CAVU Café: Royboy’s Prose & Cons, Page 11 of 17 The views expressed in CAVU Café: Royboy’s Prose & Cons blog are those solely of the writer and are not necessarily shared by the Aviation Suppliers Association or the Association’s staff, members, or Board of Directors. About Roy Resto Consignment RefinementPosted By Roy Resto | October 04, 2016
As I
outlined this blog, my first thought was to make this a straight forward presentation
of the issues devoid of any colorful flairs of expression…but then it would not
be a Royboy blog. So permit me to quickly and plainly articulate some of the
pains you may inflict upon yourself with some consignments:
So why do
companies take on consignments? It’s simple: One person’s junk, is another person’s
treasure. No doubt some of you have taken umbrage with my loose use of the term
‘junk.’ In fact there is a market for consigned parts, and money to be made. Unmarketable
Parts (note my graceful transition from
use of the term ‘junk’), after a suitable period of gathering measurable
dust, will likely find their way to the scrap heap. And yes, there are horror
stories of consigned parts being dumped into the back of trailers for you to
figure out and sort for the consignor. In this blog
the following will be addressed:
Definition: As used in
this blog: Delivery of merchandise from the owner (consignor) to an agent
(consignee) under agreement that the agent sell the merchandise for the account
of the owner. The owner retains title to the goods until sold. The consignee
sells the goods for commission and remits the net proceeds to the consignor.1
Reasons-for and sources of consigned parts:
Best Practices: It would be
great if consignment projects all followed neat standard practices, but the
truth is that every project has its own set of challenges and nuances. Here are
some best practices, which if you have the opportunity to address will make
things go more smoothly.
Some
issues to address in Consignment Agreements:
o How much labor are you putting into the deal? Are you going to have to hire temps in order to account for and process the parts into your system? Are you going to have to properly package the parts?o How much space in your warehouse is this going to take? It’s assumed you’re paying rent, lease, or a mortgage for your space, so how productive is all that space now being occupied by the consignment, going to be?o What are your costs to market the parts? If these are legacy parts for aircraft in their ‘sundown’ days, be prepared to spend a lot more of your resources to market the parts.o If you, the consignee have to pay for a part to be overhauled before it’s sold, how will that effect the commission if at all?o If the consigned parts are going to be used in exchange agreements, this too should be addressed.
Cautions:
How about virtual consignments? You are consigned
the parts but the physical location of the parts remain on the consignor’s
property. This may be desirable for parts that are very large and/or whose
shipping costs would detract from the attractiveness of the deal. Of course this is just a small intro to the exciting world of consignments. Don’t be afraid to leave some comments or words of wisdom for the readers at the end of this blog. Over ‘n out Roy ‘Royboy’
Resto www.AimSolutionsConsulting.com 1
Dictionary of International Trade; 3rd
Edition; Edward G. Hinkelman; World Trade Press. REVISITED: MILITARY 8130-3’S?Posted By Roy Resto | August 29, 2016
For those of you who read my blog below, this is a major
update, and indeed a reversal of the position I posited in the blog. It is
based on information that was forwarded to me from an FAA Employee of AFS-340.
Before I share that, you need to know who AFS-340 is. They are an FAA
Headquarters branch of the Aircraft Maintenance Division; The Repair Station
Branch. According to their web site: “The Repair Station Branch is the principal element in the
division for all repair station maintenance related to technical training,
regulations, policies, and procedures, including development of certification,
inspection, and surveillance policy.” With those power credentials established, I’ll share the
email: ‘I researched our
historical files and found a similar question asked in October 2013. The
answered provided by AFS-300 is below: “Title 14 CFR section
43.1, does not prohibit an FAA Certificated Repair Station, if it elects to
issue FAA Form 8130-3 and Form 337, Return to Service paperwork, for parts and
articles intended for military use. It would be acceptable if an FAA
Certificated Repair Station selects to issue the respective forms. In view of
that, no Certificated Repair Station should be considered in violation of 14
CFR section 43.1 when it elects to issue the above documents for products
intended for military use.” There is nothing
prohibiting the use of Form 8130-3 for product or articles being maintained
outside the applicability in Part 43.’ With that, it is now clear that a 145 repair station
working on military articles may if they choose, issue an 8130-3 (with their
repair station number as is required) for those parts. Frankly, my head still spins from the questions posed by the
original blog, but in numerous conversations I have had with FSDO employees,
the answer I consistently get is that the military maintenance being performed
by repair stations is outside their purview or jurisdiction, so the activities
you perform on military parts won’t get surveilled even if you do exercise your repair station certificate number on
the 8130-3. On the other hand: At the end of the maintenance process we are, after all,
talking about an airworthy part, so why not, in the pursuit of standardization,
use a single document to attest to the part’s airworthiness, military or
civilian? That does appeal to me. Finally, I’m not aware of anyone who is 100% comfortable
with the practice, but at the end of the day the customer will enjoy the
simplicity of a single airworthiness document for both military and civilian
parts. Your comments are welcomed. Over ‘n out. Roy “Royboy” Resto www.AimSolutionsConsulting.com The original blog follows: MILITARY 8130-3’S? By Roy Resto A distributor recently asked my opinion about an 8130-3
which appeared odd. The more I got into it, the more I saw evidence of activity
which gives its misinformed practitioners an apparently unfair competitive advantage over those who do the right
thing. What’s the practice? Repair Stations issuing 8130-3’s for military
parts. I recently saw examples from four different Repair Stations, in
different parts of the country, with different FAA FSDO’s. Leaving names out,
I’ll summarize the details of these tags: 1) A properly filled out 8130-3 using the current form with
the Repair Station exercising their certificate number as required…except the
part goes on an F-16 and is not a ‘dual use’ part. 2) An 8130-3 recently issued, but it was the superceded
form. They used a CAGE code where the certificate number belongs and…yes, it
too was not a dual use part. 3) A form identical in every way and block to an 8130-3, but
it did not say FAA FORM 8130-3 in block 2, it did say ‘8130-3’ at the bottom
left, just no reference to FAA. 4) Another form identical in every way to an 8130-3, but in
block 2 it said “Military 8130-3”. Again no reference to ‘FAA’ What’s going on here? In speaking with the repair stations involved, I was
surprised at the lack of uniformity in their beliefs supporting their
practices, prompting me to champion this prose. In this blog I need to address the following: ·
“Dual Use” parts ·
The intent of the 8130-3 ·
Repair Station Capability Lists ·
The unfair competitive advantage and possible
contributing factors DUAL USE PARTS: From FAA Order 8900.1: Dual-Use
Products/Articles. A dual-use product/article is one that a PAH manufactures
for civil application, the FAA authorizes, and is procured under a U.S.
military contract. A dual-use product/article has the identical Part Number
(P/N) and configuration as its civil counterpart and is manufactured using the
same FAA-approved design and
production processes. There are many dual use aircraft parts. In avionics for
example, you’ll find many. For instance, a common VHF (shark fin) antenna; most
are TSO products, and the same part number/TSOA combination part might be found
on a military or commercial aircraft. An 8130-3 issued for such parts is quite
acceptable. With that said, perhaps we should establish the intended use
of the 8130-3. THE INTENT OF THE
8130-3: From paragraph 2-1 of FAA Order 8130.21H: FAA Form 8130-3 is the preferred method for documenting the approval of
products and articles considered approved by the FAA. Except as provided in paragraphs 2-2 (Conformity Inspections) and 2-6 (Prepositioned Products and
Articles) of this order, products and
articles not produced under an FAA production approval are not eligible to
receive an FAA Form 8130-3. It should be clear then, that military parts, unless they are produced under an FAA production approval (i.e. PC/TC, TSOA, or PMA), ‘…are not eligible to receive an FAA Form 8130-3.’ REPAIR STATION
CAPABILITY LISTS: Many Repair Stations that work on both commercial and
military parts keep dual capabilities lists. One that is required by 145.215
for the civilian/commercial/dual-use parts, and another used for detailing the
Military part numbers it works on; the latter used mostly as an administrative
and marketing tool. Now let’s review this important FAR regarding exercising of
a Repair Station’s FAA certificate: From FAR 145.201 titled ‘Privileges and Limitations of
certificate’: (c)
A certificated repair station may not approve for return to service' (1) Any article unless the maintenance, preventive maintenance, or
alteration was performed in accordance with the applicable approved technical
data or data acceptable to the FAA. Here’s where we wrap
together all the aforementioned definitions and FAR’s. Military parts (except
dual-use) are not produced under an FAA Production Approval, and therefor any
manual used to repair those parts is not approved technical data or data acceptable
to the FAA. Because of this it is highly unlikely the FAA would let you place a
military part on the Capability List required by FAR 145.215, and further, that
you can’t exercise your repair station certificate as shown by FAR 145.201 when
returning those military parts to service. It should also be clear that
according to FAA Order 8130.21, you cannot issue an FAA Form 8130-3. Hmmm, for military parts, repair stations issuing FAA Form
8130-3’s with their certificate number on them, for parts not on their FAR
145.215 capabilities list, should
reconsider their practices. Of interest: In the civilian world, FAA Accepted manuals used to repair
and overhaul parts are generally called CMM’s, Component Maintenance Manuals,
and many are formatted according to ATA chapters. In the military world,
maintenance manuals may have varying names depending on which service owns the
aircraft. For example, Air Force manuals are called TO’s: Technical Orders. Generally, if you see an FAA 8130-3 and
the Remarks block cites a TO (instead of a CMM) as the data used to perform the
maintenance, that’s the first clue that the repair station may have crossed the
lines previously expressed. For a very popular military aircraft flown by many
nations of the world however, there may be a mitigating factor for the Lockheed
C-130. This aircraft was later Type Certificated by the FAA as the L100 series,
and flown by many civilian cargo operators. Lockheed maintains a controlled
document called the Component Overhaul Manual SMP-850. SMP-850 lists the
manuals used to repair and overhaul the type certificated L100 series, and yes,
it lists TO’s as FAA Accepted data. In this regard: ·
Repair Stations citing a TO in the Remarks
section of 8130-3’s, and whom claim it is a dual use, should also cite the
SMP-850 as the controlling document to establish the fact. ·
Since the repair station is claiming dual use,
FAA FSDO’s should ask to see the controlled copy of the Lockheed SMP-850. ·
Beware that there seems to be some uncontrolled
copies of SMP-850 floating around. I’m sure Lockheed Martin considers their
document to be IP (Intellectual Property). THE UNFAIR
COMPETITIVE ADVANTAGE AND POSSIBLE CONTRIBUTING FACTORS: Most repair stations that perform maintenance on both
military and civilian parts are aware of the aforementioned FAR’s, Orders, and
definitions and are careful not to cross the line (by not issuing FAA
8130-3’s). They feel however, that competing repair stations which appear to
cross the line by issuing 8130-3’s places them at an unfair competitive
advantage. Let’s examine the environment which may be contributing to this
state of affairs. ·
Many contracts for the maintenance of military
parts require as a condition for the award, that the service provider be an FAA
repair station. This, not because the service provider is working on civilian
parts, but due to the reasonable expectation that the service provider has a verifiable
quality system with oversight, which will extend to the service contracted for.
Unfortunately, among quite a few of the firms writing the contracts, there is
the belief that since the service provider is an FAA repair station, that the
parts will be tagged with FAA 8130-3’s (again for non, dual use parts) and the
subsequent contract requires it. What do you do? o
One repair station correctly responds they can
perform as contracted except not provide the FAA 8130-3. The airworthiness
release will be on some variation of a Military C of C o
Another repair station responds they can perform
as contracted including the 8130-3. Who gets the contract? ·
There seems to be the belief among some repair
stations that if they only omit their repair station certificate number from
the 8130-3, that it’s OK to use it. If so, please re-read the Order 8130.21
citation above. ·
The world over, people refer the FAA Form
8130-3, generically just as 8130-3. If you take an FAA Form 8130-3 and remove
the “FAA” from it, and call it an 8130-3 in the header or footer, or “Military
8130-3”, is that a deliberate attempt to
mislead possibly uninformed customers who otherwise rely on the expertise of
the certificated repair station for proper documentation? I would hope it’s
not a deliberate attempt to mislead. o
Royboy’s recommendations:
·
Finally, since we are talking about military
parts, this is technically out of the ‘jurisdiction’ of the FAA, so it is
likely they don’t surveil the activities of their repair stations regarding
those military practices, but…when you start using 8130-3 on your forms, maybe
that jurisdiction line has been crossed. Your comments are welcomed. Over ‘n out. Roy “Royboy” Resto TWENTY YEARS OF FAA AC 00-56Posted By Roy Resto | August 04, 2016
A banal cliché overheard during political campaigns is
‘working together’. I figuratively roll my eyes at the lack of creativity in
that diluted, overused utterance. Fortunately, despite cynics, there really are examples in governance where
that term bore fruit. Every government organization has its head; the
Administrator, or Director for example. An oft heard refrain among those
leaders is that the goals of the organization can’t be met without the active
participation of industry; in other words, working together (there’s that term) to achieve mutual
goals. So…are there examples of such collaboration? Without question, a paragon
model has been the FAA’s Advisory Circular 00-56. But let’s not get ahead of
the story. To understand the profound impact the AC had on the
industry, it’s important to understand the environment that existed at the time
of its creation. Bogus Parts: those were the trigger words on everyone’s lips in
the early 90’s. News programs and articles were saturating the marketplace
warning of the perils of bogus parts. In fact there was such a tumult that
Politicians held public hearing on the issues, and many independent ‘experts’,
airline representatives, trade Associations,
and FAA employees, among others gave testimony which at times painted a
dire picture, and in some instances a somewhat sensationalistic, scary
portrayal of the issues. At the conclusion of the hearings the Senate gave the
FAA a list of problems that had to be fixed. In response the FAA established a
special office whose charter was to fix the problems contributing to Unapproved
Parts (or now commonly called SUPs – Suspected Unapproved Parts). Most of you
recall Ken Reilly who headed that office for a long time and who, for his
efforts was a recipient of the prestigious ASA “Eddy” award. But, back to the
AC… One of the problems cited by the Senate for the FAA to fix
regarded the state of distributors. Unlike manufacturers, operators, and repair
stations, distributors were not regulated, had no oversight, and were not
required to implement and follow aviation style quality systems. It was felt
that if bogus parts were to find their way into the industry, the weak link
would be the distributors who supplied parts to both manufacturers and
operators. There were some in the industry (and at first I counted myself among
them) which took the position that distributors should be regulated and
certificated by the FAA. At the time I recall a number being bandied-about was
2000 regarding the estimate of the number of distributors (including stockists
and brokers) globally. Certificate that!
As you can imagine, the FAA was not
going to be funded to regulate even a fraction of that number. So, the standoff
stood; what to do about the wild-west among distributors? Enter the draft of
the AC 00-56, ‘Voluntary Distributor Accreditation Program.’ To be sure, there
was government-industry collaboration in writing, editing, and fielding it. A
few names that come to mind in that campaign are Dennis Piotrowski, Ed
Glueckler, and Al Michaels (also an “Eddy” recipient) among others. Out came the initial AC. The Air Transport Association (now
Airlines for America, A4A) distributed it to their constituent airline members,
and here was my first exposure to it. I was working for a major airline and was
handed the job of determining what the airline’s position was going to be
regarding its substance. In a rather large meeting held with the heads of
Purchasing, Material Control, and QA, I introduced the AC and solicited
feedback. There were, and still are two lines in the AC that stood out to this
management group: “We (the FAA) consider obtaining parts through accredited
distributors is a sound safety practice.” And “If a certificated customer uses
an accredited distributor, and voluntarily reports any known potential
violations of 14 CFR rules, we would recognize the fact that the certificate
holder obtained the part from an accredited distributor as a mitigating
circumstance in any subsequent administrative or enforcement action.” The terms, “…sound safety practice”, and “…mitigating
circumstance…” rang pretty well for this safety conscience airline. It took
about 15 minutes of discussion and a senior Director gave the order to send out
a letter to all its after-market distributors which stated they had a year to
become accredited or risk being dropped from the airline’s approved supplier
list, and oh yes, I was to administer this, and out went the famous letter to
its suppliers. So-much for being a ‘voluntary’ program. Other airlines and
manufacturers saw the benefits of the program and similarly used the program as
a basis to approve their distributors. Thus steadily, the AC became a success
and gained global acceptance. And a trivia question: Who were the first 6 firms to be
accredited? See bottom, beneath the web site listing. Interesting: When the AC was being drafted there was the
thorny issue of who would administer the listing of firms meeting the requirements
of accreditation; the “Database Listing”. This is not just a simple matter of
posting a listing on a web site. There are administrative procedures that must
be followed, records kept, follow-ups, and yes the web site upkeep. Read
paragraph 10 of the AC and you’ll get the picture. At first it was thought that
the FAA would perform this task, but alas, this too was not likely to get
funded. The ASA volunteered. In the AC, the FAA delegates the keeping of the
Database to the ASA. It’s an unheralded fact that the ASA has
been flawlessly performing this mission pro
bono since the AC’s inception; bravo ASA! The FAA has twice updated the AC and participated in
ride-along audits. The AC and the accreditation program is a living document. Every day there’s countless activity in
many parts of the world triggered by the AC; Manuals being updated, external
and internal audits being performed, training imparted, records updated, findings
and non-conformities being addressed, Approved Suppliers Lists being updated,
documents generated, orderly scrapping of parts, inspections performed, and
rosters updated, just to name a few, and all in conformity with… AC 00-56. September 2016; 20 years of a very effective cooperative effort
between government and industry. BTW: I know some of you may have additional details, names
or stories to round- out this great accomplishment. If so, share them in the
comments section of this blog entry. Over ‘n out Roy ‘Royboy’ Resto www.AimSolutionsConsulting.com... class="MsoNormal"> Trivia answer: AVTEAM, Avio-Diepen, and AvioSupport were all accredited the same day followed by International Aircraft Associates, Baron International Aviation, and Norcross Air, Inc. LITTLE NOTICED, HISTORICALLY SIGNIFICANT EVENTSPosted By Roy Resto | June 01, 2016
Like many of you, I enjoy history and staying
abreast of current events. From time to time I’ll read something or see a TV
report and tell myself, ‘wow, I don’t
think that commentator understood the significance of what just happened; a
tick mark in history just occurred.’
In this prose I hope to share some events which to some may seem routine
or minor, but that nonetheless are significant, understated ‘firsts’, and
therefor noteworthy.
‘Apps’ for Aircraft Operating Systems: For those of you who have read my blog titled
“Autonomic Logistics”1, you’ll notice that I make mention of the
fact that the F-35 is being fielded with many technologically advanced systems,
which, as is usual for advanced military systems, will find their way trickling
down to civilian applications. And so it is with what’s being metaphorically characterized
as installing an app on the Aircraft Operating System; yup, just like on your smart phone. Your iPhone has an operating system called iOS. It
runs everything and hosts all the apps you install. For the F-35, the
equivalent of the iOS is called OMS, Open Missions System. Israel will be the
first country to install its own proprietary ‘app’ consisting of highly
customized C4 (Command, Control, Communication, Cyber) and Electronic Warfare applications
peculiar to its own national needs. Facilitating all this is the aircraft’s
open-architecture software design by Lockheed2; another significant first.
Industry users of airborne software have long clamored for open-architecture
systems, and here it will debut on this aircraft. Writers of history will
chronical that the first use of open-architecture software and ‘apps’ onboard aircraft
operating systems occurred on the F-35. It won’t be long before the collateral
‘issues’ (such as who owns and controls the distribution rights of the apps) triggered
by this new way of operating are settled and standardized, and it finds its way
onboard new commercial designs, with airlines being offered ‘apps’ for
installation. Software issues caused crash of A400M As a self-proclaimed ‘avionics geek’ I distinctly
recall those heady days of aviation when microprocessors started showing up in
Avionics ‘boxes’. As a bench technician, when I started working on the first
generation of Ground Proximity Warning Systems (GPWS) with microprocessors in
them, I thought I was hot stuff. It took time but I learned a hard lesson: I
could fix hardware problems, but not software problems. It turns out those
early models exhibited many nuisance warnings to the aircrew, which were then written
up by the pilots - the GPWS subsequently removed and replaced by flight line
technicians - and the subsequent shop findings (me), repeated No Faults Found.
In fact many of those units ended up on chronic removal programs, but had no
failures! It took time to discover it was
really the software, not the hardware, which was causing the removals! This
got fixed over time by the OEM and follow-on product evolutions. Today nearly every major system on board modern
commercial aircraft is run by software; it dominates aircraft design, and is a
major challenge for the integrators of an aircraft’s various systems. Because
of this, a recent headline got my attention: “Airbus: Software Caused A400M Crash.”3 If so, this is
the first time I’m aware of that a software issue was at fault for the loss of
life. In the past, pilot’s unfamiliarity with how software runs the aircraft
contributed to accidents, but the software itself was not at fault. In fact,
software development for airborne applications is understandably subjected to
very high standards of Quality Control with safety considerations commensurate
with the criticality of the application. RTCA DO-178 is commonly cited as thee standard by which to develop such
software. In my opinion, although this was a ‘first’, the lessons will be
learned, and reoccurrences rare. Faulty soldering cited as root cause in aircraft
crash The typical commercial aircraft easily has thousands
of solder connections, mostly within the many Electronic boxes found throughout
the aircraft. Every chip, transistor, diode, capacitor, inductor, transformer,
and resistor is soldered into place. As any bench technician knows, faulty
solder joints are a common reason for outright or intermittent failures. Many decades ago, NASA recognized that soldering
needed to be raised to a higher level of craftsmanship in order to prevent such
failures which had the potential to strand astronauts in space; this simply
would not be tolerated. NASA created a standard for soldering (NASA-STD-8739.3)
and imposed the standard on its suppliers in order to attain the highest possible
level of component reliability. Persons performing soldering had to be
‘certified’ as conforming to the standard, and if you met this standard you
were a craftsman indeed. The NASA standard was subsequently replaced by IPC-J-STD-001,
commonly called the “J” Standard in the industry. Today, many manufacturers and
repair stations use this standard to train their technicians, and the standard
is referred to in many contracts as a document that must be followed. There are
other standards which accomplish the same. Knowledge of all this grabbed my attention when it
was determined that the root cause cited in the crash of an Air Asia aircraft
with fatalities to all aboard, was initiated by a faulty solder joint4.
This too is a ‘first’ as far as I know; that the faulty solder joint directly
contributed to loss of life. As of this writing, it has not been made publicly known
if the faulty solder joint occurred during the manufacturing process or during
a repair, but suffice it to say, manufacturers and repair stations should
re-examine the vigor of their soldering systems and/or training, and use this
unfortunate occurrence as a poster child for improvement efforts. Aircraft
collision with a drone It had been initially reported that a British
Airways flight on approach had collided with a drone, but that has since been
discounted. Regardless, many continue to worry about this inevitability, and if
it occurs, mark it in your history books. Over ‘n out Roy ‘Royboy’ Resto www.AimSolutionsConsulting.com 1 http://www.aviationsuppliers.org/index.asp?bid=222&BlogEntryID=76&FormID=300 2 Apps
for the F-35, Has Israel set a precedent?; Aviation Week & Space Technology;
April 25-May 8, 2016; Page 22 4 http://www.scmp.com/news/asia/... style="font-size:12.0pt;line-height:115%;font-family:"Times New Roman","serif""> EXCHANGE PROGRAMS: THE CORE ISSUESPosted By Roy Resto | April 06, 2016
Have you ever noticed that in some firms the sales person
with the biggest numbers is also the biggest violator of processes, procedures,
and attention to detail? It seems this gets winked-at or conveniently
overlooked since, after all, they are making the firm the most money.
Typically, QA people are seen to roll their eyes at the mention of their names.
On the other hand I have seen many firms where the biggest sales person follows
procedures and details just like everyone else – the difference? You guessed
it, the tone established by the Chief Executive, but don’t get me started! One
type of transaction that demands
everyone follow exact procedures and attention to details are for exchanges. In this blog we’ll discuss: ·
Why exchange? ·
Outlining a simple exchange program. ·
Issues for Accredited companies regarding trace. ·
The most common types of Exchange Programs. ·
Best and Common practices to protect yourselves. ·
Commonly cited problems with exchange programs. ·
Accounting. WHY EXCHANGE? The central focus of what makes exchange programs attractive
for airlines can be summed up in one word: spares (parts readily available to
fix and maintain aircraft). The issue of
spares - the right amounts, locations, cost, inventory turnover, return on
assets, and opportunity costs (for not having the parts), are among the most
continually evolving policy issues at any airline. Airlines with policies to
keep inventory levels as low as possible (spares) are typically the ones who
find that exchange programs are effective ways to mitigate the costs of delays,
cancellations, and AOG’s (Aircraft On the Ground; the plane can’t fly and is
out of service until it’s fixed with the part) due to a lack of adequate
spares. So how does a typical exchange program work? OUTLINING A SIMPLE EXCHANGE PROGRAM: An airline identifies an urgent need for a component. A new
one costs $30,000 from the OEM, and to buy one on the aftermarket in overhauled
condition would cost $8000. The lead time from the OEM is 3 months, and the
lead time for the overhauled component is 4 weeks (while it is sent out to be
overhauled). On the other hand, the airline has entered into an exchange
program with a distributor. The lead time is one day, and the distributor
immediately ships the component (which was already overhauled). The
distributor’s shipped component then becomes the property of the airline, so it
is shipped by the distributor with all the routine trace, Non-Incident
Statement (NIS) Certification, and airworthiness documents. The airline then
owes the distributor the unserviceable component that was removed from the
aircraft, which is commonly called the ‘core’. The core then becomes the property of the distributor, so it must be
accompanied by satisfactory trace and NIS documents. The distributor
charges $800 plus the costs to have the core overhauled. The advantage to the airline is that it got the component at
a fraction of the cost, got it immediately, and managed to meet their target of
keeping inventory low. In the absence of the exchange program, the airline
would have to endure higher costs, longer lead time, or stock higher numbers of
spare components. Although it sounds favorable all around, the math models for
a given airline do not always work out to favor exchange programs for certain
components. This may be due to market conditions for the commodity, OEM
influences, inventory strategies, aircraft/engine lease restrictions, or the
peculiar operations the airline engages in. ISSUES FOR ACCREDITED COMPANIES REGARDING TRACE For accredited distributors, the expectation is that trace
is always solid. But what about that core that is now the property of the
distributor? The distributor must assure that it has standard trace and NIS
documents from the airline. For some distributors this has been a
weakness, and many times the issue is getting the airline to produce the
documents. In this case, a good solution is that the distributor creates the
documents for the airline and upon review the airline signs and returns the
documents. I know more than a few airline employees which value that sort of
assistance, uh-huh. THE MOST COMMON TYPES OF EXCHANGE PROGRAMS ·
Cost-Plus: The arrangement I outlined in
the simple example is a Cost-Plus model; that is, there is a basic exchange fee plus
the ensuing fee to have the core overhauled. A common rule of thumb for the
basic fee is that it’s 10% of the market rate of the airworthy component. In my
previous example notice the market cost of an overhauled part is $8000, and the
basic exchange fee is $800. ·
Flat Rate Exchange: In a flat rate
exchange program, there is just one fee, and the cost of overhaul is
calculated-in to that fee. This demands some experience on behalf of the
distributor. Manufacturers and repair stations may be the biggest practitioners
of the Flat Rate exchange since they are so intimately familiar with the
product and parts pricing. BEST AND COMMON PRACTICES TO PROTECT YOURSELVES A written agreement between the parties for each exchange
transaction is commonly practiced and for good reasons. It should address at a
minimum the following issues: ·
Establish a unique Purchase Order or Repair
Order. ·
The basic fee is spelled out. ·
The Serial Number and Part Number of the core
that is to be returned. ·
The condition of the part is repairable. ·
The deadline for the return of the core. ·
Who is responsible for all the shipping costs? ·
Contingencies should be clearly addressed such
as, but not limited to: o
Penalties if the core is not returned by the
agreed upon date, such as additional fee’s or conversion to an outright
purchase (of the component that was initially provided) at the agreed upon
price cited in the agreement. o
Who pays for ‘over and above’ issues associated
with overhauling the core component? For example what to do if the core was
returned in repairable condition but the repair station declares the part BER
(Beyond Economical Repair) for whatever reason. o
Who pays for ‘uneven’ exchanges? For example,
the part provided by the distributor had all the required service bulletins (and
Airworthiness Directives, AD’s, in some cases) incorporated in the component,
but the received core does not have these incorporated. ·
The content and type of documentation that
should accompany the returned core. COMMONLY CITED PROBLEMS WITH EXCHANGE PROGRAMS Commonly cited problems with exchange programs include the
following: ·
The airline or customer does not return the
core. Most of the time the simple root cause is that the airline or
customer failed to apply the required ‘attention to detail’. Depending on the
level of procedural bureaucracy and computer automation at the airline, for
example, not pressing the right buttons or following their processes and
procedures will affect this. Regardless of the root cause, getting that core back may depend wholly on the follow-up system the
distributor has in place; is it robust and does it provide conspicuous
indicators of approaching deadlines? ·
The distributor does not follow-up on the
details. Lack of attention to details could potentially include the
following: o
Tracking the due date for return of the core. o
Tracking receiving inspection discrepancies, for
example, the core was returned, but without the expected documentation. o
For Cost-Plus exchanges, tracking the cost of
the overhaul of the core and charging it back to the airline or customer. o
If any of the agreement contingency issues
previously mentioned kicks in, are these being tracked? ACCOUNTING: By now it should be obvious that exchanges are not simple
buy or sell transactions. A single
exchange may incur several invoices and costs which must also be carefully
tracked. Add to this, common considerations such as Lines of Credit with the
airline or customer and how to track and address those, and the accounting
process could indeed get complicated really fast. How about inventory dedicated
to exchange programs, how do you list and value it? Hmmm… Over ‘n out Roy “Royboy” Resto SHELF LIFE CHALLENGESPosted By Roy Resto | February 01, 2016
I learned a new word recently: Whinge. It’s an old English word meaning to moan, or to complain fretfully; to whine. When it comes to certain shelf life issues, I feel an unexplainable urge to engage in whinging. Shelf life control should be an easy program to manage, right? Not always. The easy part is when the packaging on a part has a stated expiration date; these are most easily identified and placed on your shelf life control program. Most difficulties however, arise from the following: · New parts that have a stated cure date, but no stated expiration date or shelf life limitation · New parts that really have a shelf life but do not have either a stated cure date, shelf life, or expiration date, or any other indication of shelf life · In service rotables (repaired or overhauled for example) that have shelf life limitations, but the company stocking these parts is not aware of the limitations We’ll talk more about these, but first an introduction to the subject. A PRIMER: Certain parts and commodities (I’ll refer to both collectively as ‘parts’) start to deteriorate or degrade from the moment they are manufactured. Engineers determine how long a part or commodity can last in storage, and thus the shelf life. The shelf life is typically expressed either in the length of time of the shelf life, or with an actual expiration date. The length of time might be expressed in quarters (a quarter being three months), 20 Quarters for example (5 years) from the time of manufacture. It’s most easy when there is a plain expiration date on the packaging. There is another class of part, which although it does not deteriorate or degrade as discussed, must nonetheless be periodically tested. These don’t have a literal ‘shelf life’ per se, but nonetheless must be tracked as are typical shelf life parts to assure none are issued ‘expired’. Such parts known to contain shelf life include: · Aircraft Main, or APU Batteries. · Parts containing batteries such as Flight Data Recorders, Cockpit Voice Recorders, life jackets, Survival Equipment, Emergency Path Lighting Packs, defibrillators, and Emergency Locator Transmitters (ELT’s). · Parts required by FAR’s to be tested periodically such as ATC Transponders (FAR 91.413). · Certain o-rings, packings, hoses, or components containing such parts. · Certain greases, paints, enamels and sealants. · Pressure vessels, such as oxygen cylinders and fire extinguisher bottles have mandatory tests that must be performed periodically. Known as Hydrostatic tests, the period depends on the type of bottle. · Aircraft First Aid kits. For these parts, you should have a shelf life control program that accomplishes the following: · For parts in stock you should have a system to track these such that stock is rotated for First-In, First-Out, and most importantly, that no stock is issued beyond its date of expiration. Depending on the markings on these parts, you may need to affix the expiration date on the individual parts, or some sort of other conspicuous indicator. There are many variations on how you control this stock, but suffice it to say that the process should be documented in your Quality System and be in compliance with your chosen quality standard. · For commodities issued to the shop or to Technicians: Your stock room may issue greases, paint, and sealants to the shop, or for Technician’s use. If these are shelf life controlled items, operators typically affix their own expiration date decals to each issued commodity. Its purpose is to assure that shop employees don’t use the commodity beyond its expiration date. Most operators have written procedures making it clear that it is the Technician’s responsibility to assure when using such products, it not beyond it expiration date. THE CHALLENGES: But wait! I have not yet engaged in the sport of whinging! Thus far, the aforementioned Primer section was pretty routine for those of us familiar with shelf life control. Let’s now examine those challenging areas: ISSUE: New parts that have a stated cure date, but no stated expiration date or shelf life limitation: Some people see a stated “Cure Date” on a part’s packaging and assume the part must be shelf life controlled. Not necessarily. I’ve seen many parts with a stated cure date, but the manufacturer helped us by also stating “No expiration date”, or some variation of that. Great, huh? The problem arises when there really is an expiration date, but there is no indication of that except the cure date. Here’s a sampling of the reasons I’ve heard for leaving it off: · The part is also used in the commercial world (non-aviation), where there is not a quality concern with shelf life, so, to standardize packaging, they leave off the expiration date. · The expiration dates were originally controlled by military specs, and those specs are no longer being maintained by the government. · The application determines the shelf life. Exacerbating this is the fact that quite a few end users/operators will evaluate these parts and establish their own shelf life limitations. So what’s a person to do with these parts? Your first option is to call the manufacturer and ask them if any shelf life limitations exist. Your second option is to call your customer and ask them the same question. Regardless, you should be able to track the cure dates for the parts, and state as much to potential customers for them to make up their mind whether they want to proceed with the purchase. Unfortunately, there is no black and white answer to this problem, other than to whinge about lack of support from the manufacturers. BTW, regarding this pesky issue, see “Royboy’s Counsel” below ISSUE: New parts that really have a shelf life but do not have either a stated cure date, shelf life, or expiration date, or any other indication of shelf life. Now, this one really chaps my hide! Typically, you may have a lot of bearings in stock, and a customer’s auditor asks you why don’t you have the bearings on your shelf life control program? Imagine, bearings of course don’t have a cure date on them, and these don’t have any indication either on the packaging or accompanying paperwork of such limitations. Surprised, you call the manufacturer, and sure enough, there is shelf life. You’re now heard to raise your incredulous voice and ask the obvious: Well, why don’t you put it on the packaging? A long list of self-serving excuses ensues, along with a cryptic faxed document explaining the shelf life policy. It is based on the bearing’s preservative grease and packaging. Unless we are blessed with the Spirit of Prophecy, we are simply not going to know these things! I’m want to whinge some more, but nah... ROYBOY’s COUNSEL: For rubber products, there is a document published by the Department of Defense Titled “Rubber Products, Recommended Shelf Life.” If you are pressed for placing these commodities on a shelf life program, and you can find no credible information, I’d use this document. It is free! Google MIL-HDBK-695 The following two are not free, but easily available: Aerospace o-rings and other molded seals. Refer to SAE ARP5316 for recommended shelf lives. Aerospace bulk hoses and hose assemblies. Consult SAE AS1933 for age control limits for acceptance of aerospace bulk hoses and hose assemblies. ISSUE: In service rotables (repaired or overhauled for example) that have shelf life limitations, but the company stocking these parts is not aware of the limitations. Here’s where we could help by expanding a little on parts affected by shelf life. · Anything with batteries in them: If you see a Cockpit Voice Recorder (CVR) or Flight Data Recorder (FDR) with an installed acoustic beacon, check the beacon, and you’ll see it has an expiration date on it. The beacon, or pinger as some call it, sets off an emergency signal when immersed in water; it runs on batteries, and thus the shelf life. The beacon is usually a cylinder about 4 inches long by 1.5 inches in diameter on the front of the CVR/FDR. As stated, the beacon will have an expiration date, and the repair/overhaul shop’s paperwork will state the same. Life vests, emergency equipment such as that found in life raft kits, Defibrillators, Emergency Locator Transmitters, Main Aircraft batteries, APU batteries, and Emergency path lighting packs, all contain, or are in and of themselves, batteries. A visual inspection of the part and paperwork will reveal its shelf life. · Parts required by FAR’s to be tested periodically such as Transponders (FAR 91.413): This is another potential got-cha. Transponders are typical of parts that must be periodically tested, in this case every 24 months. They must be tracked as-are shelf life parts to assure none are issued to your customer expired. The DOT also requires pressure vessels (like oxygen cylinders) to be tested periodically. For these parts in your serviceable stock, are they on a monitoring program? By the way, if this topic is new to you, you should be aware not to confuse this topic with Life-Limited Parts. Savvy Shelf Life Purchasers: Keen purchasers of shelf life limited parts usually put a boiler plate statement in their purchase orders that they will not accept such parts unless 80% of the shelf life remains. So much for first in, first out! Of course if there’s an AOG, and you’re the only game in town, and only 20% remains, guess what? But don’t get me started... Roy Resto |