Inventory holding strategies haven’t changed much in the past 30 years. Airlines still cling to the ‘just-in-case’ mentality. And because of that, excessive inventory is costing airlines $10bn per year (21% of total inventory value).
What Are Your Expendables Costing You?
The management of consumables and expendables is often badly done. Poor planning and forecasting leads to panic buying and overstocking.
Because aircraft expendable and consumable unit prices are low it often gets little attention and 50% of what is purchased is never used and wasted. And when you ship these parts under critical / AOG time frames, it costs five times as much as routine parts movements.
You spend time sourcing, processing, and chasing these orders, but the total cost mindset is forgotten. You focus a lot of your energy on the unit price. It’s cheap, so you forget the costs of processing, shipping and storing the material.
If you spend $1,000,000 a year on aircraft expendables and consumables and waste 50%, $500,000 is wasted. Even if you waste only 10%, it’s still $100,000 that didn’t need to be wasted.
MROs have a huge burden as well. This is true for private, conglomerate, and airline MROs.
Their pain is the locked value of spare parts and other MRO inventory sitting on shelves. On average, an MRO has the equivalent of between 2 - 5 per cent of annual sales tied up in unused--often never used--inventory.
Control Your Aircraft Expendable & Consumable Consumption
Don’t panic. Despite these statistics, things get better. It’s about taking the time to step back and look at the big picture. Where are your biggest issues? Where do you need help? Answer those questions and start brainstorming.
When it comes to aircraft expendables and consumables, there are 3 strategies that will make your aviation life much easier, and they have the potential to save you a ton of time and money on inventory.
Maintenance Check Kitting
Build kits for all your maintenance checks. This means sending out RFQs for the 50 - 150 components you need to satisfy your maintenance check. Then let your trusted material partner send you a kit of all the components you need.
By following the $ave by Consolidating strategy, you’ll cut your sourcing, processing, and freight costs by at least 30%.
Maintenance check kitting can be used for line maintenance, A - D checks, modifications, standard RFQs of 10 - 1,000 parts, and a ton of other maintenance projects you experience.
Vendor Managed Inventory
Adopting a vendor managed inventory will allow you to differ most of your inventory risk onto your trusted material partner. They’ll do the forecasting, planning, and provisioning.
Once your inventory is established and as you consume the material, they’ll automatically send you replenishment inventory. You’ll never have to cut or chase another PO.
You can downsize your warehouse space, reduce your holding costs, and eliminate processing costs. It’s a great expendable strategy if you have the consumption history.
When you consign inventory, your trusted material partner will store their inventory at your facility. You'll then be invoiced only when you consume it.
The consignment option is great when you have consumption history and your partner can create an accurate demand forecast. Once the consignment is set, you’ll pull from their inventory when you need a component.
The brutal truth is, expendable inventory is expensive. It doesn't matter if the unit price is $.10 or $100, it all adds up to significant waste. Review your current strategy, note your issues, discuss a better way, and adopt a total cost mindset. It'll save you a ton of time and money.
What are your expendable issues? Comment below.