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Aviation Service Lifecycle Management


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Aviation Service Lifecycle Management

  1. 1. Service life-cycle management (SLM) The leading international magazine for the manufacturing and MRO sectors of commercial aviation
  2. 2. INFORMATION TECHNOLOGY Service life-cycle management As cost pressures intensify, many airlines and MRO providers are looking to service life-cycle management solutions offered by companies such as Accenture to streamline their operations. Like all the best ideas, SLM is based on a simple premise: that by eliminating unnecessary maintenance tasks and performing the necessary ones in the right way, costs can be reduced. But how exactly is this achieved? Aircraft Technology speaks to consultants at Accenture and Forrester Research to learn the answers. Southwest Airlines, a past client of Accenture, has been “forward-thinking” in its efforts to reduce maintenance costs, says Forrester Research VP Navi Radjou. A ccenture can be considered a pioneer in the field of service life-cycle management (SLM) solutions for the aviation industry. A global management consulting, centricity. “The first relates to doing the right maintenance,” explains Michael Denis, Accenture’s director of aviation maintenance solutions. “In other words, increasing the yield of positive economic spread over a complete business cycle.” Economic spread here is an indicator of how much wealth a company has created for its shareholders after taking into technology services and outsourcing scheduled maintenance. The second account the cost of capital; a positive company which achieved net relates to doing maintenance the right economic spread indicates that the revenues of $13.7bn in the fiscal year way, in a manner that increases A&P return on invested capital (ROIC) ended August 31, 2004, its aviation [airframe and powerplant] mechanic exceeds the weighted average cost of clients include American Airlines, productivity and resource capital (WACC). British Airways, Southwest Airlines, utilisation.” He adds: “SLM is one Typically, major network carriers KLM, jetBlue Airways, SR Technics, element of Accenture’s broader are profitable in strong economies Pratt & Whitney, Airbus and Delta ‘Customer Centric Airline’ initiative but struggle during weaker periods Air Lines, among numerous others. which focuses improvement efforts on due to the capital-intensive, cash While the general term SLM was activities that customers value, such flow-sensitive nature of the industry. originated at AMR Research, as safety, quality, cost, punctuality “Low-revenue growth and yield are Accenture defines SLM operational and customer experience.” currently limiting factors for most excellence, at its most fundamental airlines in generating a positive functional level, as “the right Background economic spread, necessitating a qualified person at the right place at So, what is motivating aerospace continued focus on cost reduction the right time; with the right tools, companies to explore Accenture’s through outsourcing and shared the right parts and the right service life-cycle management services,” says Denis. “A typical information; doing the right solutions? “The airlines’ cost airline’s cost structure leaves few economically opportunistic structure is prohibitive to consistent areas of significant control; however, maintenance, seamlessly integrated profitability over a complete business MRO, which represents 11 to throughout the organisation as well as cycle,” notes Denis. “If you look at 15 per cent of operating costs, is the external value chain network”. It the profits and the cumulative controllable and represents one of divides SLM into two overarching revenues over the past 50 years, the few such costs that has not been categories: asset and component airlines have never created consistent fully addressed by most carriers.” centricity; and mechanic and process wealth. Few airlines have achieved a 2 Reprinted from Aircraft Technology Engineering & Maintenance - December 2004/January 2005
  3. 3. INFORMATION TECHNOLOGY Navi Radjou, a VP at independent Firms must use post-sales insights to tune upstream processes technology research company Forrester Research, notes that certain “forward- How to exploit post-sales insights Vendors that can help thinking” carriers, such as Southwest Do root cause analysis on warranty data to detect design flaws Agile Software, EDS, Airlines, have taken a lead in this area: Analyze maintenance records to boost design-for-supportability Kaidara Software, MSXI, MatrixOne, Sopheon “Southwest buys only one single Boeing model because they’ve thought Analyze warranty data to weed out poor-quality part suppliers Optum, WorldChain, SAS, Feed VMI suppliers with realtime data on spare-part availability Entigo, Apexon, Tradec about the maintenance costs associated with having a diverse fleet. In all their Analyze product geneology info to fine-tune manufacturing Tecnomatix Technologies, decisions, such as their acquisition of processes that cause product failures Camstar, Datasweep i2’s [Global Logistics Monitor] Study product usage patterns to identify opportunities to cross-sell First Internet Systems, software, Southwest has given serious accessories and services, or upsell more expensive products Axeda, Questra thought to service management, Use predictive data collected from physical-sensing devices products Xelus, Servigistics, IBM, whereas for many airlines MRO is an to continually update parts and labour forecasts Manugistics, Novient, SAP afterthought because they have other Source: Forrester Research, Inc. serious issues to deal with - unionised pilots, for example.” In tackling maintenance costs, reduction of inventory must be the economies of scale and perform priority, continues Radjou: “Spare engine or component maintenance “No single [piece of] software parts inventories can tie up millions well, and want to distribute the fixed can perform all of the complex of dollars. Because you don’t exactly capital cost over a wider base; or know when and where you will need they are going to outsource it engineering, maintenance them, there’s a tendency to pile them because it’s a commodity activity.” management and up across different warehouses and The case for outsourcing varies optimization functions different locations. But airlines such across airlines: “There is a as US Airways are now starting to misconception that you can’t make of aviation service life-cycle use forecasting and demand planning money in heavy maintenance. It is management.” tools to determine the exact amounts definitely the lowest-margin —Michael Denis, director of they should hold, thereby reducing [business], but you can make money working capital.” in heavy maintenance; otherwise aviation maintenance In Denis’ view, airlines have TIMCO, Goodrich, PEMCO, AAR, ST solutions, Accenture “taken great strides” in the areas of Aero and the rest of them wouldn’t be reservation and distribution cost in that business. But what you can’t reduction as well as reductions in do is profitably perform heavy labour rates. He notes: “Rates have been beaten down and the number of people actually working at airlines is Firms must make service supply networks responsive down. United Airlines has reduced around 25 per cent of the workforce Tactics Benefits Vendors who can help Speed warranty Faster processing boosts dealer/customer Entigo, Centor, Click they had at 9/11. Fleet rationalisation processing loyaltyInvalid claims elminated; warranty costs Commerce, Motive will, to some extent, take additional can be passed on to suppliers whose parts Communications, SAS, time, but it’s being addressed. A lot are defective Syncata, of processes that can be outsourced Treat parts Fewer expedited shipments; optimized labour Baxter Planning Systems, have been outsourced — catering, Reduced fix-time limits SLA-noncompliance risk Click Software, IBM, and labour call centres, servicing, finance and holistically and lowers customers cost-of-failure ObjectFX, accounting, etc.” PointServe, ViryaNet Outsourcing to achieve SLM Offer technicians Improved fix-time and labor utilization as Avexus, Critical Reach, access to product technicians spend less time chasing product data Datastream. Enigma, Outsourcing appears to be gaining lifecycle info Helps customers extend their assets life cycles Intermec, MatrixOne, popularity as part of a wider strategy MRO Software, PTC to transform fixed costs to variable costs, thereby creating the flexibility Gain real-time SLA compliance as budding product failures Axeda, Embrace required to manage through data on are proactively addressed Networks, downturns. Denis explains the product Usage data creates upselling opportunities First Internet Systems, usage and Improved technician productivity and Graviton, Kaidara, underlying rationale thus: “Aviation performance maintenance/repair accuracy Networkcar maintenance organisations are going to in-source because they have Source: Forrester Research, Inc. Reprinted from Aircraft Technology Engineering & Maintenance - December 2004/January 2005 3
  4. 4. INFORMATION TECHNOLOGY making money while Delta itself is losing money and that clearly shows what’s going on. Companies such as Delta are actually turning what used to be a cost centre into a profit centre. You can draw a comparison between what is happening in this sector and what happened in the US manufacturing sector, with a redefinition of industrial core competencies. In the ‘80s and ‘90s, US manufacturers facing cost pressures started shedding non-core manufacturing activities and outsourcing them, and a similar pattern is developing among airlines. CEOs are realising it’s better to make certain costs variable by outsourcing, rather than keep MRO expenses as fixed assets on their balance sheet. I wouldn’t be surprised if you start seeing companies in the business process outsourcing business, such as IBM and Accenture, acquiring MRO services companies.” Denis, meanwhile, speculates that small airlines (which he defines as those with less than 100 aircraft) will maintenance with a high labour cost, North America, yet their investment eventually outsource every restrictive work rules and low labour in technology and process MRO/supply-chain function bar productivity. improvement methodologies — such regulatory management; that medium “Another misconception is that as lean management and Six Sigma — airlines (100 to 250 aircraft) will labour rate and labour cost are the means that their people are just more outsource everything bar line same thing, they’re absolutely not. productive and hence their total maintenance and regulatory Two perfect examples are Delta Air labour cost is lower.” management; and that large airlines Lines and Southwest Airlines. While Radjou also cites the example of (more than 250 aircraft) will have to on the complete opposite ends of the Delta as being illustrative of wider choose between forming a for-profit business model spectrum they have a trends: “Delta TechOps — the third-party MRO organisation, couple of the highest labour rates in maintenance arm of Delta — is forming a niche MRO with the “What airlines and alliances will look for is a single provider to help design and deploy end-to-end process flows that build upon the business logic underpinning their various best-of-breed applications.” —Navi Radjou, VP, Forrester Research Low-cost carrier jetBlue Airways is among Accenture’s past clients, as is the manufacturer of this aircraft, Airbus. 4 Reprinted from Aircraft Technology Engineering & Maintenance - December 2004/January 2005
  5. 5. INFORMATION TECHNOLOGY majority of functions outsourced, or Functional Configuration via Effectivity following the medium airlines out of Management (CMF) is the cut-in of tracking, analysis and manage- the “wrench-turning” and logistics ment of the functional design PLM businesses. and operating performance SL As for the airframe OEMs, Denis parameters of an asset, assembly SLM or component. There is a Logical predicts that an aversion on the part “as-designed” (FL) and Physical of airlines to same-source aircraft “as-operated” (FP) version. Design/Plan Scheduled and financing, manufacturing and MRO changes in FL SP accounted for Structural Configuration services will continue to preclude Management (CMS) is the OEMs from emerging as dominant tracking, analysis and manage- ment of the structural piece of players in the MRO “wrench- an asset’s Bill of Material (BOM, turning” market. Indeed, legal EBOM, MBOM). There is a Logical FP “as-allowed” (SL) structure challenges to FAR Part 21 ICA and Physical “as-maintained” (instructions for continued (SP) version. in response to airworthiness) regulations could analysis of Effectivity (δE) is the dimension erode the OEM’s primary advantage that tracks and schedules changes over independent repair stations: in one or more of the previous two dimensions (CMF or namely, the intellectual property CMS) in accordance with a L = Logical F = Functional S = Structural rights to maintenance procedures. specific derivative. Change P = Physical F = Functional S = Structural “The aspects of service life-cycle derivatives can include: EO/EAs, Airworthiness Directives (AD), management the airframers do want Service Bulletins (SB), calendar * 3DMC — © Accenture 2003 — Accenture holds three US/EU Patents to be involved in are in-service time, operating time, cycles, and has five US/EU Patents pending on multi-dimensional configuration environment or events management of complex assets and its use for engineering, engineering, maintenance programme (e.g., lightning/EM radiation, maintenance and readiness-based service parts management. management and IT, in order to bird strike, hard landing...). maintain control of the aftermarket parts business,” says Denis. “I think they will continue to gain [in those 3DCM represents the DNA model for MRO. areas] as airlines downsize their engineering staff.” Other likely MRO trends, opines we could achieve with currently Such downsizing might partly Denis, include standardisation — of available advanced tools and be the result of an extension of the equipment, such as cockpits; of processes,” he asserts. “Airlines can low-fare concept from domestic into logistics and maintenance aim to reach a point where they’re international markets. “The low-fare management; and of IT systems — doing the right maintenance at the carriers tend to accept the OEM’s across the airline alliances (such as right time, balancing economic and MPD [maintenance planning STAR, Sky Team and oneworld); safety requirements.” document] verbatim,” notes Denis. rising costs in the area of regulatory At the heart of doing the right “They’re not investing in improving compliance (partly driven by the maintenance, he continues, is three- maintenance programmes, component above-mentioned JAR 145 NPA 12 dimensional configuration reliability, scheduling or other and FAR Part 21 ICA regulations, as management (branded ‘3DCM’), maintenance engineering functions. well as increased frequency of CASS comprising functional configuration Who’s going to pick up the slack? [continuing analysis & surveillance management. “Some of our Airlines own the utilisation system] inspections); and continued benchmarking in designing three- information required to improve domination of the off-wing market by dimensional configuration reliability, maintainability and engine/APU OEMs, primarily due to management came from the medical supplier performance. One of the the bundling of by-the-hour contracts industry. There’s a shift between reasons you see Airbus forming a that leverage financing and execution. evasive medicine and preventative global MRO network [under which medicine, and that’s what we’re certain third-party MROs are given Doing the right maintenance basically trying to get to: the best the Airbus ‘seal of approval’] is to It is Denis’ contention that solution, but also with the best get to the operational data. To be maintenance planning documents operational and financial efficiency. part of that network, you have to typically require airlines to perform “It’s hard to devise schedules that share the data. But that’s a big issue more maintenance than is ensure everything comes together in to many organisations, because if functionally required. “The MPD — the right place at the right time if you’re in the MRO business for on a component basis and on an asset you don’t take it down to a very profit, [that data represents] basis — has significant excess in it: granular level, and this brings us to competitive advantage.” we [as an industry] are ‘gold-plating’ the problem with most of the current maintenance and we’re getting a IT out there, especially ERP vendors. lower yield on that maintenance than Reprinted from Aircraft Technology Engineering & Maintenance - December 2004/January 2005 5
  6. 6. INFORMATION TECHNOLOGY SYSTEM SYSTEM SYSTEM DEGRADED AVAILABILITY NON-AVAILABILITY AVAILABILITY FMC Time and cost NFMC-x to failure (TTF) Cost of poor quality Time and cost (COPQ) to support (TTS) Time and cost to maintain (TTM) Lethality PLM Reliability Supportability Maintainability Survivability SLM Operation Logistics Maintenance Operation Scope of Lean & TOC improvement methodolgies Six Sigma Planning must take into account that aviation assets experience both the OEM’s product life-cycle (PLM) and the operator’s service life-cycle (SLM). I spoke to a senior executive costs, you really can’t price your Radjou likewise notes the rising maintenance manager recently who services properly. Doing maintenance popularity of predictive maintenance said, ‘We know what it costs to do a right requires three-dimensional techniques, citing the example of check but we have no idea what it configuration management to Delta’s decision to deploy costs to do any particular piece of autonomically synchronise SmartSignal’s engine condition maintenance within that check.’ information, production and monitoring software to detect What’s required is activity-based logistics.” ‘Autonomic’, he explains, potential problems before they force costing at a granular level, to is a medical term referring to the grounding of the aircraft. “Every facilitate financial tracking at the human nervous system, which hour a plane is grounded they lose unique serialised component level. automatically and autonomously runs hundreds of thousands of dollars and Ultimately, if you don’t know what it the viscera organs. suffer an erosion in customer loyalty,” he reasons. Indeed, Denis claims Accenture’s 3DCM — which he describes as “the DNA of aviation maintenance” — contains the potential to reduce commercial aviation MRO costs by 40 per cent. He explains: “3DCM is the enabler of the physics and engineering of maintenance so that we can make a paradigm shift from RCM [reliability-centred maintenance] to CBM [condition-based maintenance] and cost-efficient predictive maintenance — real-time degradation analysis, diagnostics, prognostics and, ultimately, readiness-based sparing.” Formulating SLM solutions Distinguishing service life-cycle management (“the operator’s view”) from product life-cycle management (“an OEM’s perspective”), Denis explains Accenture’s approach to the market for aviation SLM solutions Air Canada is among the airlines that has realised cost savings via SLM capabilities. thus: “There’s no ‘one size fits all’ 6 Reprinted from Aircraft Technology Engineering & Maintenance - December 2004/January 2005
  7. 7. INFORMATION TECHNOLOGY solution, as there are multiple markets within what we call 3DCM ‘aerospace & defence industries’. So, step one is to understand or help Supply chain management develop a company-specific strategy. Maintenance programs, planning A next-generation SLM solution scheduling, & execution creates economic value by closing the eAI execution gap between strategy, Finance & business design and process performance i ng management execution as measured by both Operations & c en ter corporate-level critical success customer relationship on at i management niz rga factors and granular key process Human performance management & o re ctu indicator performance metrics.” ite Enterprise process arch Certain questions need to be IT platform addressed before embarking on an SLM project, he explains: “Basically, what’s the probability that the component will fail, and what’s the contribution of that failing to the total degradation of the asset? We do The full aviation SLM business architecture is comprised of four capability hierarchies (MRO, these tradeoffs all the time. The SCM, CRM/Ops and FPM) built upon three platforms (Organization & Human Performance, failure profile of components is not Process and IT) and synchronized via three dimensional configuration management (3DCM). binary, it’s not that they just suddenly stop working; their knowledge, wisdom] model — and reliability); the second, supply and condition actually degrades, and applied it to our conceptual model so service management; the third, that’s where MSG-3 and condition- that we could understand the operations and customer contact based maintenance come into play. interrelations between capabilities management; and the fourth, finance But what if you could functionally and physical enablement, that being and shareholder value management. track the degradation of an asset the technology and the process. By linking corporate-level critical based on true condition parameters? Take, for example, opportunistic success factors to key process “What we are seeing is a shift from maintenance scheduling. Let’s say indicators, the theory runs, business surrogate parameters to the actual you have a failure and you have to performance can be measured and functional parameters, because if you open, inspect, remove, install, test, improved through Six Sigma, lean can track the rate changes of those etc. The question to ask is, what practices and the ‘Theory of parameters — temperature, pressure, other maintenance should the Constraints’, a management amperage, voltage, whatever — you mechanic accomplish at the same philosophy which holds that the can start tracking true on-condition time, so as to optimise his invested output of any system will be requirements and thereby track time? Well, to figure that out you constrained by the least productive degradation. If you can track need to do degradation analysis for sequential step in that system. degradation, then you can perform predictive maintenance; then, on a prognostics for predictive structural basis, you need to Potential benefits maintenance. Thirty years ago when understand the zonal location and The ultimate goal, says Denis, is the industry shifted from re- the associated maintenance enterprise profit optimisation: “If manufacturing to RCM, we didn’t requirements for anything in that someone in the chain isn’t performing have the tools or computing power to location.” three-dimensional configuration accomplish this. Today there are Under the DIKW model, originally management manually or through COTS [commercial off-the-shelf] tools developed by IEEE, a business technology, you’re never going to and unlimited bandwidth to capability architecture imputes, optimise the service life cycle of an accomplish CBM and predictive based on the strategy, the asset. And there is no single system maintenance.” hierarchical relationships between that can do this. Few airlines would To facilitate predictive capabilities and functional views of entertain using their ERP to run their maintenance, Accenture developed a the business. There are, according to reservation systems. [But] on the conceptual model and approached Accenture, four views that make up surface a reservation system is really various IT vendors with a view to the full capability model for aviation nothing other than an inventory of building an appropriate system. Says SLM. The first view covers potential seats, a pricing distribution Denis: “We took a fairly standard maintenance capabilities of those seats and an order-to-cash decision support and IT framework (maintenance programmes, planning, accounting system. So why would — the DIKW [data, information, scheduling, execution and one think any single [piece of] Reprinted from Aircraft Technology Engineering & Maintenance - December 2004/January 2005 7
  8. 8. INFORMATION TECHNOLOGY software can also perform all of the companies such as Mxi and airline implemented a standard complex engineering and maintenance SmartSignal will need to decide COTS solution to provide diagnostic management functions of aviation which ‘ecosystem’ or partner network capability on its fleet of A319, A320, service life-cycle management?” (or networks) they want to be a part A330 and A340 aircraft. The Radjou agrees that no single system of, to fit into a world where a lead solution included a case-based can be expected to deliver end-to-end contractor such as Accenture or SAP learning system that automatically service life-cycle management. “A lot will be heading up a portfolio of increased fault isolation and repair of companies have SAP managing specialist companies. We can help rates by associating successful their financial transactions and Mxi them decide what type of corrective maintenance with the doing their MRO and are using subcontractor they wish to be in a fault code and configuration. By forecasting tools from companies such particular network... For the users, these means, the airline realised a 30 as Servigistics and Xelus on top of we have assessment tools they can per cent reduction in A320 aircraft that. Our prediction is that, in the deploy to evaluate vendor capabilities fault messages via the onboard asset future, they’re going to ask one and decide which ones are best for health management system. Further vendor — and I would suggest four their requirements. We can also keep analysis indicated that maintenance candidates: SAP, Oracle, IBM and them abreast of business and delays normalised to aircraft Accenture — to help them integrate technology trends and advise them on utilisation dropped proportionally all the existing best-of-breed best-in-class integration technologies during that same time period, applications they have. The first two, or portal technologies they could use achieving savings of $6,000 per SAP and Oracle, would bring in the to integrate their legacy systems.” It aircraft per year. “On 300 aircraft ERP backbone, the other two their should be note that AMR Research, as this one small element of SLM saved systems integration capabilities. What the originators of SLM theory, the airline an estimated $1.5m and a airlines and alliances will look for is a constitutes a major competitor to complete SLM capability could save single provider to help design and Forrester Research in these areas. tens of millions,” says Denis. deploy end-to-end process flows that So what are the financial benefits To airlines operating in today’s build upon the business logic SLM can deliver? Denis cites the wintry economic environment, underpinning their various example of a project carried out by savings of this magnitude would best-of-breed applications.” Air Canada, which needed to be very welcome indeed. G But what of Forrester’s role in all increase its on-time departure/arrival this? “We will be helping both sides: rate while simultaneously increasing For more information the vendors and the users,” says labour productivity and reducing Radjou. “On the vendor side, logistics costs. To this end, the Defense Jack Woodward Lieutenant General, USAF (Ret.) 703-947-1213 Aerospace Ray Grainger 310.726.2938 Airlines Patrice Vinet 33.15.323.5685 SCM Service Management R. Douglas Derrick Delta Air Lines, despite relatively high labour rates, has achieved one of the industry’s 678.657.4254 lowest labour costs, thanks to its operational efficiency and investments in lean, Six Sigma enabling technology. 8 Reprinted from Aircraft Technology Engineering & Maintenance - December 2004/January 2005