Maintenance Cost Management or Value Management

Transcription

1 Maintenance Cost Management or Value Management 10th Annual Managing Aircraft Maintenance Costs Conference Lisbon, November 25 th, 2009 Welcome!

2 Agenda The relationship between a MRO provider and an airline The nature of relation: Strategic or not Responsibility, liaison and delegation of decision making KPI s Data driven management Summary 10th Annual Managing Aircraft Maintenance Costs Conference, Lisbon, Nov. 25th,

3 MRO s are at the hart of an airline value chain Flight Operations MRO Impact On time Functionality Appearance Safety Reliability Sales: Connections Comfort Cleanliness Safety Reliability Business Result: Product delivery Image Reputation 10th Annual Managing Aircraft Maintenance Costs Conference, Lisbon, Nov. 25th,

4 Successful Airline MRO relations center around 3 themes: Right Type of Relationship: Portfolio Delegation Agent Theory Getting a fair deal Price Product Value Ensure expectations are met KPI s Data driven management 10th Annual Managing Aircraft Maintenance Costs Conference, Lisbon, Nov. 25th,

5 Low Value added Strategic relations are attractive but hard to get Substitution threat Low Performance relation Short & Long term contracts Content focus Incidental relation Short term contracts Price focus Strategic relation Enduring contract Win-Win focus Political relation Long term term contracts Proces focus Price pressure Low Low Dependency 10th Annual Managing Aircraft Maintenance Costs Conference, Lisbon, Nov. 25th,

6 Low Value added In a buoyant market the risks for each relation type are relatively low Substitution threat Low Performance relation Short & Long term contracts Content focus Incidental relation Short term contracts Price focus Strategic relation Enduring contract Win-Win focus Political relation Long term contracts Process focus Price pressure Low Low Dependency 10th Annual Managing Aircraft Maintenance Costs Conference, Lisbon, Nov. 25th,

7 Low Value added but current market conditions change the risk spectrum dramatically Substitution threat Low Performance relation Short & Long term contracts Content focus Incidental relation Short term contracts Price focus Strategic relation Enduring contract Win-Win focus Political relation Long term term contracts Proces focus Price pressure Low Low Dependency 10th Annual Managing Aircraft Maintenance Costs Conference, Lisbon, Nov. 25th,

8 The dilemma: Competence versus Impact based decision making Decision based upon cost or impact on operation: is this the (technically) RIGHT decision? Economical Risk Legal Compliance EASA Part 145 MRO Airline Legal Compliance EASA Part M Technical Expertise Most common delegation mix Decision based upon competence: who absorbs the (economical and operational) consequences? 10th Annual Managing Aircraft Maintenance Costs Conference, Lisbon, Nov. 25th,

9 Available knowledge & Competence In decision making, competence meets decision power Optimal trade-of Knowledge Trade-Offs Decision Rights Frontier Power Trade-Offs Low Power for decision making 10th Annual Managing Aircraft Maintenance Costs Conference, Lisbon, Nov. 25th,

10 Need for delegation of decisions Airlines & MRO s should realize their strengths and weaknesses Optimal trade-of Competence Trade-Offs Autonomy Trade-Offs Low Internal Competence 10th Annual Managing Aircraft Maintenance Costs Conference, Lisbon, Nov. 25th,

11 Need for delegation of decisions Required in House Competence EASA has limited the span of Operator and MRO discretion Decisions Frontier Required In House decision making Low Internal Competence 10th Annual Managing Aircraft Maintenance Costs Conference, Lisbon, Nov. 25th,

12 The agent theory is about delegating decisions Decisions reflect MRO interest Delegation of decision making Decisions desired by Operator 10th Annual Managing Aircraft Maintenance Costs Conference, Lisbon, Nov. 25th,

13 and finding ways to transfer individual objectives into mutual goals MRO Objectives Airline Objectives Goal Congruence Aligned interest Mutual Benefits (Trust) Profit 10th Annual Managing Aircraft Maintenance Costs Conference, Lisbon, Nov. 25th,

14 The right mix between cost, competence & benefit is essential Desirable delegation mix Economical Risk Legal Compliance EASA Part 145 MRO Airline Legal Compliance EASA Part M Technical Expertise Most common delegation mix 10th Annual Managing Aircraft Maintenance Costs Conference, Lisbon, Nov. 25th,

15 Low Value added A portfolio features all relation models for different purposes Substitution threat Low Performance relation Short & Long term contracts Content focus Incidental relation Short term contracts Price focus Strategic relation Enduring contract Win-Win focus Political relation Long term contracts Process focus Price pressure Low Low Dependency 10th Annual Managing Aircraft Maintenance Costs Conference, Lisbon, Nov. 25th,

16 Successful Airline MRO relations center around 3 themes: Right Type of Relationship: Portfolio Delegation Agent Theory Getting a fair deal Price Product Value Ensure expectations are met KPI s Data driven management 10th Annual Managing Aircraft Maintenance Costs Conference, Lisbon, Nov. 25th,

17 Size matters: ensure you have the right leverage to get the right price Your value for the MRO Relative size of the MRO More Leverage Less effort Better result 10th Annual Managing Aircraft Maintenance Costs Conference, Lisbon, Nov. 25th,

18 A relation should deal with value proposition expectations 3 Result: Dysfunctional contracting Best Solution Customized product Customer Intimacy Expect Ask Best Performance Superior Product Innovation Buy Best Price Standard product Operational excellence 10th Annual Managing Aircraft Maintenance Costs Conference, Lisbon, Nov. 25th,

19 Risk More production & less resources requires change of practices Accident Incident Medium Low System s production objectives Safety space Violation space Exceptional violation Space Minimum System output Maximum Source: ICAO Doc 9859, Safety Management Manual ed. 2 10th Annual Managing Aircraft Maintenance Costs Conference, Lisbon, Nov. 25th,

20 Successful Airline MRO relations center around 3 themes: Right Type of Relationship: Portfolio Delegation Agent Theory Getting a fair deal Price Product Value Ensure expectations are met KPI s Data driven management 10th Annual Managing Aircraft Maintenance Costs Conference, Lisbon, Nov. 25th,

21 Cost is ONE aspect of a multidimensional framework SAMPLE Financial Operational Strategic Absolute Value xx million # flights # charter contracts Trend Increasing Flat Fluctuating Ratio /FH OTP % %of total flights 10th Annual Managing Aircraft Maintenance Costs Conference, Lisbon, Nov. 25th,

22 The leverage of TAT is underestimated Less stock Shorter rental or Lease More Shop Flexibility Predictable Value Less AOG Risk Predictable TAT 10th Annual Managing Aircraft Maintenance Costs Conference, Lisbon, Nov. 25th,

23 Profit is the balance between cost, risk and profit Risk Benefit Profit Cost 10th Annual Managing Aircraft Maintenance Costs Conference, Lisbon, Nov. 25th,

24 IT Leverage Structured cost saving requires a systemic approach Results =?? Data driven decisions Data analysis Trends & Correlations Consequential Impact Data collection 10th Annual Managing Aircraft Maintenance Costs Conference, Lisbon, Nov. 25th,

25 Business Intelligence technology can provide extra leverage Managerial Information Data analysis capacity BI technology More Leverage Less effort Better result 10th Annual Managing Aircraft Maintenance Costs Conference, Lisbon, Nov. 25th,

26 Competing on analytics influences cost and performance What s the best that can happen? What will happen next? What if these trends continue? Why is this happening? What actions are needed? Where exactly is the problem? How many, how often, where? What happened? 10th Annual Managing Aircraft Maintenance Costs Conference, Lisbon, Nov. 25th,

27 Steps to Results: Define your expectations: Contract relation type(s) Level of internal competence Level of delegation Level of Risk & Reward (Re-)Define Contract relations: Review/(Re-)Assign Decision Rights Define Risk & Opportunities Link good Decisions to Rewards Define Evaluation tools Use external facilitation where necessary Purchase on Value: Link price to Value Proposition Link Value Proposition to Business Model Understand & Manage Risk Leverage your data available Achieve TRUE Results: Business Optimal Relations Optimal decision making Benchmark prices Meaningful KPI s 10th Annual Managing Aircraft Maintenance Costs Conference, Lisbon, Nov. 25th,

28 Summary Push for the extreme of the envelop: be really good in what you do Value proposition Delegation Contract mix Chose the right partner Competence Size Avoid the squeeze Obtain value for money Work smarter instead of pushing safety Use your data Statistical modeling to simulate future Smart technology to detect trends, patterns & correlations Enhance speed of access and convert data into competitive advantage 10th Annual Managing Aircraft Maintenance Costs Conference, Lisbon, Nov. 25th,

29 The relation between MRO and Airline: a complex but beautiful thing Contract relations Value Proposition Data analysis Agent Theory KPI & Benchmark Decision Trade-of Risk vs Competency based decisions 10th Annual Managing Aircraft Maintenance Costs Conference, Lisbon, Nov. 25th,

30 Discussion & follow-up is welcome Paul Schneijder Managing Director Vrusschemigerweg PB Heerlen The Netherlands Mobile: th Annual Managing Aircraft Maintenance Costs Conference, Lisbon, Nov. 25th,

31 Thank You... Welcome! for Your Attention!