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As seen in Airside International Magazine, September 2008

“We hold lots of inventory,” comments Michael Bloomfield, Executive Vice President of Sage Parts. “It’s the only way we can do our business.”

He explains that Sage Parts operates two areas of business; one is very conventional in which the parts purchaser requests information on parts and delivery and, if they like what they hear, Sage Parts picks, packs and ships the item to them.

“The other business we are in is more related to supply chains and logistics. Once again we use our own inventory but we are on site at the customer’s location and when the mechanic needs a part, he will come up to the parts counter, talk to a Sage employee about an item, the Sage employee will take a Sage owned part off the shelf and hand that to the mechanic at which point the item changes title and we invoice for it,” explains Bloomfield. “In this scenario, the customer – mostly airlines – has us come on site and establish a parts room in their maintenance facility and we dispense parts directly to the mechanic.”

So how does Sage Parts manage its exposure to ageing, obsolete or too plentiful inventory? “In several ways,” responds Bloomfield. “We have developed some very advanced algorithms – along with algorithms that we’ve purchased with our enterprise software – that allow us to do a tremendous amount of anticipatory buying and keeping of inventory. This adjusts for varying types of customer demand and seasonal demand.”

Sage Parts is not in the business of repairing used parts but it does have the facility to bring cost savings for its customers in relation to major parts. “We have a rotable programme for engines, transmissions, steer axles, drive axles, hydraulic components, and any other complex components where Sage can create value for its customers,” comments Bloomfield.

In terms of buying, he comments that Sage Parts takes the view that it is sometimes business prudent to buy more parts than it needs. “When it’s not, we’ll find other options to make the acquisition of that particular item business prudent. When it is advantageous to buy large quantities of parts, then we do so,” comments Bloomfield. “We often buy an entire production run of items to fulfil demand for high flow items”.

In terms of logistics, where Sage Parts is not on site at a customer’s location, parts are despatched by the company from any one of 24 Sage Parts warehouses worldwide.  Customers can order parts through an e‑commerce system – eSage – or through its Customer Service group.  Troubleshooting and hand-holding is offered through by the same customer service group or any of their many sales and service representatives in the field. “We are a single source supplier for many of our customers,” insists Bloomfield. “We feel it is a much better proposition to consolidate purchasing through a company like Sage than to go shopping for individual items.”

He continues: “If a customer, over the course of a year, purchases 1,000 items from us, some they will pay more for and some they will pay less for. But if you add up the total purchase of 1,000 items it will come out less.”

More than a GSE supplier

For some providers, parts provisioning is just one strand of the business. Steve Rowe, GSE Sales Manager at Wings Electro Sales in Florida, explains that his company also builds electrical connectors, for GSE applications but also for avionics and other aircraft related applications.

“Our GSE position is probably about 20% of our business,” he explains. “Mostly our GSE business provides spares in the couplings and hoses applications.”

He continues: “We contract with a lot of the airlines who purchase couplings and hoses for their on site uses. We sell a lot to FBOs because they are always replacing or upgrading their lav and water carts on site. And we also deal with a lot of the OEMs that manufacture those carts and trucks.”

Rowe confirms that Wings Electro Sales deals with the market on an item by item basis. “We use IT systems to control our inventory. We monitor our stock levels. In most cases we find that when someone needs a replacement part, specifically lav and water coupling and hoses, they need their parts yesterday – they can’t service an aircraft if they don’t have a way to link it up. We try to maintain stock at all times for these components. We work with Rockwell Collins to make sure that we have timely arrival of parts into our stock so that we can make shipments the day that someone requests a part.”

Wings Electro Sales ships parts all over the world. “If we ship outside the US, the method of shipment is determined by the customer,” says Rowe. Everything is shipped from a central location to where it is needed worldwide. “With today’s shipping provision, we don’t feel we need to have other locations, but the possibility of opening a location in Asia to service that rapidly expanding market is under discussion” he adds.

Manufactured in our name

Katey Hunt at Ground Support Products explains that this company supplies replacement parts for non-motorised ground support equipment. “A lot of it is for cargo dollies, baggage carts and other trailers,” she says. “These parts are manufactured exclusively for us and under our name.”

She continues: “We work with and supply to OEMs. We undertake any improvements they ask for. We also do that with our customers. If there’s a part that they think can be improved, we will certainly try to do that for them and then we can go back to the manufacturer and tell them about the improvement.”

In terms of Ground Support Products’ route to market, mostly this is direct, although there are some brokers involved in some supply chains. Supplies are made internationally. “At the customers’ end, inventory calculations tend to be automated so they know when stock is getting low and then they simply notify us,” she says.

“In the US, we have five warehouses and we ship from the closest warehouse to the customer,” says Hunt. “We keep a good amount of stock so that the customers have the product when they need it. It’s a case of keeping track of what stock has gone out and making sure we have plenty of the stock that moves the fastest.”

Hunt says: “We do have a lot of customers who are doing more repairs on the equipment. But, as of late, we have not seen as much of a down cycle as I was expecting. We do a lot with ground handlers and they are pretty busy. The airlines are a little more conservative with how they are spending but we’ve been busier than I expected.”

“We are always adding new parts to our product line. There are other industries that use similar parts to the ones we supply to the airline industry and for a while we have supplied them too. I think it is important to look outside of the aviation industry and expand into other areas.”

One, two, three, go

T123 Ltd, is a key contender in this market but at present its main focus is the UK. The company was formerly Multipart Fleetserve but has undergone a management buyout, funded by top management, a private investor and a bank. Donna Bamber, Head of Commercial at T123, explains that the company is operating as usual but the change in ownership will enable the company to build on its core business in the critical fleet sector.

About 60–70% of the business is derived from the airport environment. While today the clients are UK-based, the intention is to expand internationally, particularly Europe.

When asked whether parts provisioning for GSE can or should become as sophisticated as it is for aircraft maintenance, Bamber responds: “There are reasons why it does not need to be that sophisticated. Our business relates to the fact that we hold stock on site and offer a value added service not that we operate just in time delivery. A lot of the GSE manufacturers are overseas so our experience in inventory management and determining which parts to hold to maintain high levels of availability is invaluable to our customers.”

By way of example, she explains that all sorts of penalties can come into play if parts are not where they need to be in the airport environment. Let’s say a particular loader is missing a wheel, the loader is not in service, the handlers can’t unload the aircraft and so there is a delay. That’s where the penalties come in.

The diversity of components for such a large array of equipment from a plethora of providers means specialist parts suppliers have an intrinsic role to play, especially if the equipment has been modified. She adds: “This is a specialist market. It is not like the standard automotive truck market. Not anyone can supply you with a part for an aircraft tug.” Bamber points out that there is a critical element to this service and specialist parts knowledge that cannot be achieved by amateurs.

So how can T123 distinguish itself in this market as it seeks international expansion? Partly, a parts supplier like T123 distinguishes itself through achieving good terms through bulk buying, she says. “We have systems set up with our clients whereby we are on their site, we issue them their parts, we download information to them overnight to update their systems and we provide the headcount for their operations,” Bamber comments. “It is not just about supplying the parts but the additional value we can bring to our clients non core activities.”

So what clinches a deal? “We buy the inventory or manage the inventory reduction which injects cash into the client’s business. In the event that we buy the inventory, this means the client does not have to source this funding and they do not have obsolescence or excess risk. We may also take the people off their books and provide training in inventory management.  Our strong relationship with the supply base enables us to be competitive on parts pricing whilst still offering a value added service”

Dealing with downturn

Surely, given market conditions, parts providers have an intrinsic role to play. In terms of Sage Parts’ reaction to the market and its down cycle, Bloomfield comments: “When the market goes into a downturn, that is both a threat to this business and it is also an opportunity. If you had to weight the threat versus the opportunity, I would say the opportunity far exceeds the threat. The problem with the downturn is the financial health of the airlines and there is always the threat in this business that an airline – particularly in the US – is going to file for bankruptcy. When this happens, of course you have an inability to collect any outstanding receivables. To operate this business in the down times, it is very important that we remain extremely cognisant to the financial health of the airlines.”

He concludes: “I believe, there is always a decrease in demand for everything during a downturn, including replacement parts. But for a shorter period of time than there would be for a downturn in demand for other things. GSE has to be utilised regardless and, if operators are not replacing GSE with new, they have to do the repairs which means that they have to buy parts.”

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