure on their suppliers grows.
“MRO providers are being pushed tighter and tighter into very aggressive quoting that has to be very accurate,” says Mxi’s Elliott.
This, he notes, is driving a push by MRO providers for deeper metrics. “It comes back to analyzing their internal data historically—not just what the customer is asking them for, but knowing how long it takes to perform” tasks that make up larger packages, he explains. “There are lots of factors underneath a turnaround time, for example, that an MRO is trying to monitor and understand about its own performance.”
For many suppliers, the most challenging step is the first one—identifying what is worth measuring. Mxi, which counts about 40 commercial customers, including MRO providers KLM UK Engineering, Iceland Air Technical Services, and Haeco, has studied the question and developed very detailed answers.
The company has identified about 130 processes as being part of most MRO businesses. Among them, it has pegged about 10% of them as “high- yield,” Elliott explains. “We have validated with customers [the processes] that really drive the overall majority of the value,” he says. “If you really work at improving those 12-13 processes, you’re looking at most of the opportunity to improve your business.”
Among them are several that focus on materials availability, so the right part is in the right place when needed, rather than gathering dust in a bin or, worse, unavailable. Others focus on rigorous reliability tracking and learning lessons that can be applied to future processes—turning “tribal knowledge” into actionable items that move the efficiency needle, Elliot explains.
Gaining such insight requires open communication between customer and service provider. While scorecards and dashboards are helpful for providing big-picture summaries and at-a-glance snapshots, taking full advantage of detailed metrics-tracking is as much a conversation as a process.
“MROs have been looking for ways to communicate to their customers, not simply on the progress of metrics like turnaround time but also on specifics like nonroutine ratios that are clear identifications of risk factors,” Elliott says. “MROs are finding that being open and communicating this with their operators as early as possible helps alleviate some of the blame when things don’t go to plan.”
Proactive communications and progress reports are becoming must-haves for airframe MRO providers. Mxi has been web-based for a decade, enabling its MRO segment customers to log in and gain real-time, dashboard-like views of an aircraft check status. Scorecards can be tailored to a customer’s needs and produced for discussion at regular reviews.
At ATS, airframe maintenance customers have web access to reports in the MRO provider’s internally developed, Oracle-based enterprise resource planning (ERP) system, Hirshman says. The system also pushes out twice-daily status reports on specific tail numbers that highlight progress and note any potential problems.
While such practices may seem rote to airframe MRO providers, which are responsible for the most critical inanimate assets that airlines have, some airline executives lament that there are too many places in the supply chain where silence is the norm.
“You’d be surprised at the lack of communication we see with some of our suppliers,” Gorinsky says.
Some challenges are difficult to communicate proactively. Giles, the former FAA executive, points out that a review of major airline Continuing Analysis and Surveillance System audits shows that the most common errors during maintenance checks fall into the “failure to follow procedures” category. While issues such as parts being late are visible in real-time, how well a mechanic followed a task card is much more difficult to detect using technology, or even by relying on the dozens of representatives that a major airline has stationed at its largest MRO providers.
Accordingly, Hirshman emphasizes that truly transformational metrics require gathering data long after an aircraft has left the hangar. The MRO provider is a long-time vendor to several larger carriers, including Alaska and Southwest. Performing multiple checks on a single operator’s fleet over time gleans valuable data that can be used to improve both the next check on the same aircraft as well as future checks on similar models.
For instance, ATS pays close attention to how smoothly the aircraft it works on return to service, Hirshman says. A “clean” return means few problems once aircraft is back flying the line, which speaks to the big-picture quality of ATS’s work.
“Typically, reliability problems are immediate,” Hirshman notes. “They are evident within a week or so.” But ATS also gathers insight on how its customers’ aircraft are flying months later. This helps paint a more complete picture of how well ATS is executing its customers’ maintenance programs.
Internally, myriad other maintenance-check-specific metrics are compiled, including paperwork errors, damage that occurred during the check, and tasks that must be re-worked. All of it is fed into ATS’s ERP and is both visible to management and summarized in scorecards reviewed during routine progress checks.
Executed correctly, long-term agreements that forge close partnerships drive value for all parties involved. But the required transparency—combined with just-in-time visibility and unambiguous, data-driven scorecards—present challenges, too. Chief among them: What happens when a partner is not hitting its targets?
While penalties are a common response, several executives note that they are a punitive response, not a fix. Invoking a penalty “means [we have]failed,” Alaska’s Newton says. Alaska’s new supplier strategy includes a new approach here as well. Instead of penalties or out clauses, when the carrier experiences major hurdles with an exclusive supplier it will hit a de facto pause button. It will then seek a temporary alternate supplier—possibly asking the exclusive supplier to cover any costs incurred—while the original partner works out its kinks.
“If we sign a contract and it’s an exclusive contract, you can’t hold me to go only to you if you’re not performing,” Newton explains. “I’d rather not default on the contract because you can’t perform. We all have our challenges. Give us the flexibility to make sure our airplanes are flying, and we’ll give you the opportunity to fix your challenges.”