Navigating The Global Marketplace
Most distributors are happy to dispatch their stock to clientele and, if necessary, truck it to a port or airport for it to be loaded there. For Aero Precision, the California-based global supplier of original equipment manufacturer (OEM) systems and aftermarket aircraft spares, the process is usually a bit more involved. To prepare to supply new digital anti-skid brake systems made by Crane
Aerospace for the wheels of Hercules C-130 aircraft belonging to the air forces of Singapore and Indonesia, the company first had to ship engineers to Southeast Asia to inspect the planes.
“A lot of air forces have done modifications on their aircraft, so it’s important that we do surveys of them first,” says Aero Precision President Frank Cowle.
Cowle’s company has the exclusive worldwide contract to distribute the digital anti-skid brake system for the H model of the Hercules C-130 transport aircraft. The new system replaces an analog kit that had no diagnostic capabilities, which facilitates maintenance and repair work significantly, and also reduces by 18 percent the distance needed for the plane to come to a complete stop.
The Royal Netherlands Air Force was the launch customer for the brake upgrade on its C-130H fleet. Its technical division performed the installation itself, but in other cases Aero Precision has either supervised the process and provided training or carried out the installation for its clients. In Singapore, where the air force flies a mix of B and H models of the Hercules aircraft, Aero Precision had to make some slight modifications for the former type.
“It’s never ‘ship and forget’ for us,” says Cowle. “We can do the complete installation.”
For integration into clients’ existing avionics, electrical and mechanical systems, the company can provide complete data packages. This extends to providing training programs that cover theory, operation and troubleshooting.
Aero Precision’s business model is centered on product support using strictly OEM parts, in many cases on the basis of exclusive distribution contracts with OEMs such as Honeywell, Eaton, Crane Aerospace and Pratt & Whitney, among many others. These include the exclusive management of more than 250 electrical power system line items for the F-16 fighter from Hamilton Sundstrand, licenses for multiple F-16, F-15 and F-5 gearbox components and the exclusive distribution authority for all wheel and brake products from Honeywell for the F-15.
“Our main focus is on U.S.-manufactured products operated by international clients. About 84 percent of our product is for export, and 100 percent is military,” says Cowle.
In its role as a distributor of OEM systems and parts for military aircraft, Aero Precision has three strands of clients: the OEMs with which it signs distribution agreements and acts as their channel to the users of their products; the users (typically national air forces); and aircraft repair and maintenance facilities that work with air forces.
All three customer bases are fairly well defined. As the company concentrates on 16 specific aircraft types—comprising of fighter planes, helicopters and transport aircraft—there is a finite list of OEMs that produce their systems and parts. There are roughly 20 major OEM partners that Aero Precision has aligned itself with; likewise, the number of national air forces that are eligible to fly the aircraft in question is limited. Still, Aero Precision currently ships parts and systems to 64 countries, though the number of independent aircraft repair facilities working for military clients is also finite.
“We know where every aircraft is,” Cowle says. “There are not many walk-in customers.”
Buying aircraft parts in volume, Aero Precision can provide them to its customers at a lower price than if they were to place their order with the OEM. For the Herc-100’s anti-skid brake system it acquired 100 sets from the manufacturer, Crane Aerospace. Eleven units were shipped to the Royal Netherlands Air Force, the South African Air Force took nine, two sets went to Chile, one to Tunisia and 11 to Indonesia, while Aero Precision is in the final stages of releasing orders for 12 sets to Singapore and Colombia. This also allowed the manufacturer to produce a large order rather than several smaller individual ones.
“Many air forces have reduced budgets,” says Cowle, pointing out another benefit for clients who buy through Aero Precision. “As we have the parts available, they don’t need to stock them themselves.”
Cowle says that a large part of its role for OEMs and customers is the legwork associated with exporting products that are subject to export restrictions, since dealing with equipment used in military aircraft invariably entails a lengthy string of paperwork and permits.
“We need to have control of the export documentation,” he says.
“We want to avoid the risk of somebody not completing the documentation. The OEMs don’t have to do the import and export documentation. We manage all that, and we apply for export licenses.”
The process is not without its twists and turns. When some F-16 fighters were transferred from Europe to Chile, for instance, Aero Precision had to scramble to get the export licenses for the parts to the South American country, Cowle recalls.
When parts are sold to aircraft repair facilities, the distributor has to obtain end-user certificates and documentation about the country of destination from its customer. To operate in this environment, Aero Precision complies with specific sets of practices. The company satisfies the U.S. government’s International Traffic in Arms Regulations and its Foreign Corrupt Practices Act, and all of its representatives are TRACE certified.
With a flow of aircraft parts to more than 60 countries around the globe, the company’s exporting activities have earned it recognition from high up. In 2011, it was awarded the Presidential E award for exports by the Department of Commerce.
From its inception 25 years ago, Aero Precision has grown into a company with more than 120 employees and projected revenues of $166 million this year. In 2013, it was acquired by Greenwich AeroGroup, which owns and operates several providers of general, commercial, government and military aviation services. In April of last year, the distributor moved into a new facility in Livermore, Calif., that doubled its office space and tripled its warehouse space to accommodate growing success in capturing markets for its OEM partners and demand for off-the-shelf delivery. The company holds all inventory in this central warehouse; no parts are stored in overseas locations, says Cowle.
This set up, Cowle continues, helps his company act quickly. “We can send products quickly, usually two to three days around the world.” Sometimes repair facilities need parts at short notice, but on the whole Aero Precision has ample time to line up the logistics. For that matter, obtaining an export license for a product takes six to eight weeks; blanket export licenses require three months to process.
“Our average supplier lead time is more than 300 days,” says Cowle. However, this does not translate into slow modes of transport. For the most part, products are shipped by air.
Many of the shipments are relatively small, lending themselves well to air cargo. An anti-skid brake unit for the Herc-130 fits into a small box. “The computer weighs three pounds. I don’t think the whole unit weighs more than 20 to 25 pounds,” Cowle notes.
It all depends on how soon clients require the kits. The anti-skid brake systems to the Dutch air force went in one shipment to the Netherlands, and the process was rather short for the distributor because the Dutch military used their own technicians to manage the installation. The air force of Singapore elected to install the anti-skid brake units on its aircraft over a period of time, as each aircraft was due for maintenance. Installing the units takes less than 20 hours.
For internal shipments in its supply-chain management, Aero Precision often uses the integrated express carriers FedEx and UPS; it works with freight forwarders when moving product to clients. Some air forces have consolidators which they prefer, or have arrangements with forwarders that give them better rates.
“In a lot of cases, the customers decide which company to use,” says Cowle. When the decision is up to his outfit, the decision normally comes down to a few forwarders that Aero Precision has been working with.
Among the criteria for selecting a forwarder, a key point is a provider’s ability to properly manage the import into the country of destination. “It is no use if the product gets to the country and is stuck in customs,” comments Cowle. The fact that the cargo in question is for military use has no bearing on the forwarder selection; they do not need specific expertise in dealing with the military. “Generally it is an evaluation of speed and price.”
When Aero Precision ventures into a new country, it normally uses a local rep. To ensure they are in line with requirements, the company engages TRACE to perform due diligence on them. Another key step is an evaluation of the logistics infrastructure of the country in question to ensure there are no unpleasant surprises in getting product to the final destination.
After a quarter of a century in business, Aero Precision is still bent on expansion, as management aims to add another leg to its business model. Cowle would like to get more involved in demand planning and use this for materials stocking for the government. The distributor could take over the demand planning aspect from its clients.
“The piece that has been missing is the visibility,” Cowle says. Using order and shipment patterns, Aero Precision has the forecasting capability but must make this visible to the customer. To that end it has been working on a web portal for its customer base.
“You need real-time visibility, not normal e-mail traffic,” Cowle says.
He reckons that this element could add about $100 million in annual revenues. “I believe that will be the future,” he says.