How To Set Up Your Vendor Managed Inventory

Your aircraft expendable inventory is like a child’s bedroom. Messy and out of control. You have stock on what you don’t need and you’re AOG for items you should have planned for.

Skylink, Vendor Managed Inventory, VMI

Skylink, Vendor Managed Inventory, VMI

It’s a mess. You’re frustrated that time and money is wasted. All you want is for the craziness to stop. You want to stock the things you need and plan for the rest. And this is where aircraft inventory management plays a big role. 

What you need, is vendor managed inventory. It’s an aircraft expendable dream. Have what you want and only consume what you need. Once you hit a minimum stock level, an automatic shipment of replacements is sent to you. Easy!

But how do you decide if it’s right for you? 

Is vendor managed inventory right for you? 

If you’re constantly purchasing expendables and consumables, then the plan is right for you. But, err on the side of caution. It’s very important that you and your supplier understand and accept each other's expectations. There’s nothing worse than getting into a sinking partner-ship. Get it?

During the initial phases of implementation, you and the supplier should clearly outline your expectations and performance metrics

You should understand each other’s business model and company vision. It’s important to gain this level of understanding in the early stages so that both companies are working towards one common goal.

To get yourself started, answer these 3 questions: 

  • Do I purchase expendables on a regular basis? 
  • Do the majority of the expendables I need exceed 1 piece per year? 
  • Do I have a partner, who I know and trust, with a vendor managed inventory?

Begin setting up your vendor managed aircraft expendable inventory

You’re ready to take the plunge into the deep dark vortex of proper aircraft inventory management. You don’t want to spend so much time dealing with aircraft expendables. You want what you need now--no more, no less. 

First, you must be committed to solving your expendable problems. Once you are, the rest is easy. 

1. Run your consumption report and determine stock items

consumption report, stock items, lead time, safety stock

The best option you have is to run a simple consumption report for the past two years. Ideally, breaking this down into monthly consumption will give the most accurate data in further steps. It’ll help your supplier narrow in on the safety stock and re-order points with more effectiveness. 

It’s important to have a consumption report. If you don’t then we can determine the items you need based on OEM data, known events and unknown events, but this will take you a lot more time. 

Once you have your consumption report, have maintenance review it. They may have hangar floor insight that you could use when building your vendor managed inventory list. 

Don’t worry. This won’t be perfect starting off. Over time, your vendor managed inventory will be properly monitored, making adjustments as your demand pattern shows trends. 

2. Set allocation quantity

From here, it's up to your supplier. You just need to get them the items you want covered and the consumption and they’ll do the rest.

They’ll look into your consumption habits and set an initial allocation quantity. This will be your recommended stock quantity. They pull this information from your past consumption data. Their goal is to get each line item into a daily consumption statistic. 

They’ll set your allocation quantity based on daily usage and maintenance consumption recommendations. 

3. Set safety stock & determine re-order point

Your supplier will then begin running more detailed statistics. Don’t worry, it’s not too complicated. They don’t need a Phd in math. They just need a brain and a spreadsheet. 

When Skylink begins doing these calculations, we stress that you try to have a monthly consumption report. It’ll help your supplier determine your daily requirements and forecast a more accurate reorder point.

Your partner will use a standard deviation, service level, and lead time factor to determine what your safety stock should be. If you only have a yearly consumption, your standard deviation will be the same for all part numbers. Over time, your supplier will correct this by watching your consumption habits. 

Once the safety stock is established, a reorder point is set. 

4. Monitor & Replenish

Monitor & replinish your vendor managed inventory

Monitor & replinish your vendor managed inventory

The final step for you and your supplier is to watch your consumption habits. Anytime you hit a reorder point (or minimum inventory), replacements will be sent to you in the form of your allocation quantity.

Over time, your supplier may increase or decrease your re-order point based on the trends they see. Remember, if you don’t have detailed consumption reports starting out, that’s okay. It’ll just take your supplier some time to learn about your consumption habits. This is very important to remember so you do not think they’ll create a perfect model with very little information. Just remember, they’re not Harry Potter. 

These steps will get you moving in the right direction to a stress free expendable life organized by a Vendor Managed Inventory strategy. 

Have you wanted to try a vendor managed aircraft expendable strategy? Are you taking advantage of this strategy right now? Comment below, we want to hear from you!