Guidance Material and Best Practices for Inventory ...

1 Guidance Material and Best Practices for Inventory Management 2nd Edition NOTICE. DISCLAIMER. The information contained in this publication is subject to constant review in the light of changing government requirements and regula- tions. No subscriber or other reader should act on the basis of any such information without referring to applicable laws and regulations and/or without taking appropriate professional advice. Although every effort has been made to ensure accuracy, the International Air Transport Association shall not be held responsible for any loss or damage caused by errors, omissions, misprints or misinterpretation of the contents hereof.

2 Furthermore, the International Air Transport Association expressly disclaims any and all liability to any person or entity, whether a purchaser of this publication or not, in respect of anything done or omitted, and the consequences of anything done or omitted, by any such person or entity in reliance on the contents of this publication. International Air Transport Association. All Rights Reserved. No part of this publication may be reproduced, recast, reformatted or trans- mitted in any form by any means, electronic or mechanical, including photocopying, record- ing or any information storage and retrieval sys- tem, without the prior written permission from: Senior Vice President Safety and Flight Operations International Air Transport Association 800 Place Victoria Box 113.

3 Montreal, Quebec CANADA H4Z 1M1. Guidance Material and Best Practices for Inventory Management ISBN 978-92-9252-741-9. 2015 International Air Transport Association. All rights reserved. Montreal Geneva Table of Content List of Figures ..v List of Tables ..vii Abbreviations ..viii Introduction ..x Purpose of the Guide ..xi Scope .. xi Audience .. xi Objective .. xii Section 1 Goals of Inventory Management ..1. Section 2 Introduction to Inventory Classification ..4. Rotable Inventory ..8. Repairable Inventory ..9. Expendable Inventory ..10. Recoverable Inventory ..11. SPEC2000 Inventory Classification ..12. SPC 1 ..12.

4 SPC 2 ..12. SPC 6 ..12. Section 3 Initial Discussion of Airline Provisioning ..13. Sources for Spares Provisioning Data ..16. Data from the Aircraft Manufacturer ..16. Operational Data from another Carrier with the Same or Similar Fleet ..22. Data from an MRO Partnering with the Carrier for Spares Provisioning and Repair/Overhaul ..22. Data from Industry Experts or Consultants ..22. How to Provision for Airline Operations ..23. Nine Step Model to Determine ROTABLE Inventory Support for Airline Operations ..23. Understand Airline Operational Goals ..24. Gather Needed Data ..24. Calculate Annual Demand ..26. Designate Stock Items.

5 27. Calculate Station Qualification ..28. 2nd Edition 2015 i Guidance Material and Best Practices for Inventory Management Determine Allocation Quantities and Location .. 33. Determine WIP Support Inventory Levels .. 41. Formulate Procurement Strategy .. 44. Ownership .. 45. Leasing .. 46. Owned Versus Leased Assets .. 47. Options other than Ownership or Leasing .. 50. Inventory Pooling .. 50. Borrow Strategies .. 51. Exchange .. 54. Robbing Parts .. 55. Considerations for Different Types of Operators .. 56. New Versus Aging Fleet .. 56. Provisioning Considerations for an Airline: New or Leased Aircraft .. 58. Section 4 Monitor and Improve the Inventory System.

6 60. Inventory Performance Metrics .. 63. Metrics and their Importance to Operations .. 67. An Integrated Approach for Metric Monitoring .. 68. Frequency .. 68. Format .. 69. Summary on Metrics .. 72. Section 5 Understanding Provisioning Calculations .. 73. Assumption of a Poisson Process .. 73. Notes on Essential Data and Sparing Calculations .. 74. MTTR or TAT .. 75. Using MTTR in Lieu of TAT .. 76. Summary of MTTR Versus TAT .. 79. Section 6 Forecasting, Practical Application and Impact on Sparing Strategy .. 80. Day to Day Operational Considerations .. 81. Surplus .. 81. Surplus of Excess Assets .. 81. Purchase of Assets on the Surplus Market.

7 83. Airline-MRO Relationships .. 84. Inventory Sale-Leasebacks .. 86. Some Specifics Regarding Sale-Leasebacks .. 87. ii 2nd Edition 2015. Table of Content Section 7 Optimization of Airline Inventory ..89. Goals Revisited with Optimization ..91. Organizational Structures ..92. Interactions an Inventory Manager Should Expect ..95. Internal Interactions ..95. External Interactions ..98. Expendable Planning ..99. Introduction ..99. Expendable Planning Strategies ..100. Planning the Expendables Warehouse ..105. Planning Station Expendables ..107. Data Needed ..108. Calculating Safety Stock ..108. Planning the Station.

8 110. Determine Stock Items ..111. Determine Replenishment Lead Time ..112. Set Allocation Quantity ..112. Set Safety Stock or Min ..113. Determine Reorder Point ..113. Planning the Warehouse ..115. Minimum Lot Basic Inventory Model ..116. Safety Stock at the Warehouse ..117. Calculating the Safety Stock and Reorder Points at the Warehouse ..118. MRP/ERP in Warehouse Management ..121. EOQ in Warehouse Discussion of Ordering Strategies ..123. Planning for the Hangar Bay ..125. Control of Expendable Inventories ..125. Inventory Accuracy ..126. Section 8 Accounting for Rotables and Expendables ..127. Introduction ..127.

9 Rotables ..127. Expendables/Consumables ..128. Accounting 2nd Edition 2015 iii Guidance Material and Best Practices for Inventory Management Section 9 New Value Chain Options .. 131. Point-of-Use Trends .. 131. Distributive Versus Allocated Models .. 131. Section 10 Inventory Assessment .. 134. OECM .. 134. Recommendation and Examples .. 135. Recommendation .. 135. Examples .. 136. Section 11 Work Cited .. 138. Section 12 Acknowledgements .. 139. iv 2nd Edition 2015. List of Figures List of Figures Figure 1. Goal Hierarchy in Aviation Inventory Figure 2. Inventory Classifications and Characteristics ..4. Figure 3. Examples of Commonly Allocated Parts by Material Type.

10 5. Figure 4. Aircraft, Airframe, and Engine Inventory ..6. Figure 5. QEC and LRU Inventory Relationship to Engine and Airframe Inventory ..8. Figure 6. High Level Inventory System Design ..13. Figure 7. Nine Step Inventory Provisioning Model ..24. Figure 8. Situations with Potential for Inventory Consolidation ..34. Figure 9. Critical Path of Remove and Install ..36. Figure 10. Representation of the Removal and Repair Cycle Showing the Repair Pipeline ..39. Figure 11. Provisioning Options Summarized ..55. Figure 12. Typical Bathtub Curve ..57. Figure 13. Flow of Inventory through the Airline ..60. Figure 14. SIPOC Model.