Balancing the number of spares needed to ensure fleet airworthiness against its cash flow requirements can be a tricky task, but help is at hand, as Bernie Baldwin reports
‘Cash is king’ according to a well-known saying. Having enough to do the work you need is vital, especially in the airline industry. Tying up cash by having too many spare parts hardly counts as best practice. There needs to be smart control of the inventory to ensure that the right parts are available when needed, but it’s important that overstocking does not cause cash flow problems.
Acknowledging that “effective inventory management has always been about balancing the need to have parts readily available against the high cost of holding those parts on the shelf”, Ian Kent, Product Manager at Rusada, explains the role an IT package can play.
“A good maintenance software system should be able to help operators understand their inventory needs as well as their supply chain, so that stock levels can be continually optimised,” he says. “A good system should also be able to manage the inventory, ensuring appropriate levels of stock turnover, shelf-life control and cost management.
“An age-old problem for airlines is the continuous increase of inventory on the shelf. It is often difficult for an airline to understand the reasons for this. A good system should have the analytical tools which enable the airline to quickly and easily understand inventory movement,” Kent emphasises.
Optimising your inventory holding
When assessing optimum inventory holding there are many factors that come into play. “These include aircraft types operated, age and fleet size, type of operation, geographical extent of operation, level of service protection required, level of maintenance operations performed in-house, supplier lead times and many more,” he states. “Many airlines, especially start-ups, will look to their OEM for recommendations and initial provisioning lists, but often these are significantly more than is actually required.
“Most of the decisions associated with these factors lie with the airline but an MRO/inventory management system can certainly assist in the decision making through the analysis of material demand data for both routine scheduled and unscheduled maintenance,” Kent continues. “Systems such as [Rusada’s] ENVISION, allow material requirements to be clearly defined against maintenance task requirements and comprehensive forecasting tools enable accurate material requirements to be determined. This helps an organisation to understand where and when they need inventory to be available.”
Choosing your procurement strategy
Parts specialists are no longer the sole source for spares, having been joined in the aftermarket by the OEMs themselves. Comprehensive support packages offered by the airframers and engine manufacturers nearly always include an offer to help control inventory.
“Many airlines are looking for alternative ways to meet their inventory needs without having the traditional high cost of ownership,” observes Kent. “Airframe OEMs and specialist companies offer a range of flexible solutions including provision of on-site consignment stock and access to rotable pool stock under a range of financial options including leasing, power by the hour, loan and exchange.
“Whilst these solutions do allow airlines to lower their investment needs and simplify their supply chain, they can end up increasing the burden of inventory management,” he argues. “Many of these solutions require careful management of OEM-owned/supplied stock and failure to do so can result in heavy penalty costs.
“A good MRO/inventory management software system should support this process, by ensuring that unserviceable components are returned to the OEM/rotable stock provider within agreed timeframes. Being able to manage these contractual terms and the relationship between exchange items and unserviceable cores is critical for an airline,” Kent emphasises.
This feature was originally published in the June 2019 issue of MRO Management.