Spare Parts Supply Chain

How can inventory control and material availability be reconciled?

The optimization of spare parts inventory management is a key factor to the performance of after-sales activities and in-service support, both from an economic perspective and in terms of material availability.

Context and challenges

Optimizing the performance of the spare parts Supply Chain involves several stages:

  • Service offering, which constitutes a commitment to the customer, often needs to be revised in order to meet the customer’s expectations as fully as possible. This phase helps avoid the most common problems:
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  • Failure to adequately scrutinize the actual value delivered to the customer and falling short of their real expectations
  • Inadequate customer segmentation
  • No control over service costs or customer profitability
  • Difficulty in delivering a good level of service in relation to these offerings
  • Logistics network and inventory policy are then defined simultaneously in order to support the service offerings:
    • Structure and location of distribution points throughout the logistics network and associated trade areas in order to minimize the overall cost (including taxes, in certain cases)
    • Inventory location and sizing in line with the turnover, cost, and criticality of each product, delivery lead times, and service level targets
    • Analysis of inventory and service sensitivity required to optimize service levels with limited inventory and at the lowest possible cost, and to determine the best overall compromise
  • Sales forecasting is an important process in the spare parts Supply Chain, and must incorporate the following:
    • High volume of part numbers to be managed
    • Erratic nature of sales, using sophisticated statistical calculations
    • Exceptional incidents (technical, quality, etc.)
    • Analysis of causal factors and their forecasting (e.g. the link between the number of flying hours/landings, and the sale/consumption of parts)
    • Changes in the installed equipment base (and its different service configurations)
    • Changes to items throughout their life cycle (interchangeability, etc.)
    • Various sales and consumption channels (sales of replacement parts, own consumption by repair centers, and sales to affiliates)
    • Link with repaired parts inventory and changes in the “repair or replace” policy
  • Operational control processes (forecasts, procurement, deployment, deliveries, etc.), roles and responsibilities, and the organization of teams (forecasters, order managers, logistics managers, etc.) must all be adapted to each type of service offering and customer requirements (especially in terms of lead time: delivery in 24 hrs, in 48 hrs, in several weeks, locally, regionally, nationwide, worldwide, etc.)
  • Lastly, management of the life cycle of parts must focus on three aspects:
    • Regulations and safety
    • Technical terms (possible interchangeability, upgrade policy, mapping with the configurations of the systems in operation and changes to these, etc.)
    • Commercial terms (compulsory upgrade, total or partial coverage of upgrade costs, and impact on the total cost of ownership for the customer)

 

 How can Argon Consulting help you?

  • Formalizing the definition of customer expectations and target service offering
  • Designing the distribution logistics network and inventory policy (models and tools)
  • Defining of the Supply Chain processes (forecasting, distribution, procurement, etc.), organization, and the roles and responsibilities involved
  • Creating action plans for reducing inventory levels and/or improving service performance
  • Assisting with the implementation of IT system tools
  • Defining the methods for managing the life cycle of parts and subassemblies

Case Studies

Improvement of management practices of maintenance interventions and spare parts stock management