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Case Study: Achieving Zero Inventory with Hyper-Connected and Automated Supply Chain at AMP Parts
Author: David Rieth, Director Business Development, Airline MRO Parts (AMP) and Manoj Singh, Sr VP & Head of Aviation in Americas, Ramco AviationSubscribe
David Rieth, Airline MRO Parts (AMP) and Manoj Singh, Ramco Aviation explain how a state-of-the-art system supports the management inventory, purchases and more
Replacing inventory with data, speed and automation is that Nirvana that many try to attain repeatedly. In this article, we’re going to look at how this concept has been implemented in a hyper-connected mode at AMP. Before that, here’s a brief introduction to AMP to understand their business model that required a hyper-connected solution, and also their business challenges and requirements. Then we’ll talk about how end-to-end integration has been achieved.
AIRLINE MRO PARTS (AMP)
AMP is the purchasing agent and onsite consignment partner for MRO Holdings which includes Aeroman in El Salvador, TechOps Mexico and Flightstar Aircraft Services in Jacksonville, Florida. Aeroman makes up 35 of the 60 lines of maintenance that MRO Holdings has to offer. An operation that large requires a unique business model to help support it and its components, which are made up of consumables and expendables, which is where AMP comes in. Airline MRO Parts provides on-site on consignment as well as purchasing consolidation, and inventory disposition, while automating these processes.
AMP’s Business Model
The business model is built around automation and consignment. With AMP’s consignment model, users pay for materials when they need those materials; so they don’t have to worry about ordering large volumes of material in advance; it’s AMP’s concern to simply make sure that the material is available when the customer needs it. That material is located on site with the users and there are AMP employees on site to assist users and to ensure that they have stock available for the user to walk over, pick it up and execute their tasks. This prevents slowdowns and stoppages in the operation. The other thing that AMP does, which will appeal to any readers involved with finance, is to acquire surplus from companies, a process that ties in well with the theme of this article. AMP acquires surplus, aging material, perhaps through platform obsolescence from, say, a Boeing 717 or 727, and then makes it available to distribute across the industry.
What AMP needed from the solution upgrade was to streamline the whole process because, in dealing with the surplus as well as when dealing with onsite materials and consumption via consignment, a situation was created where AMP had to flip thousands and thousands of purchase orders (POs) with thousands of suppliers with a transaction every few seconds. Users would order material and AMP would flip those POs from the consumer to AMP and to the supplier and then back. So AMP decided to use Aeroxchange to help automate that process. But Aeroxchange requires a platform to help better integrate it into the company and into their business model.
For that, AMP chose to team up with Ramco Systems to execute their business model and enable support for an operation the size of MRO Holdings.
ENABLING ZERO INVENTORY AT AMP
The whole concept of the business model that AMP is striving to achieve is moving towards the concept of Zero Inventory, i.e., either move the inventory to the customer location in terms of consignment or keep it back at the supplier location and still be able to meet the demand and the lead time requirement from the customer, the end user (figure 1).
If we now look at the whole zero inventory model that has been enabled at AMP, the first item in figure 1 is the normal PO to Procurement model with the only difference in the aspect of inventory which stays with suppliers. The challenge with this is the speed of communication and the speed at which the whole transaction and thousands of others can be completed in a way that still meets the lead time requirements of the customer. The second item in figure 1 is Bulk Buy with the quantity based on the customer’s forecast requirements, kept at the customer’s MRO Holding facility until a requirement arises when the invoice is presented to the customer. Third item on the list is the Speculative Buy and, once the speculative buy has happened, the inventory has to be moved and placed at the customer location for them to send it out, at which point an invoice is raised.
HOW THE NEW SOLUTION SUPPORTS THE BUSINESS
We’ll use the first, PO to procurement model, as an example of how the solution adopted at AMP has been designed according to their business model. From a technology perspective, the solution offers a ‘zero touch’, be it order to cash process with the thousands of POs, transactions or shipment invoicing that occur. The Ramco solution is at the core of their business as its ERP (Enterprise Resource Planning) solution which helps both ends of the process, including Aeroxchange to connect with their customers and suppliers. Figures 2 and figure 3 offer two views of this process. Many of the suppliers and customers were already using Aeroxchange and AMP specifically identified them. However, in order to put into effect the required process, there had to be Aeroxchange at each end with Ramco in the middle. Therefore, those who were not on Aeroxchange have been introduced to the system as there was no other way in which this change could work.
Enabling a high volume, High Speed, Fully Automated, multi-enterprise Integrated Solution
In this specific case, AeroBuy was used from PO to shipment to invoicing, connecting it all to the bank for final transaction closure. For this process, the Ramco solution had to connect to Aeroxchange.
We’d like to walk readers through how the whole automation happens. The purchase order is released by, in this case, MRO Holdings or Aeroman or Flightstar, and it goes into the Ramco instance of AMP at which point a lot of checks and balances happen: considering the contract that AMP has with the customers, because there are multiple entities dealing with MRO Holdings, and to confirm exactly which part is specified in the PO and from which supplier it has to be procured.
Then a sale order is created and that is where the ‘magic’ happens with something called a PO flip wherein the PO is taken from the customer, the business logic is applied along with all the terms and conditions of customers and suppliers before the solution looks at supplier mapping, the preferred supplier list, the past performance of suppliers to determine the right supplier for that transaction and then flip it to create a PO to be passed to the supplier through Aeroxchange.
Once the supplier has made the shipment, the process is redirected to Ramco where a shipping note is created to be sent to the customer based on the information gathered. Once the goods are received by the customer, again the information comes back into Ramco where a goods receipt is automatically generated. Here is where the goods receipt is matched with the PO, a very important part of the business process enabled by the new Ramco solution. Once the invoice comes from the suppliers, two things happen:
- There is a mark-up that AMP has to apply to invoices before invoicing the end customer, and that is handled within the Ramco system;
- The three-way matching is done.
All these are regular business processes that happen in any organization but the key differentiator here is the complete automation of the process. There are two or three people in the whole procurement organization and there’s an added challenge of thousands of POs flowing back and forth between AMP’s customers and suppliers and with almost zero inventory. That is the essence of the whole solution that has been deployed, enabling a high volume, high speed fully automated and multi-enterprise system. That’s a lot of words but it is what has been achieved.
Automation and Intelligence
While you need not explore in depth the entire solution, you can say this- the reality of a process is very far from the ideal. With Ramco, changes to POs by the customer or supplier, or any shipment delays are managed as exceptions, captured as part of the process, and the relevant notifications are passed to the related parties, either customers or suppliers. All of that is part of the automation but exceptions are transferred to the appropriate stakeholder for them to make a decision and, once that has been done, it’s passed on to the main flow and then the whole transaction is completed.
BENEFITS OF THE SOLUTION IN PRACTICE
But, of course, with all that has been done, the key interest will be in what has been achieved in terms of business benefits and savings (figure 4).
There were people at AMP who were going through thousands of transactions before the new solution was implemented. After the new solution was implemented, it was possible to observe the process, from PO to invoice, and to identify the time spent by the team from the PO to Sales Order generation in Ramco, creation of supply purchase order and sending it to suppliers, receiving parts and invoicing. It was found that on an average, 20 minutes could be saved for each customer PO through automation which, considering the thousands of POs involved each month, amounted to a very large saving.
One thing that is worth mentioning is the transformation that is widely happening across organizations. For Ramco, it is all about moving from Passive Enterprise Applications to Intelligent Enterprise Applications. AMP too is an example of that. One element of the whole Intelligent Enterprise Application and what is meant by the term ‘Intelligent Enterprise Application’ can be explained in five key tenets that Ramco is enabling in its software (figure 5).
One of the tenets is Frictionless Experience and automation; an instance of which is facial recognition for sign-off that can be used by a mechanic. Zero UI, another tenet, is the concept which enables business transactions to be carried out without logging into a system. It can be done through usual emails and notifications and mobile chatbots that Ramco has enabled. It is now not necessary to log into the system to actually transact your business. Predictive maintenance is also very important and one of the big game changers, on which Ramco is working.
David Rieth is the Director of Business Development for Airline MRO Parts (AMP). With over a decade of business development and aviation experience, David has contributed to the aerospace industry through positions in sales, support, product development, and technical advisory. As Director of Business Development for Airline MRO Parts (AMP), he is currently responsible for the growth of AMP’s supplier and customer relationships, sales, and marketing efforts.
Manoj Singh has two decades of experience in software, consulting, and business management. At Ramco, he heads the business for Ramco Systems Corporation in the US and Americas and has been instrumental in driving thought leadership and significant business growth in the US. He holds a bachelor’s degree in Mechanical Engineering, Masters in Industrial Engineering, and an MBA in Information Management.
Airline MRO Parts
Airline MRO Parts (AMP) is an industry leader in purchasing consolidation, inventory disposition, and onsite inventory management. Focused on consumable and expendable inventories, AMP has built a strong foundation of long-lasting relationships with an extensive list of global suppliers. With a global footprint, AMP is able to service customers around the world, providing high-quality inventory services which enable them to operate more effectively.
Ramco Aviation software offers Maintenance solutions on cloud and on premise with multi-tenant capability and next-gen mobility, catering to the needs of Airlines, Heli-Operators, MROs and Charter operations. Next-gen mobility solutions for maintenance operations are available through an app ecosystem where MRO supervisors, mechanics, pilots, storekeepers and customers can seamlessly execute critical operations on the go, from anywhere, anytime.