SellUe Project Management
Disrupting Traditional Teardown & Consignment. Up to 2x Returns on Whole Asset Value.
- Introduction
- Client/Organization:
SellUe is an Organisation that serves the Aviation Market through Project Management of Teardown and Consignment. Retiring aircraft retain significant value through the sale of its parts into the maintenance aftermarket. Combining focus, technology, and experience, SellUe achieves the best value from retiring aircraft in teardown. - Industry:
Aviation, End of Life Aircraft Teardown & Consignment. - Location:
Cork, Ireland - Project Details:
| Asset Type | Airbus A319-112 Airframe |
| Year of Manufacture | 2005 |
| Major Component Status | Low Landing Gear Life Remaining & Older APU part number 4500001C |
| Whole Airframe Market Value | $900,000 |
| Project Timing | Initiation Mid 2022, Duration 2.5 Years from decision |
- Background:
Using decades of experience in aviation components, business processes, commercial understanding, through manufacturing, repairing, buying, selling parts for component repair shops, spares parts sellers, OEMs, and MROs, SellUe has achieved close to 2x the market value of whole asset value.
- Case Study Problem/Challenge
- Situation:
Leasing Companies do an excellent job of getting high returns for their investors through leasing aircraft to airlines. Generally, the larger leasing companies have dedicated personnel managing teardown and consignment. Where sufficient volume does not exist leasing companies understandably put their resource dollars where highest returns are achievable – leasing.
- This can mean that overseeing teardown and consignment is the responsibility of those who also have responsibility to leasing assets. This can serve to diminish focus and, in some cases, dilute the experience required to critically review results and drive optimal returns.
- Consignment management challenges can be then compounded by the use of multiple consignees which means different reporting methodologies, formats and meanings.
- Obstacles:
Acceptance that returns have not been historically optimised.
- That the expertise and experience required to optimise teardown and consignment is different to what is required in the leasing World.
- With overall asset return commitments to investors met through lease returns the pressure to optimise returns through optimising end of life value can be reduced.
- As a consequence of the above the end-of-life process can be more of a responsibility to the process then the outcome.
- Goals and Objectives:
Demonstrating optimal outcomes achievable.
- Demonstrating teardown & consignment as a viable alternative option to whole asset sale at end of life (something that is being tested in today’s market).
- Making teardown and consignment an investible product.
- Solution
- Solution:
A skills-based project management approach allied with a clear communication platform outlining the current and projected values across all aspects. Through detailed metrics create a review process that further enhances the outcome, as well as allowing Clients to participate to the level that they choose without losing sight of performance. - Implementation:
A project management approach broke and rebuilt the full teardown and consignment process, identified what value was within each area, and converted these into measurable elements.
- SellUe set up established processes to identify and benchmark suitable teardown, warehousing and consignment partners optimal for each project built on the experience of working with multiple global providers, across criteria including the following:
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- Separation of services consideration brings solid opportunities to reduce cost and optimise revenue.
- Selection of the right teardown shop, the right warehouse as well as the right consignment seller for your asset and its timeframe can have significant impact on the outcome.
- Expertise, experience, qualifications, and approach to environmentally friendly disposal at a broad level.
- Specific to an asset key criteria are location, timing, global reach, and lead time.
- Critically with a consignment seller an understanding of their current asset mix to avoid component queuing across Tier 2, 3 and 4 materials.
- The set up of a common reporting platform that would communicate on each element in terms of value achieved, value achievable, performance to expectation, and protect asset value in such a way that the client would be able fully review the asset at a glance if they wished, or in all detail if preferred.
- Created initially in excel for design and development, the platform, called OPTIC (OPtimising Teardown Inventory Consignment) manages data through a process of leaning (removing surplus), validating (accuracy check), layering (data detail), and colour coding (performance to expectation). Through this process a simple performance and value picture is created that allows a top-down review approach.
- This enables a client to see in minutes performance to expectation at each project level. The excel format was then converted into an online web platform that can be accessed through a mobile phone at a high to medium project level and at transaction detail level by computer. Also included is an in-platform messaging process so that everything exists in the one place.
- Collaboration:
The case study project was a strong collaboration between The Leasing Company and SellUe. This case study represents the earliest SellUe were involved in an asset Teardown and Consignment project – including the initial business case of full asset sales verses teardown and consignment. The key role of consignment model alignment, undertaken by SellUe, was instrumental in making the decision to go with a full teardown and consignment project. An outline of the values involved is included in the value sequence presented later in this case study
- Separation of services suited this client very well as they had existing relationships with teardown shops and warehouses that worked well with the asset type. The primary adjustment was the conversion of the warehouse from a box storing facility to a component storing facility. The Project worked closely with the warehouse as regards this set up with significant warehouse storage and systems adjustments made to facilitate the change.
- The separation of services was a significant cost saving measure, competitive rates were secured across teardown and warehousing, with a lower commission rate agreed with the consignment partner as their only focus was sales.
- Operational contracting across all services was enhanced through the operational experience brought by all parties, ensuring that all elements were covered and no upsell costs would be incurred. SellUe operational contracting templates were utilised with legal elements overseen by the client.
- SellUe template reporting was established with the consignment partner and OPTIC was then set up to facilitate asset reporting. The first six months of consignment was project managed with weekly reviews with consignee of OPTIC key metrics. Thereafter the project reverted to a reporting only function with the review process then reverting to the client and consignment partner.
- At consignment end SellUe carry out end of consignment reviews including exchange closure, credit reconciliation, material returns and reconciliation.
- Customization/Innovation:
Within this project several key customizations took place not normally used within traditional teardown and consignment. This included the separation of services, project management at a micro level, the processing of data through a leaning, validating, layering and colour coding process.
- One of the critical customization steps was the evaluation of the consignment seller. Despite past successes they may not be the right partner for you at that point in time. If they have just taken (bought or consigned) an asset like your own in the last 6 months their ability to optimise your return can be compromised. Understanding the market they are feeding, their policy on managing material queues, all of these and other dynamics are examined through a bespoke suitability process. In this case the choice was central to the project success as they had no competing assets.
- Innovative metrics included a realistic quote conversion calculation, and measuring quote activity to sales targets utilising quote conversion achieved. A monthly project end forecast using the key metrics plus analysis of the remaining inventory by tier level and sales probability gave a constant forward picture of performance.
- Results
| Quantitative-Results: | |
| 2022 Market Airframe Value | $ 900,000 |
| Traditional Consignment Modelled Return | $1,250,000 |
| Agreed Return Adjustment post Model Alignment | $1,450,000 |
| Current Consignment Return (after all costs) | $1,645,000 |
| Trending Projected Returns (2 months remaining) | $1,760,000 |
- Key Contributors – Bottom Line Impact
| Key Contributors & Metrics; Traditional Model to Aligned Model – $200,000 | |
| Topline Revenue from $2,289,428 to $2,619,899, through updated market check and change in approach from 60% AR/40% SV to 40% AR/60% SV | $351,255 |
| Separation of Services leading to reduced costs/commissions | $ 65,564 |
| Reduction in modelled % Repair cost from 30% to 25% | |
| Reduction in modelled COGs from 25% to 20% | |
| Return on increased sales (condition change was cost plus). | $134,436 |
| Key Contributors & Metrics; Aligned Model to Actual Outcome – $310,000 | |
| Increased PN Pricing to PN model | $258,859 |
| Reduction in % Repair cost from 25% to 24% | $ 16,057 |
| Reduction in COGs from 20% to 19% (Warehousing/Logistics) | $ 49,896 |
Support Metrics – Trending Sales Support
These key support metrics protect and enhance sales projections. Measuring the PN returns to model ensures project model integrity is retained. Measuring quote activity and quote conversion rates in a fair and reasonable manner means that the consignment partner has a chance to get ahead of any potential downturn in sales.
A review of sales to end users verses intermediaries can also be carried out against an initial projection to further protect model values and project projections.
Monthly Material & Cost Management:
- Soft Stock Audit
- Inventory Reconciliation
- Revenue Distribution
- Invoice Alignment
- Payment Reconciliation
Periodic Commercial Management:
- Physical Material Audit
- Exchange Closure Audit
- Credit Audit
- Returns Audit
- Cost Audit
Qualitative-Results:
SellUe was awarded the “Most Trusted Aviation Management & Reporting Platform 2024 – Europe” in the Aviation & Aerospace Awards 2024.
SellUe was also nominated for the “Aviation Customer Focus Achievement Award” in Aviation Industry Awards in 2023 alongside Aer Lingus, Aer Arann Islands, Aero Inspection, and Dublin Airport.
Benefits:
SellUe and OPTIC have been able to demonstrate the viability of teardown and consignment as a real alternative to full asset sale, allowing leasing companies the opportunity to increase and optimise returns to their investors. In addition, it opens new opportunities for investors to put funds into teardown and consignment as single projects rather than part of a leasing project.
Client Testimonials:
Working with SellUe raised our awareness of the value attainable through consignment. Utilising SellUe’s principles on consignment allowed us to take control of consignment activity with efficient, effective, and sharply focussed processes. Chief Commercial Officer at GENESIS Leasing
SellUe has optimised each operational element of the consignment, including cost and revenue management, reporting and communication. SellUe’s hands on and analytical approach, really improved our consignment result in challenging market environments, and resulted in enduring relationships that continue to positively contribute to our business. Head of Aviation of Dr. Peters Group
SellUe’s attention to detail, market and product knowledge along with commitment levels and business development drive have ensured that we were able to achieve the optimal return from the aircraft within the teardown program. Head of Aviation at Riechmuth & Co. Investment Management AG
Clear direction on material categories, geographical coverage, specific targeting within all segments, monthly reporting and reviews, all introduced through a coaching approach, meant that SellUe was able to support the Sales Team in doubling sales up to $85M. CEO at EirTrade
- Conclusion
- Summary of Key Success Factors:
Demonstrated ability to achieve results up to 2x the value of an assets market value, with early intervention and a clear communication strategy. - Lessons Learned:
Asset teardown and consignment is a viable alternative to full asset sale at end of life and has the ability to stand alone as an investible product. - Next Steps/Looking Forward:
Raise investment, install origination resources, continued development of OPTIC to include environmental performance measures.
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- Visuals
OPTIC Data Platform Entry (Only accessible through invitation, not listed in app stores).
Client data protection is enhanced through a double authentication process as part of the login process.
Areas Project Managed – Strategic
Colour coded against expectations, including messaging (Decision Nudges DN) response times.
Areas Project Managed – Tactical
Colour coded against expectations, including messaging (Decision Nudges DN) response times.
Top Level Performance Scoreboard & Communications
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- Media
- Call to Action
- Get in Touch:
Contact us for a demo of this live asset and see how much more value can be generated through the SellUe and OPTIC methodology. - See us on www.sellue.com
- Call us on +353 831 456617
- Write to us on [email protected]
- Visit us at Unit 14 Penrose Wharf Business Centre, Penrose Wharf, Cork, Ireland.