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Company Profile
Octagon
Aerospace, Inc.
(Octagon) inventories and actively markets tens of
thousands of part numbers providing aviation industry
aftermarket support on aircraft interior components such as
lavatories, crew seats, galleys, air stairs, coffeemakers, and
ovens to over 600 unique customers worldwide. Octagon is also
an authorized distributor for original equipment manufacturers
(OEM’s) of aircraft bearings, seals and other critical
components. Octagon owns an extensive inventory of factory
new DC-8, DC-9, DC-10 and MD-80 airframe and related
structural components, which are stored at it's 80,000
square-foot secure facility in Fillmore, California.
Additionally, Octagon provides both on site and off site
consignment inventory marketing services to assist airlines
and others turn their slow moving inventory into cash.
Octagon's newest line of
business is in Powerplant services. With the addition of
aircraft engine technical and sales specialists, and with the
Company's stronger financial structure, Octagon is now able to
offer complete engine teardown and spare parts services for
General Electric, Pratt-Whitney and other aircraft engines.
Over the years, Octagon has
developed excellent working relationships with many airlines
and overhaul centers, including the added dimension of
creating an expansive network of nearly 400 brokers who handle
the placement of the aircraft parts into numerous small
markets throughout the world. Between 1996 and 2000 we became
recognized as a primary supplier of aircraft interior products
and developed a deserved reputation for highly responsive
aftermarket service and support.
No other third party
aftermarket source has brought together the unique
capabilities that Octagon has been able to develop including:
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The most experienced
aircraft interior personnel with an;
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Extensive knowledge of the
OEM’s products and markets;
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Broad
experience in brokering both expendables and rotables;
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Large selection
of interior products in stock;
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Focused sales team
dedicated to moving its supplier’s inventory.
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 We
work closely with our OEM’s to keep them up to speed on our
sales efforts of their products by alerting them of our travel
plans and providing copies of our trip reports. Additionally,
we send our OEM’s quarterly reports showing customer usage by
part number, as well as providing valuable market analysis on
the specific aftermarket conditions as it may affect their
products to highlight both opportunities and potential
problems before they become issues. We track fleet changes at
these airlines as well as remain in close contact with
maintenance personnel to provide valuable feedback to our
OEM’s. We keep our OEM’s informed of the potential for PMA
dealers to reverse engineer their parts so we can work
together to quickly determine the best way to handle this
situation before it can deteriorate our OEM’s profit margins.
GLOBAL SALES AND MARKETING
The movement by airlines to
offload maintenance and spare parts inventory management and
logistics to third party suppliers has shifted these demanding
requirements to either original equipment manufacturers
(OEM’s) or to spare parts distributors. Since airlines demand
just-in-time delivery, the requirement to stock and deliver
parts inside most standard OEM lead times demands a
comprehensive, sophisticated inventory management and
forecasting solution.
Many OEMs believe their
expertise and therefore best use of scarce resources to
maximize profitability and enhance customer support is through
the use of outside distributors who specialize in a specific
market niche to support their unique customer
 base.
Knowledge, focus and continuous monitoring of aircraft
interior parts demand by experienced personnel utilizing
sophisticated in house developed information management tools
enables Octagon to provide superior levels of support for
manufacturers of aircraft products to the aviation
aftermarket.
Distributors, such as Octagon,
may be better equipped to search for parts available on the
open market or be in a better position to service the
customer’s requirement with refurbished components to meet a
rapid delivery. If lead-time for a particular stock item is
too long, as removed or overhauled parts can be provided.
Appropriate parts stocking and communication with this type of
provider is mandatory for success.
Additionally, airline’s
constant competitive pressures to reduce cost and improve
management of working capital has made it far more acceptable
than in the past for PMA's to enter the marketplace. Octagon
assists OEM's in this area by working with the airlines and
overhaul customers under long-term relationships by stocking
the majority of their spare parts requirements. Maintaining
these relationships aides in stifling the demand for PMA parts
from aircraft operators.
Octagon’s primary focus in spare
parts has been and continues to be analysis and logistics
management of its supplier’s part numbers to the aviation
aftermarket. Over the years, Octagon has amassed a valuable
database of information on aircraft part usage by customer
and region.
We believe by working more
closely with the OEM as an authorized distributor, we can
together refine this valuable database of information to
improve customer satisfaction by reducing out-of-stock
conditions while, at the same time, improving the OEM’s
profitability by providing larger volume production requests
for parts and reducing the demand for PMA parts in the
marketplace.
Octagon sells its distribution
inventory to over 600 customers worldwide. However, a
manageable number of our customers purchased over two-thirds
of this volume annually. Our number one customer represented
14% of sales. The top five accounted for approximately 33% of
sales and the top thirty accounted for nearly 66% of sales.
Octagon supported a manageable
number of large customers in 1999. Since most of the volume
is concentrated in these accounts, the staff at Octagon’ Simi
Valley facility is sufficient to support its represented
aircraft products throughout the world, especially when you
take into consideration the 300+ independent broker network.
Since most of the volume is with these larger customers,
Octagon’ experienced aircraft parts sales and customer service
departments are able to concentrate their efforts with these
critical high volume accounts.
Sales in 1999 were primarily
concentrated in North America, followed by Europe, Latin
America, Asia and the Middle East. Eighty-two percent of 1999
worldwide sales were in the North American region. Of the
North American sales by Octagon, 53% were with the airlines,
21% were with brokers and the remaining 26% were to repair and
overhaul shops.
Europe accounted for 9.8% of
worldwide sales of aircraft spare parts. Airlines, overhaul
shops and brokers accounted for 63%, 21% and 16% of European
sales, respectively. Sales into the other regions of the
world accounted for less than 9% of total sales with the
majority of those sales being directly to international
airlines.
Since most of the US
manufacturer’s aircraft products are sold in North America,
Octagon’ presence near Los Angeles enables it to communicate
and deliver effectively with the largest customer base for
those products. Octagon sales and service department provide
24/7 AOG support to its airline and other customers worldwide.
In Europe, Latin America and
other parts of the world Octagon customer base is more
narrowly focused on a smaller group of customers. However,
since many of the North American based brokers sell
internationally, we cannot fully identify how much of the
total broker volume in the US is ultimately utilized by a
foreign-based aircraft operator.
Airlines are demanding just in
time inventory management from OEM’s. Many aircraft parts
manufacturers are not equipped to manage the high volume of
daily demands for low
quantity orders from the airlines for dozens of different part
numbers. In these situations a just in time or AOG service
from an authorized distributor provides another supply channel
for the OEM’s customers. Octagon has been providing this
necessary service to the airlines for a number of years,
specializing in Douglas airframe and a wide range of aircraft
interior components, and most recently bearings, seals and
other components.
Key reasons OEM’s consider
using Octagon Aerospace as its authorized distributor include:
1.
Octagon possesses extensive aircraft product and
aftermarket industry knowledge and we are willing to share
this knowledge by presenting to our OEM’s a quarterly or
semi-annual marketing analysis, including product specific
sales data.
2.
Octagon's sales, purchasing and management personnel have
a combined 130+ years experience in the aviation industry
wide-ranging contacts and valuable relationships among the
aircraft interior buyers.
3.
Octagon's multi-year historical database of product sales
may provide a valuable competitive advantage to OEM’s.
Octagon will be able to provide specific aftermarket product
knowledge not readily available to some of our OEM’s
competitors.
4.
Octagon's ability to consolidate the numerous small order
quantities from airlines, overhaul shops and brokers
throughout the world provide the OEM with higher volume,
long-term purchase orders with scheduled deliveries enabling
the OEM to manufacture product more cost effectively by taking
advantage of natural economies of scale.
5.
Octagon's ability to forecast requirements up to 12
months or more by product group and part number will assist
the OEM
 in
preparing its production capacity plan.
6.
Octagon's level of service to airlines is unequalled.
We believe Octagon is far more responsive to the airlines in
quoting prices and shipping product on time than any other OEM
distributor. We also believe that through our
experienced aircraft aftermarket personnel, Octagon has the ability to
communicate effectively with buyers to ensure the correct OEM
part numbers are ordered, which improves the customer’s
perception of the OEM and their products.
7.
Octagon's historical performance in delivering its OEM’s
products on a just-in-time basis enhances the OEM’s product
line to the airlines and to the industry in general, which may
lead to new business with aircraft manufacturers.
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