A growing trend I’ve observed in my consulting and auditing
activities involves Maintenance Repair and Overhaul MROs) organisations opening
up affiliated aftermarket distributorships. For example, an MRO opens up a
separate but affiliated firm, and gets that distributor firm to be accredited
to the ASA-100. From all appearances there seems to be many benefits for the MRO
with this arrangement, and these will be reviewed.
This trend also extends to OEMs, Airlines, and
tear-down/disassembly facilities starting their own affiliated aftermarket
distributorships, but in this article I’ll stick to MROs. Also, for a
certainty, there is also the same reverse trend wherein distributors open up
The following will be addressed:
- Existing and emerging business
- Royboy’s recommendations regarding
structure and startup.
EXISTING AND EMERGING
The following are what appears to be emerging uses of
distributorships to support MRO Operations:
- Part outs: The distributor engages
in part-out, disassembly projects and targets assets that that can be routed to
the MRO either for complete repair and overhauls or as spare parts.
- Purchasing expertise: A core expertise for any distributor is
purchasing. In recognition of this, the MRO uses the distributor to perform
all of its purchasing activity.
- Leases. It may be that the MRO
repairs or overhauls assemblies which are classic lease candidates including
aircraft, engines, APUs, Landing Gear etc. Leasing
is one activity the distributor may engage in which will also drive business to
- Exchange Management: For operators
who are under-spared, exchanges are a popular alternative, but are typically
labor intensive for the service provider requiring careful management of fees,
the exchange agreement, ERP entries, accounting, and the documentation. Let the distributor handle these and drive
the repairables to the MRO.
- Contract/Agreement management: Let
the distributor be the signatory and contract manager for subsequent customer
agreements. For example, Power by the Hour contracts and their equivalents are
popular. Let the distributor administer the details of these.
For successful MRO-distributor relationships, the following
- The affiliated distributor becomes
one of the MRO’s most prominent customers.
- The affiliation allows the MRO to
concentrate on and specialize on its core tasks.
If not obvious, advantages of having your own separate but
affiliated distributorship, which may tickle your imagination include:
- Unlike your MRO, the distributor
is not encumbered by restrictions on what parts it can trade. We know your MRO
is limited by its Certificate, Operations-Specifications or Capabilities List. Now,
as an example let’s say your MRO only works on engine accessories. The
Distributor buys an entire engine, has it parted out, sends all the accessories
to the shop, but independently sells the remaining disassembled parts as it
- Seizing upon this example, it may
be that you wish to make it known to the world that you’re thee one-stop engine accessory specialists. The distributor can
stock, buy, sell, exchange, and manage outsourced repairs for any engine accessory even if it’s not on
the MRO Capabilities List (please read “Be
careful” below). In this case the MRO is not used at all, but your
reputation and expertise base has accordingly increased significantly.
REGARDING STRUCTURE AND STARTUP
- Establish the distributorship as a
wholly separate and independent firm. This makes it easier to track ledgers, profitability,
and cash flows, and to facilitate independent business ventures not encumbered
by MRO restrictions.
- Even though employees, floor space,
and the ERP system may be shared, each firm should treat each other in a typical
Customer – Supplier relationship. For example, any work the Distributor sends
to the MRO is accomplished with a Repair Order. Parts the MRO obtains from the
Distributor are accomplished with a Purchase Order.
- Keep the Quality Systems and their
Manuals wholly separate from each other. I have seen where the MRO tries to
incorporate elements of their Distributor’s Quality requirements into the MRO
Manual/Quality Control Manual and/or Training Manual or other Expositions. At
first this may seem efficient since so many requirements are shared; for
example both must have strict controls on shelf life inventory. The problem
emerges that these manuals will have frequent revisions due to the Distribution
operation, and since the manuals will have to be approved/accepted by the
respective Civil Aviation Authority, you will soon find your CAA contact asking
why are you bothering them to approve/accept non-MRO related revisions.
- Segregate the inventory of two
firms. Your CAA regulator and ASA auditor will look for physical evidence of
- Accreditation. It is well known
that getting the distributor operation Accredited per the FAA’s AC 00-56 and
ASA-100 will greatly assist in getting the firm on your customer’s Approved
Supplier’s List, and adds a degree of credibility to your operation’s quality.
You will also enjoy the visibility of having your firm listed on the FAA
database of accredited distributors.
- Share the Approved Suppliers List.
You will likely discover that there are many resources that can be shared,
duplication eliminated, and efficiencies realized. One of the pesky quality
requirements is that you have an Approved Suppliers List (ASL). I have written quality
manuals and systems which plainly state the two firms will share a common ASL.
There are other commonality candidates you may consider such as:
- A common database used to manage
shelf life products.
- A common database for tracking
- If needed, the distributor’s
equipment requiring calibration is managed by the MRO.
- Be careful: If the distributor is trading parts that are not on the MRO Capabilities
List, which is OK, be careful that the distributor’s paperwork and
documents do not exercise the MRO
Certification Number possibly falsely misleading the customer or buyer that
they have trace to an MRO/145, or that any product was an extension of the
MRO’s approved quality system. Give that
some thought please…
Over ‘n out
Roy ‘Royboy’ Resto