Aircraft Rotable Components - MRO Cost Models_v17_Final_Slideshare

Aircraft Maintenance and Repair – Rotable Inventory Components
“A rapid repair loop is a key component of an agile supply
chain. It is also one of the most direct ways to save money in
high-tech, high-pressure sectors. Put differently, the only way to
compensate for a sub-optimized repair loop is to spend more
money on new stock.”
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Airline Major Cost Drivers
 Airline Major Cost Drivers
 Introduction to Rotable Components
 Understanding the Repair Loop
 Supply Chain Value Creation
 Pricing Models and their Application
 Smarter MRO – Deloitte
 RFID Technology – MRO Management December 2013
 Big Data and MRO – SAP Predictive and Preventive Analytics
 Aircraft MRO Market Study to 2035 – STRAIR
 Aviation growth patterns and the MRO strategy forward
 Commercial Aviation MRO 2020 – IBM
 MRO Survey 2014 – Oliver Wyman
 AHMS – Aircraft Health Management Systems
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Jet Fuel

Heavy Maintenance

Component MRO

Financing

Operations

Sales and Marketing

Airline Revenue Optimization
 For a comprehensive industry analysis of Airline Revenue Optimization please visit our presentation research
on our website www.thedataminingcompany.com by clicking image below:
Includes:
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• Flight Dynamics and Operations
• Airplane Boarding Optimization
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• Big Data – The Industrial Internet
• Route / Flight Planning
• Fleet Optimization
• Mobile Technology
• Ancillary Revenue
• Retailing Opportunities
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Introduction to Rotables and the Repair Loop
“It’s tougher than ever to perform MRO operations efficiently
and effectively. From outside, material costs are rising. From
inside, siloed processes, disparate systems, and data overload
make it hard to coordinate the whole MRO process, from
scheduling and forecasting to inventory management and
replenishment. “ - Deloitte
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Introduction to Rotables
ROTABLE: “Is an equipment item or component that if removed from service may be
repaired and returned to stores as a serviceable spare.”
“If good practices in rotable management can be successfully implemented and sustained :
 There can be significant cost savings and improvements in operational reliability:
 Reduced stock-outs
 Reduced inventory levels
 Reduced repair TAT (turn around time)
 Reduced early failures (increase in reliability)
 Improved equipment life through defect elimination
Repairable: Any component that is typically repaired and returned to service as repaired/overhauled or "as new" conditon. Engines,
generators, pumps, large actuators, many electric motors, etc.
Expendable: Any component that is discarded at the end of its useful life, i.e is not worth repairing or cannot be repaired or overhauled due
to it's construction. Hoses, some brake components, small actuators, switches, etc.
Consumable: Any component that is rendered unsuitable for reuse when it's installed. Gaskets, sealants, compression fittings, etc.

The Key: Optimizing the Repair Loop
“A rapid repair loop is a key component of an agile supply chain. It is also one of the most direct ways to save money
in high-tech, high-pressure sectors. Put differently, the only way to compensate for a sub-optimised repair loop is to
spend more money on new stock.”
 Rotable components can be categorized within the Repair Loop:
 1. In the air (MTBF; MTBR; MTBUR)
 Part is installed on an aircraft and subject to hard failure
 Efficient statistical information on MTBF, MTBR, MTBUR is necessary to predict demand patterns
 2. Waiting for repair (CORE)
 Removed from an aircraft due to hard failure
 Operator needs to ship part to “Service provider”
 3. In repair (TAT)
 Shop has received part and will inspect and repair/overhaul
 Pricing models need to be evaluated for effective inventory evaluation and to contribute to CBH modelling
 4. Waiting for use (Serviceable)
 Part is now functional and waiting for demand (sitting on shelf)

In the Air
Waiting for
Repair
In Repair
Waiting for
Use
The Repair Loop
CORE UNIT
- Inventory may sit in
Operators hangar or
warehouse for longer than
necessary
- The longer a CORE unit takes
to get through the loop, the
more money will be tied up
in inventory that we need to
hold to meet demand
patterns
SERVICEABLE
- The supply pattern for
rotables needs efficient
“transit time” for the CORE
unit to move through the
loop, and also the pricing ,
reliability and safety
parameters need to be
monitored for cost savings
and regulatory compliance
Optimizing the Repair Loop
The question is:
How do we keep
flying at the lowest
inventory costs
without sacrificing
the supply of
mission critical
components?

In the Air
Waiting for
Repair
In Repair
Waiting for
Use
The Repair Loop
CORE UNIT
Operators hangar or
necessary
hold to meet demand
patterns
SERVICEABLE
The question is:
How do we keep
flying at the lowest
inventory costs
without sacrificing
the supply of
mission critical
components?
“ Optimize repair
cost and inventory
levels without
compromising
Customer Service
levels ”

1. In the air (MTBF; MTBR; MTBUR)
Part is installed on an aircraft and subject to hard failure
Optimization for Inventory “In the Air”
 Efficient statistical information on MTBF, MTBR, MTBUR is necessary to predict demand
patterns
 RFID tags on “moving” inventory may identify where your inventory is going and the
destination for your replacement part. Optimally reducing the need for buying new parts
 Engineering initiatives for part reliability and value engineering will enhance “on wing”
time and will reduce inventories needed on the shelf in stores
 Dedicated pilot and flight engineering teams should be trained to note and report hard
failures for parts as they occur for efficient repair and deployment
 Big Data analytics from Aircraft HMS (Health Monitoring Systems) may predict part
failures and associated system failures and enhancements for maximum uptime of
revenue producing Aircraft. Use associations rules data modeling to develop rules and
algorithms to determine potential part failures and remedial actions.
Inventory “In the Air”
Part installed on Aircraft and subject to hard failure

2. Waiting for Repair
Part removed from Aircraft and waiting for shipment to pass through warehouse (Open Loop)
Optimization for Inventory “Waiting for Repair”
 Provide incentives for Operators to ship parts to warehouse for regulatory paperwork
as quickly as possible
 RFID tags on “moving” inventory may identify where your inventory is going and the
destination for your replacement part. Optimally reducing the need for buying new parts
 Discuss and evaluate the possibility for lowering repair costs through “Pure Fixed Cost
of Repair”, PMA parts incorporation, DER repairs
 Properly mitigate risks associated with DOA (Dead on Arrival) , NFF (No Fault Found),
and Rogue Units
Evaluate the incorporation of SB (Service Bulletins) and AD (Airworthiness directives)
 Optimally, repair centers with capabilites should be onsite or have regulatory
compliance authority to optimize repair loop time
Inventory “Waiting for Repair”
Part is “CORE”; failed and waiting for repair

Inventory “In Repair”
Repair Shop is analyzing CMM repair scheme
3. In Repair
Part is now at repair/overhaul facility
Optimization for Inventory “In Repair”
 Supply Chain for piece parts required for repair scheme needs lean processing and
availability requirements
 Enhance IT systems to be able to track TAT (repair Turn Around Time) to contractual
commitments and industry standards
 Negotiate best T&C (terms and conditions) for piece part availability and pricing
 Expedite parts as soon as possible back to Serviceable warehouse for re-use on Aircraft
in Service

Inventory “Ready for Use”
Part is Serviceable
4. Ready for Use
Part is now Serviceable
Optimization for Inventory “Ready for Use”
 Optimize the repair loop by making certain all regulatory compliance issues have been
cleared and there will be no paperwork setbacks when deploying part for service
 Using advanced warehouse logistics, make certain parts are easily accessible and part
is optimized for proper shelf life
 Take into consideration the shelf time of LLP (life limited parts) such as seals, gaskets,
and fluids
 Use a FIFO (First in first out) inventory policy to optimize parts shelf life time

In the Air
Waiting for
Repair
In Repair
Waiting for
Use
The Repair Loop
CORE UNIT
Operators hangar or
necessary
hold to meet demand
patterns
SERVICEABLE
Optimization
involves a robust IT
system that breaks
operational silos
and fosters open
communication.

In the Air
Waiting for
Repair
In Repair
Waiting for
Use
The Repair Loop
CORE UNIT
Operators hangar or
necessary
hold to meet demand
patterns
SERVICEABLE

In the Air
Waiting for
Repair
In Repair
Waiting for
Use
The Repair Loop
CORE UNIT
Operators hangar or
necessary
hold to meet demand
patterns
SERVICEABLE
Aircraft Health
Monitoring
Systems
Highly Efficient
Logisitcs with
Regulatory
Compliance
Capabilities
Effective TAT
with Reliability
& Warehousing
Integration

System OEM
suppliers
•Providing complete integrated systems to Aerospace and other
•Business cases built primarily on after market revenue (80:20)
•Generate Revenue
Aircraft OEM
suppliers
•Offer Aircrafts that are efficient (Fuel burn & Operating / Maintenance Costs)
•Provide all encompassing service solutions for Operators
•Provide training and pilots to operate the AC
•Generate Revenue
Supply Chain Value Creation
Airline
Operator
•Maximize Revenue per Available Seat Mile
•Minimize Costs per available seat mile ; Fuel Burn and Maintenance
•Trend: Aggressive maintenance plans an integral part of RFQ
•Generate Revenue
Bundled
Service
Providers
•Competitive maintenance & logistics plans to Operators
•Keep AC Fleet flying at the lowest cost
•Cost centers driving to profit center models
•Generate Revenue
MRO service
providers
•Offer R&OH services at the lowest cost (compete with system OEMs)
•Charging framework; T&M, FC + exclus; PFCR
•Specific technology will limit nose to tail offerings
•May offer exchange programs for specific components
•Generate Revenue

In the Air
Waiting for
Repair
In Repair
Waiting for
Use
The Repair Loop
CORE UNIT
Operators hangar or
necessary
hold to meet demand
patterns
SERVICEABLE
Challenge: Synchronizing Supply and Demand
Affected by:
Fleet Use (Cycles and FH)
Part Reliablity (MTBF, MTBR, MTBUR)
Aircraft operating Environments
Scheduled Maintenance Checks
Geographic Positioning
Maintenance Crew Expertise
Supply Pattern for Rotables
• Bundled Service Providers may be able to mitigate risk for Operators
• There is an aggressive trend for airline opertaors to negotiate service contracts with the Aircraft RFQ
• Any inefficiencies in this portion of the Supply Pattern will lead to over investment in inventory
• Inefficiencies will also lead to downtime of revenue producing Aircraft
Demand Pattern for Rotables
Negotiate effective CBH programs
Affected by:
TAT – Turn Around Time
Efficiency of the the part moving through
the Repair Loop
Regulatory Compliance processes at
receiving and deployment warehouses

Component Repair Pricing models and their Application
Few MRO entities have the analytical power and data management
skills to support the systematic translation of raw data into the
actionable productivity metrics needed for continuous improvement.
Having that capability, an MRO organization can measure and
compare performance by mechanic and by work package, allowing
leading practices to be shared and effective remedial training to be
targeted. Time-based data can support better sequencing of work,
especially non-routine tasks. Rather than simply reacting,
management can discover variations early on and develop
corrective actions. - Deloitte
tdmc

Turn Around
Time
R&OH Cost
Safety &
Reliability
In Repair
Providing cost protection and budget predictability to aircraft operators
Allowing operators to focus on their Core business activity
Rotable Inventory Repair Loop Cost Parameters
Bundled Service
Providers

R&OH Cost
• Usually highest risk for Repair Pricing
• Hourly rates may not be competitive
• Material discounts may not be competitive
Time & Material
• Variable pricing
• No current/future benchmark
• Selling price to market may not be profitable
• Profit margins
• Spend Budget
Fixed Cost Plus
Exclusions
• Attempts to revert cost volatility risk to supplier
• Allows PO deployment with Fixed Price
• Easier to manage budgets for PL
• Creates benchmarks for future reference
Pure Fixed Cost of
Repair
Rotable Inventory Repair Loop – Pricing Models

• Usually highest risk for Repair Pricing
• Hourly rates may not be competitive
• Material discounts may not be competitive
Time & Material
Upon Reception of LRU:
Repair Shop will :
- Disassemble as per CMM
- Analyze parts requirements for R&OH
- Send a detailed quote including parts
requirements and labour hours required
- Quote received by Logistics is approved
Pricing Models – Time & Material

Pricing Models – Fixed Cost plus Exclusions
• Variable pricing
• No current/future benchmark
• Selling price to market may not be profitable
• Profit margins
• Spend Budget
Fixed Cost Plus
Exclusions
Repair Shop will :
- Determine which parts are in scope / out of
scope
- Send a detailed quote including which agreed
upon repair scheme price to be used
- Quote received by Logistics Agent to be checked
against pricing agreement and approved

• Attempts to revert cost volatility risk to supplier
• Allows PO deployment with Fixed Price
• Easier to manage budgets for PL
• Creates benchmarks for future reference
Pure Fixed Cost
of Repair
Repair Shop will :
- Send a detailed quote along with the fixed price
that has been negotiated contractually
- Quote received by MLA to be checked against
pricing agreement and approved
Pricing Models – Pure Fixed Cost of Repair

Deloitte - Strategies for smarter MRO
Sometimes, it’s best to begin at the end. What’s the ideal state for
maintenance, repair, and overhaul operations? An appropriate
answer is an integrated approach in which processes, people
(including OEMs, third-party providers, and vendors), and
technology are connected, each component of the whole process
finely tuned and coordinated to achieve optimal reliability for the
lowest possible cost. - Deloitte
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Reports and Industry Analysis
Strategies for Smarter MRO- Deloitte

Reports and Industry Analysis
Strategies for Smarter MRO- Deloitte
The Five Strategies – Key Takeaways
1. Achieve short and consistent turnaround time
(TAT) using a combination of lean, Six Sigma,
theory of constraints, and information
2. Improve the design and planning of
maintenance
3. Reduce inventory, while increasing service
levels
4. Select the right MRO IT solution and extract
value from that investment
5. Craft a fact-based outsourcing strategy

AHMS – Aircraft Health Management Systems
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AHMS
Aircraft Health Management System
Intelligent Airline Operations
Objectives of AHMS
 Leverage an aircraft`s real time data within the context of operations so that one can
identify and address a maintenance event before it occurs
 Reduce the costs of airlines and operators due to delays and cancellations resulting from
unscheduled or unpredicted events
 Increase profitability, performance, customer experience, and uptime of revenue
producing assets

AHMS
How it came to be – The Industrial Internet
Integrated Technologies
 Machine learning
 Big Data
 Internet of Things
 Machine to Machine Communications
 Advanced Computing
 Low Cost Sensing

AHMS
Aircraft Health Monitoring - Evolution

AHMS
Cost Benefits of Intelligent Airline Operations
 Reduction of unscheduled maintenance
 Fewer delays and cancellations
 Increased aircraft availability
 Enhanced on-time performance
 Increased maintenance efficiency
 Reduction in maintenance costs
 Reduction in lost revenue costs
 Spare parts inventory optimization
 Provides enhanced first time fix effectiveness
 Increases fuel mileage

AHMS – Standard feature on some Jets
Real time Data Exchanges

Industry Updates and RFID Technology
Radio frequency identification (RFID) technology use is quickly
becoming commonplace in the aerospace industry as airlines,
aerospace manufacturers and their suppliers are using tags to track and
identify items as part of trading partner programs and internal materials
management and MRO programs. - XERAFY
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Industry Updates
Click to Link to Web Based Article about Parts Consolidation in the MRO industry

Industry Updates
Click to Link to Web Based Whitepaper about RFID
tags in the Aerospace Industry and the reality of
How the Technology is helping suppliers

Click to Link to Web Based Article about Boeing and Airbus using RFID tags
Tracking (RFID) devices cut costs and reduces inventory

Click HERE to view web article from MRO Management December 2013

Optimizing MRO Big Data & SAP Preventive and Predictive Analytics
We’re hearing a lot about Big Data these days. Mostly it’s about
organizations collecting vast amounts of customer and user data –
and then trying to make sense of it to improve various business
operations. The truth is Big Data is not always about highly complex
algorithms. Sometimes it is simply about being able to access the
information that you need at the right place and at the right time.
Let’s take a look at aerospace maintenance, repair, and overhaul
(MRO) operations to see how real-time information access can be
just as important as complex information analysis.- Terra XML
tdmc

Click HERE for web Article
Using Big Data to Streamline Aircraft Maintenance
FACTS
 In 2011 there were 7185 aircraft in the US Commercial fleet
 Each aircraft must undergo a rigorous schedule of servicing
CHALLENGES
 Each time a plane is taken out of service for maintenance it can`t be used by the airline
for generating revenue
 This could translate into a revenue loss of six figures or more, per plane, per day
Big Data and MRO Optimization

Factors Affecting Aircraft Turn Around Time
 Delivering and Tracking maintenance job cards
 Finding Approved Procedural Information
 Tracking Completed tasks and generating related non-routines
 Identifying maintenance records for individual aircraft
 Selecting and procuring required replacement parts
CHALLENGES
 Each time a plane is taken out of service for maintenance it can`t be used by the airline
for generating revenue
 This could translate into a revenue loss of six figures or more, per plane, per day

Information access for maintenance technicians
CHALLENGES
 Information can be stored across multiple physical and electronic repositories
 Alerts for updated / new part and procedure information are delivered inconsistently
 Tracking completed work and generating the necessary signoffs
BUSINESS QUESTION ?
How can an aircraft MRO organization leverage Big Data technology to improve
operational efficiency and minimize aircraft downtime ?

BUSINESS QUESTION ?
1. Centralize Information: central data base must store all necessary data, with links back to
source files to be sure all updates are delivered to workers in the field. All industry
standard file formats ATA, S1000D, DITA, and Docbook must be supported.
2. Filter According to defined user roles: to make Big Data more approachable is to filter
information according to specified user roles. By presenting the information associated
with a specific operation or aircraft tail number, service technicians are better able to
focus on completing the task at hand.

BUSINESS QUESTION ?
3. Make Information Searchable: eliminate time required for service technicians to search
through thousands of pages of maintenance documents and parts catalogues. Data needs
to be delivered in a form more advanced than a simple viewer. Use intelligent search and
and context awareness ; bookmarking, hyperlink management, and tail number effectivity
to supply MRO information quickly and accurately.
4. Mobile Delivery: Integrate mobile technology into aircraft flight and maintenance
operations.
CHALLENGE – there is no single OS that can deliver information across all mobile platforms
SOLUTION – use a web interface to make it accessible on any hardware system with an
internet connection and a web browser

BUSINESS QUESTION ?
5. CONTENT Authoring: Integrate a content authoring / publishing system into MRO data
management to add value. With the capability of authoring routine and non-routine job
cards directly from the data collection environment.
6. Use Consistent Structure: Model and capture data upfront to avoid separate metadata
implications. The required data should be capable of being mined in any number of
planned and unplanned ways.
7. Learn from Experiences: Study and improve granular events as part of CASS (Continuing
Analysis and Surveillance Systems). Detect trends in failures, parts usages, non-routines
and life limits. Use data to refine maintenance planning operations that support cost
reductions and safety of flight operations.

BUSINESS QUESTION ?
BUSINESS BENEFITS
Operator Level Benefits – access to more intelligent information means that more time is
spent completing tasks than finding or processing paperwork
Business Level Benefits – more efficient operations translate into reduced aircraft downtime,
driving higher margins for commercial operations

Click for Web Article – SAP for Aerospace and Defense
Leveraging Big Data for MRO Optimization
Click HERE for SAP
MRO Solutions
Videos

How it Works – SAP Predictive Analytics

How it Works – SAP Predictive Analytics
Click HERE for additional information on SAP Predictive Analytics

Click HERE for web article
Analyze Sensor Data in near Real Time

Click HERE for Web Article research paper
Data Science for Flight Operations Analysis
Distributed Optimization for Aircraft Fleet Monitoring

Aircraft MRO Market Study to 2035
The global fleet is expected roughly to triple to 44,000
aircraft and the European fleet to nearly double. In
spite of the shift towards larger aircraft, more than
half of the aircraft in service in 2035 will be narrow bodies.
This situation arises as availability of adequate
flight frequencies is still judged to be critical,
even in the maturing markets. - STRAIR
tdmc

Aviation Growth Forecast
Growth Forecast of the Aviation Industry – Methodology
1. Macroeconomic forecast using US Department of Energy
assumptions for GDP growth
2. Passenger traffic forecasts were derived using income and price
elasticity factors
3. Demand for aircraft calculated from the passenger traffic forecast

MRO Worldwide Facts and Figures
 Global Airline fleet will triple by 2035 to 44000 aircraft
 More than half of the worldwide fleet will be narrowbody (single aisle)
 This occurance arises since flight frequencies are a critical parameter
for passengers and airlines
 ? What does this mean for the MRO market ?
* Over time the maintenance requirements per aircraft are tending to
decline because each generation of aircraft is engineered to require less
maintenance than the preceding generation.

MRO Business Issues
1. Cost Constrained Airlines
Financial pressure has forced them to reduce costs resulting in outsourcing of MRO
activities
2. MRO Providers
Use the volume of business and specialization to lower the unit costs of
work by choosing locations with lower labour costs and lower set up costs
3. MRO Function
Traditional role of the MRO provider is changing to become a total support
function. Airlines are looking for a one stop solution based on a long term
commitment to the provider
4. Labour
Lower costs in China, the Far East and South America has pushed MRO activity
geographically. Service quality issues in these regions is receding.

Airline passenger growth to 2035
Passenger growth vs. MRO growth
Since each new generation of aircraft is more sophisticated than its predecessor,
thus requiring less frequent maintenance intervals, then the MRO growth in the
mainstream scenario will be less than half of the traffic growth

Worldwide fleet growth to 2035

Building your MRO Strategy
Considerations for MRO Strategy forward
 Finding the “sweet spot” for the bulk of MRO activity for aging aircraft before they are
retired or re-commissioned geographically to different parts of the world to extend their
serviceable life
 As fuel prices continue to climb, this will accentuate the trend for airlines to re-fleet with
newer more fuel efficient aircraft. Will the aircraft they retire be readily available for their
value in spare components?
 There are already signs in the industry that aircraft retirement ages are reducing and it is
possible that the average lifespan of an aircraft can reduce to 20 or even 15 years.

MRO market drivers
What is the main driver of MRO operations?
 Maintenance tasks are generated as a result of aircraft operations
Aircraft OEM and regulators (FAA, CAA, etc) provide a maintenance planning
(MPD) document for the particular aircraft type which spells out the required
tasks and frequency (interval) at which individual maintenance checks need to
be performed
 Maintenance Intervals are affected by:
Fleet flying hours
Landings
Cycles
Calendar time

MRO Trends
 Airlines outsource to cut costs
 Major Airlines have set up their MRO operations as profit centre businesses
 Since aircraft can move easily geographically suppliers are competing on an
international if not global basis
 Some European airlines dispatch aircraft to engineering facilities in Asia,
especially modifications and D-checks
 Airlines must consider the time taken to ferry aircraft to and from Asia as a
major factor since it means a major loss of revenue earning days

New Generation variations of Aircraft require less man hours for maintenance
MRO Maintenance trends for new generation aircraft

MRO Success Parameters
 Guaranteed and minimised downtime
Indirect costs of revenue loss during downtime is sometimes more important
than the direct cost of the maintenance procedure
 Quality / Reliability
Use big data opportunities to track analytics for maximum uptime of revenue
producing aircraft
 Price
Becomes an issue after the two above criteria are met. Most operators will pay
more for quality and delivery being achieved since it will increase the uptime of
revenue producing aircraft
 Availability
Is an issue in component and engine service scenarios since AOG will cause
delays and adversely affect revenues
 Financial
ROI for investors / return on capital

The MRO Landscape – 5 Categories
1. Aircraft and aircraft System OEMs
2. Major Airlines
3. Major Airlines Subsidiaries
4. Independent MRO providers
5. Aftermarket parts suppliers/distributors
MRO Classifications for Repair
1. Line maintenance
2. Component maintenance
3. Engine maintenance
4. Heavy maintenance
Click HERE for full IBM Whitepaper Report

The MRO Component Classification
1. Avionics
2. Landing Gear and Brakes
3. Electrical Power
4. Fuel Systems
5. Hydro-mechanical Systems
6. In cabin environmental controls
7. In flight entertainment systems
Component Maintenance

END
The goal of collaboration is a common agenda necessary to
standardize the work scope and, in this way, take costly variability
out of the process. In a typical case, engineers want a lot of detail,
making each work order different; operations want repeatability;
OEMs (original equipment manufacturers) want nothing to do with
PMAs (parts manufacturing authority) and have an ideal, albeit
costly, work scope in mind: these different agendas are hard to
arbitrate on the fly. - Deloitte
tdmc

Aircraft Rotable Components - MRO Cost Models_v17_Final_Slideshare

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