The 10 best practices – Inventory optimization for Airlines

These best practices are fundamental to achieving the significant inventory reductions and substantial bottom-line savings that are the hallmarks of inventory optimization for Airlines , MRO ‘s and Aircraft Operators.

1. Demand Forecasting : Commissioning of additional spares may be projected to increase demand for certain catalogue items. Demand forecasting for Airlines , MRO ‘s and Aircraft Operators should include:

  • Selection of appropriate forecasting methods(algorithms)
  • Use of forecasting and statistical distributions that are suitable for a wide range of spares items, including slow moving and lumpy demand
  • Filtering and Clipping techniques to manage irregular data
  • The ability to segregate planned maintenance and demand from unplanned activities
  • Capabilities to use the information of expected future events or trends to apply demand profiles to forecasts for the future

2. ​Lead Time Forecasting: Forecasting the lead time is a key factor in determining optimal safe stocks –

  • Forecasting average lead time using purchase order and receipts history
  • Filtering and clipping techniques to eliminate irregular data
  • Overriding lead times as required
  • Calculation of variance in lead time and use of this variable in calculating expected service levels

​​3. Issue- Size Forecasting: The number of units typically required for a maintenance activity (the issue size) is also a crucial factor in determining stock levels – a good inventory optimization solution will provide:

  • The ability to forecast middling issue size using spare issue history
  • Appropriate filtering and clipping techniques to exclude abnormal data
  • Capabilities to supersede forecast issue size as required
  • Calculation of variance in issue size and use of this variable in calculating expected service levels

4. Economic Modelling: Economic modelling abilities need to allow for “what-if” modelling of inventory trade decisions:

  • Inventory holding costs for different types of spares(items)
  • Total replenishment costs incurred for different purchasing methods
  • Emergency freight costs
  • Stock-out costs, based on criticality and period of stock-out
  • Comparing existing and optimized results for metrics such as: Inventory value, Service level, Turnover, Annual inventory costs

5. Optimization Of Reordering Parameters: The reordering parameters i.e. minimum and maximum levels (MIN/MAX) used by the MRO & Airlines plays an important role in Optimizing Inventory Levels. An Enterprise level materials management system used to generate replenishment orders are the main determinants of inventory outcomes. Enterprises should consider optimization of reordering parameters periodically to reflect changes in usage, criticality, lead time & other factors. The optimization process addresses.

  • Selection of suitable algorithms to enhance minimum and maximum stock levels
  • Use of an economic cost model which considers the costs of holding inventory, replenishment, expediting and stock-outs.
  • Analysing of group of items rather than one by one.
  • The ability to execute “what-if” modelling and compare optimized results against current inventory performance
  • Consideration of “real-world” constraints including: Maximum bin capacity, Standard pack sizes, Storage capacity, Set sizes

6. Inventory Segregation : Inventory segregation in MRO & Airlines provides a management framework for inventory that recognizes that a number of different management techniques which are required for various item profiles

  • Segregate the inventory based on characteristics such as Usage value, Holding value, Commodity, Availability, Movement frequency, Criticality, Stock holding method
  • Apply structured policies or business rules to the Airlines or MRO management of each inventory segment, such as: Manual control of special spares, Surplus and obsolete for disposal, Review of potentially obsolete spares, Items suitable for statistical optimization

7. Spares Risk Assessment: Some MRO’s & Airlines inventories will include a considerable proportion of spares that are high cost, high value, critical, have little or no predictable usage and require long lead times for receiving. Managing these items requires specific techniques:

  • Risk modelling of the effect of holding zero, one or two sets of spares
  • The ability to carry out sensitivity analysis around expected mean-time between demand and stock-out cost.
  • Decision support tools to assist in new stock purchasing or deferred replacement judgements
  • The ability to model the repairable item replenishment cycle

8. Spares Pooling(Sharing): Significant reductions in overall safety stock investment are possible through the pooling or sharing of high value, infrequent items across various sites. To enable such arrangements, asset-intensive companies need to:

  • Categorise common items that are suitable for sharing
  • Establish the optimal number of sharable spares to be held
  • Optimal location for holding the spares

9. Knowledge Capture: Capturing organizational information relating to inventory items is an important business process in preventing errors; the inventory optimization solution should:

  • Provide an audit trail for decisions and system audits
  • Ensure high quality data for input parameters and classification code
  • Provide notifications when reviews are due

10. Reporting Inventory Key Performance Indicators (KPIs): KPI reporting for Inventory is important to allow improvements in the inventory to be tracked. KPI reporting should include:

  • A selection of pre-defined management report for inventory
  • The ability to automatically capture a large selection of pre-defined inventory KPI
  • The ability for users to customize reports and statistics

BytzSoft has designed a software tool FlyPal, which effectively helps in keeping Inventory optimized. FlyPal Inventory module is been instrumental in successful inventory optimization for our 30+ customers. Enquire about our Aviation Inventory & Stores Management Software here which can be used by Airlines , MRO ‘s and Aircraft Operators.

BytzSoft Also offers: Crew Rostering & FDTL Software for Airline & Aircraft Operators    Safety Managment Software for Airlines & MRO’s

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