Expendable Automation: 6 months, 500 parts, 0 delays

Do you ever wonder how you can make aircraft consumable and expendable consumption easier? Or even automated?

No matter the price, no matter the size, no matter how many you need, even a small expendable can cause you to have an Aircraft on Ground (AOG). 

These are 3 words every procurement professional never wants to hear. These words raise your blood pressure, make you sweat, and keep you up at night.

AOGs are costly occurrences that thousands of airlines experience due to consumable and expendable problems. It’s often caused by the component being out of stock, but it doesn’t stop there.

These little things can cause AOGs because of capital costs / obsolescence, logistics, or even from a failed purchasing plan. 

How often does one of these create issues for you? Think about it. Once, twice, twenty times a week?

Now think of all the time and money you spend fixing these problems.  It gets messy fast.

It doesn’t have to be all that bad and is incredibly simple if the right strategies are applied.

Automating your expendable and consumable consumption

I’m a huge advocate of automating certain aspects of my life.

From social media posts and blog creation, to business development and automated ERP processes, automation can be found everywhere.

And most importantly, automation is handled by people who have a greater knowledge of certain activities. Or the opportunity cost for them to do a certain task is far cheaper than what you can do it for.

A good example is the company who cleans your office. The opportunity cost is much cheaper for them to do it instead of you. Make sense?

The same goes for automating your consumable and expendable consumption.

It’s as simple as 1, 2, and 3.

1. Identify high usage components and / or components you use every year.
2. Send this list to your consumable management partner
3. They ship these items to you on a forecasted monthly consumption rate (JIT) or they keep them in stock for On-Demand delivery.

The benefit of automating is you get On-Demand component reliability through continuous replenishment. This significantly reduces your costs of AOGs, procurement, shipping, stocking components, and out of stock scenarios.

Through automation you get aircraft consumables and expendables when you need them, where you need them, and how you need them. Direct, automated shipments can be used for one maintenance hub or 15. It doesn't matter as the program automation is designed for your unique operation.

Think about it, how will automating reduce your costs and increase your reliability?

P.S. We  structure our consumable automation program around you. For more information on how we can support your needs through this program, simply fill out the contact form below!

A Romantic Story Of Just In Time Inventory & Decision Making Fatigue

Face it. You dislike fumbling around with aircraft expendables just as much as I like making my bed.

Both are messy.

I’m a terrible bed maker. My corners are never crisp, my pillow is never fluffed and my side is always sloppy. Just ask my wife. Okay, maybe don’t ask her.

Although I’m sloppy at making my bed, being sloppy and unorganized with expendable procurement is much more costly.

I see it time and time again. Partners who procure the same seal, over and over, each time with a greater urgency. They spend thousands of dollars for a measly $300 seal.

It happens far too often. We quote a seal 3 days prior, the quote becomes urgent on day 2, the PO is placed on day 3, and now you’re in an AOG situation.

For a seal (or insert another high usage expendable or consumable)…

We can blame it all on the maintenance crew all day long, but the real problem is in the planning and decision making. 

With so many decisions being made by you, it gets overwhelming and daunting.

Everyday you make last minute decisions to avoid AOGs. It’s common and your not alone.

Decision making fatigue, it’s a real thing

Would you believe me if I told you that you only have so much energy to make a certain amount of decisions in a given day?

Willpower is like a muscle. You can only stress it out so much before it gets fatigued and tired. Each time you make a decision you deplete your willpower fuel tank. Your willpower fades with the more decisions you have to make.

Should you ship it this way, should you call this person, how are you to resolve this problem? Do these questions sound familiar? 

Every time you answer these, you're zapping your willpower reserves. When your willpower is fading and your brain is tired of making decisions, it’s easier to make irrational decisions.

In a 2008 American Psychological Association journal their “…present findings suggest that self-regulation, active initiative, and effortful choosing draw on the same psychological resource. Making decisions depletes that resource, thereby weakening the subsequent capacity for self-control and active initiative. The impairment of self-control was shown on a variety of tasks, including physical stamina and pain tolerance, persistence in the face of failure, and quality and quantity of numerical calculations. It also led to greater passivity.”

Think without thinking and make better decisions by making less

What are you to do? Well that’s simple, make less decisions.

By creating a strategy where you can make less decisions and still  guarantee expendable delivery is a no-brainer. You simply automate the procurement process.

A Just In Time Inventory program does most of the heavy lifting for you.

You determine what high usage expendables you use over a 12+ month period and every month a predetermined amount is delivered to you on time. You eliminate the decisions to decide who to send the Purchase Orders to, how and where to ship, when to track your material and call your supplier and how to follow-up with orders.

Your material shows up when and as needed, no more fumbling around with administration tasks and excessive decision making. 

By automating your high usage expandable procurement you’ll cut your decision making fatigue down and make better decisions on higher value projects.

You’ll also reduce your freight costs, reduce your inventory levels, minimize AOGs, guaranteed fixed pricing and availability and significantly reduce administrative tasks.

So remember this, in order to reduce decision making fatigue, make less decisions and automate your expendable procurement process.

P.S. Our Just In Time Inventory saves  thousands of hours every year for relative administrative decisions, click here to request how it can work for you.

Try This And Combat Your 45 Day C-check Worries

It's often a fight, you versus your aircraft maintenance c-check.

The doors close behind you and it's an all out battle. You're up against a deadline and it's all or nothing.

Either you're on time or you're not. If you fail, money is lost, the pressure thickens, and your bosses get angry. 

It’s a time of intense pressure.

When it comes time for your c-check you begin preparing to be stressed. You prep for your 23 hour days. 

You visualize how you would like it structured, but until your aircraft is in the hangar it’s a guessing game.

But it’s not all lost, having a plan is a perfect starting point.

Create your battle plan

Here at Skylink we have a battle plan for certain activities.

If it’s a maintenance project we organize the logistics in our project management software and prepare for contingencies. 

Your battle plan is specific to your operation, but there's a general truth of how it should be organized.

It should be structured around your primary goal. 

Are you looking to significantly reduce costs, or reduce aircraft down time?

It’s a question you should think about. If you have one, usually the other will suffer. 

Once you have your primary goal in place, you set your foundation.

Set your foundation

You never go into battle alone and the same is true for your aircraft c-check.

Think about who you want to take to battle. Who do you trust? Who communicates well with you? Who has a positive track record?

You probably already have your aircraft MRO chosen, but you’ll also need a logistics company, rotable and consumable support, and possibly a component MRO.

It can get messy fast so having your partners in place will alleviate a lot of pressure during your maintenance check. 

A word of caution, don’t just have your own plan, share it with your partners. Let them get ready to support you. Tell them your goals and what your looking to get out of the project.

Open lines of communication is critical. 

The moral of the c-check story is to not go into battle ill prepared.

Have a plan and have partners to help support your plan. It’s a simple as that.

P.S. Our c-check program is designed for complete rotable and consumable support. One shipment and all supporting spares will arrive to your MRO when and as needed. P.P.S. Click here and tell us about your upcoming c-check and we’ll tell you how we can support you for maximum efficiency.

5 Huge Reasons To Outsource Your Inventory

Airlines burden themselves with inventory. They procure aircraft parts to avoid costly delays and adversely restrict their financial flexibility.

Inventory works against itself.

It siphons cash, requires more administration, and is a pain in the butt.

You look at having inventory as the ends to a mean, but is it the beginning of a long hard relationship of what to have, when to procure it, and how much money to spend?

Airlines need to keep their fleets in the air, true, but you don’t have to specialize in all areas to make that happen.

Think about it.

Do you provide your own on board catering? Probably not, LSG Sky Chefs is who you’ll usually turn to.

Do you supply your own fuel? Not likely as Shell is someone you would consider instead.

What about aircraft maintenance? Yes, some legacy carriers do their own maintenance, but the majority of airlines will outsource this responsibility.

The same goes with inventory.

Why should you spend your time stocking inventory when you can focus more time and energy on core activities?

Inventory is a burden.

The burden of cash

Cash can vanish with the blink of an eye.

You prepare for future issues, but in the next moment your cash reserves are low and you're spending more money on inventory than anticipated.

With no specific plan, inventory and maintenance is a variable cost that is hard for your CFO to forecast and predict.

Costs add up and become a burden to your available cash for other operational objectives.

Airlines spend on average $1.6M on inventory per aircraft. If you didn’t have to invest in inventory, where could you use this money?

The burden of dust

What is dust worth to you?

The longer a part sits on your shelf the more it incurs holding costs.

At 20% of the value of the part per year, this easily forgettable cost of inventory adds up quickly.

Just think, if you have one $1.6M worth of inventory on your shelves for 12 months, that’s roughly $200,000 in holding costs you’ll have to deal with.

Chat with your CFO and see what she has to say about inventory.

Now go back and think of all the waste for expired or superseded parts.

Just another example of spoilage and you’re not even in the grocery industry.

The burden of administration

You’re thinking, duh, administration is a part of holding costs and you’re right.

But…

Let’s talk about its direct burden.

You have to have people procuring, receiving, inspecting, and maintaining your inventory. Think of the time and resources that’s tied to this activity.

Forget procuring just for maintenance projects, think about the resources that are used for you to hold inventory.

Do you see time and money flying out the window?

I do.

The burden of forecasting

How do you know what parts you’ll need and when?

You could consider the mean times between removal and how many flight hours each aircraft accrues, but is that necessary?

Yes and no.

It's necessary information for you to have but not necessary for you to use into inventory strategies.

When you begin to source components to support your MTBR and line up contingencies, you put more burden on time and money.

It adds up. What is your time and opportunity costs worth?

The burden of specialization

Every hour you spend away from your core activities, you're making an opportunity cost decision.

Calculate how much this costs you.

It’s a lot I’m sure.

Stocking inventory both for consumables and rotables is a specialization. You have to train, develop, and watch market trends.

You need to have a pulse on the industry. Who’s reliable and trustworthy, what are the best logistical options for easy distribution, and the list goes on and on.

These are activities you shouldn’t be engaged in. It doesn't make you money and there’s resources that are educated and reliable enough to do it for you.

The moral of the story is, when you're not focusing on your core competencies every activity becomes a burden.

When you tie specialization into pooling and inventory management programs, it becomes even more efficient for you.

P.S. Do you find inventory becoming a burden? Your solution is component pooling. Learn more by clicking here.

Why You Spend 8x More Than You Have To On Inventory

Your CFO opens the bank account and sees red. The money that once lingered in this account has now been spent on inventory.

His stress level is high.

He screams and yells because of the pressure.

If you're not the one he's yelling at, he's yelling at someone.

At first inventory might sound like a good idea.

You stock rotables and consumables to avoid AOG situations.

Nobody likes AOGs. In fact, just writing "AOG" gives me goose bumps.

As an airline, stock is used as a safety net. If you're not in the air, you're not making money.

I should become a professor with that insight. Am I the first?

I get it. Stock eases your mind.

But what about your poor CFO?

Inventory poses a huge financial burden with upfront costs and pesky holding costs.

It’s a burden on your available cash.

Over-utilized capital for inventory

Let's say you need 100 A320 aircraft components to support your No-Go safety stock. You'll easily spend $1,000,000 to stock up.

And that's not $1,000,000 spread out over several years. That's $1,000,000 upfront, cold hard cash due now.

And don't forget the cost of inventory. The dreaded holding costs.

It's estimated that it costs airlines 20-30% of the cost of the unit per year in holding costs. So if you have a million dollars worth of inventory on your shelves you spend how much on holding costs? That's right, $200,000 per year.

It's madness I know.

Spend $0 on inventory

Wait.

What did I just say?

Okay, you're right, I did say that. Spend $0 on inventory.

Before you yell and scream at me, hear me out.

What would you do with the money if you didn't have to invest and re-invest in inventory? Would you spend it on marketing initiatives to attract new passengers? Would you hire more people for your maintenance team for quicker turn arounds? So what is it?

Whatever it is, the money you save would be used on core activities. No, inventory isn't a core activity silly.

Just think, $1,000,000 to spend on something else, something that drives revenue.

It represents an opportunity cost. When aircraft components are on the shelf they're not being sold, and that money could be deployed elsewhere.

Holding costs are the blood sucking bats of inventory

Just because a part is sitting on a shelf doesn't mean it’s not costing you money.

I know, I know, it's just a shelf.

But stocking is much more than buying something, putting it on the shelf, and watching it get dusty.

It's a money pit.

I don't need to re-state what has already been said, so I'm going to let my good friend Wikipedia tell us why inventory is like a blood sucking bat:

"The most obvious holding costs include rent for the required space; equipment, materials, and labor to operate the space; insurance; security; interest on money invested in the inventory and space, and other direct expenses. Some stored goods become obsolete before they are sold, reducing their contribution to revenue while having no effect on their holding cost. Some goods are damaged by handling, weather, or other mechanisms. Some goods are lost through mishandling, poor record keeping, or theft, a category euphemistically called shrinkage.

Holding cost also includes the opportunity cost of reduced responsiveness to customers' changing requirements, slowed introduction of improved items, and the inventory's value and direct expenses, since that money could be used for other purposes.

While it is possible to measure the components of holding cost, it is common to estimate them as at least one-third the value of the stored goods per year. If opportunity cost is included, it is reasonable to use one-half the value of stored goods as their holding cost.

The effect of reducing the value of inventory by $1,000,000 reveals the effect holding cost has on its owner. If holding cost is set at one-third of the inventory's value, $333,333 becomes available for other purposes. At the higher rate, $500,000 becomes available. Whether that money is added to net income and profitability or used for other purposes, it is a noticeable amount."

I couldn't have said it better myself.

Spend less, make more

So by now you're wondering how to spend less on inventory, am I right?

Well, it's rather simple.

Become the best outsourcer you possibly can.

There are companies (no shocker here but Skylink is one of them) that invest in inventories.

You make money in the air, they make money selling from their shelves.

It's simple as that.

Partner with someone that makes sense. Do you trust them? Are they transparent? Do they get the "job" done?

An even better strategy would be to adopt a component pooling partnership with this person. It ensures you have the right part, at the right time, in the right place, without you having to invest for your own shelves.

Leave that to someone else.

There are amazing resources (like this one) that can help you eliminate having to invest hefty amounts of money in inventory and paying it for years to come in holding costs.

P.S. I have the perfect pooling program for you. Just click hereto help you save time and money.

Photo credit:  Hloom via Flickr.com  / CC BY-SA, 401(K) 2013 401(K) 2013 via Foter.com / CC BY-SA,

Why Lead Times Are A Nightmare & How To Guarantee Aircraft Component Delivery

How often are you sitting at your desk waiting, wondering, hoping, your aircraft component arrives on time?

It was supposed to arrive 4 days ago but still, you’ve kept waiting.

Every day the component fails to ship is another day your aircraft maintenance schedule is pushed back.

It’s a distribution bottleneck nightmare. And a costly one.

As the days pass, the closer you get to your aircraft being AOG. Scheduled flights are where you make money, not in some hangar. Thousands of dollars are at stake waiting on this measly aircraft component. One component will delay the entire aircraft from generating revenue.

It’s scary. It’s nerve wrecking. It’s a nightmare.

Sitting and waiting on components isn’t the best use of your time. Frankly, it’s an unjustifiable money suck.

In this crazy aviation world, is there a way to avoid this, or at least minimize the effects?

On time delivery

Let’s face it, having the right part, at the right time, at the right place, is critical to airline operations.

After speaking with hundreds of friends and airline partners over the years, it's unanimous. Turn time, lead time time, or whatever else you want to call it is a HUGE issue. It's what keeps you up at night, it’s what delays your maintenance project, and worst of all it's a serious contributor to your AOG expenses.

Meet your new best friend…pooling.

An aircraft component pooling program gives you the flexibility to have the right part at the right time. No headaches of processing POs or wondering if a part is actually “ready to go.”

It gives you complete transparency without the inventory investment.

They’re typically based on a guaranteed service level that work with your unique operation.

If turn time’s are an issue for your MEL, No-Go and even safety stock, aircraft component pooling is something to consider.

Fixed costs

Another benefit to pooling is the fixed costs.

It’s like leasing an aircraft without having to spend the the capital on inventory.

Every month you’ll have a fixed cost based on your service level.

Now you tell me that your CFO wouldn’t be happy with fixed costs? You’ll make his life much easier. But don’t worry, leave me out of it and you can take all the credit.

Even better, pooling programs guarantee stock availability, reducing unnecessary expenditure.

AOGs affect your overall maintenance spending. The more AOGs you have, the more you're going to spend on outright purchases and freight to fix the last minute problem.

Simple to implement

A pooling program doesn’t have to be complicated.

On the basic level you’ll need to know what components you need support with, and from there you can decide on your service level.

Start with reviewing where your issues are occurring and work with a partner that can be flexible with your needs, and help you make the right choice.

An aircraft component pooling program’s goal is to guarantee availability backed by fixed costs. That directly makes your life less stressful and the best part is you don't have to invest in inventory.

Does it get much easier?

P.S. If you need help guaranteeing TAT and component availability, check out our pooling program here. Or if you want to skip that and get right into the details, contact us here.

How Aircraft Component Pooling Can Save You Millions

Why do you spend millions on unnecessary inventory? This questions riddles you with turmoil.

You dance with excess inventory to support your fleet, or gamble with an AOG because your component source dropped the ball.

Yelling and screaming gives you some relief, but you're still dancing.

And let’s be honest, is dancing something you’re good at?

If you're anything like me, dancing is not a pretty sight.

Millions of dollars are put into inventory to sit and gather dust just for “piece of mind.”[CLICK TO TWEET]

It’s either that or subject yourself to mediocre service levels.

So what are you supposed to do?

Aircraft component pooling

Don’t worry, I’m not going to be your Wikipedia for pooling.

It’s rather simple.

You need a part, you have immediate access to inventory that you didn't have to invest in, and you install the component on your aircraft.

That’s a reduced definition, but you get the point.

Aircraft component pooling allows you to have access to an agreed upon inventory that you can tap in to at any given moment. Gone are the days of you having to invents millions in inventory.

Playing with inventory is not your strong suite and it’s definitely not where you make money.

Aircraft component pooling has many benefits and since the average airlines spends 8x more than they have to to support their fleet, there's some serious strategies to reduce the inventory burden.

Time is money, and money is…money

How much is your departments time worth?

I'm sure once you get into the cost of time, the number is shocking.

Now add on the cost of inefficiencies and you'll get a real time picture of where the money is bleeding out due to operational inefficiencies.

Maybe it's chasing a supplier for shipment confirmation on a PO, babysitting an MRO for the OH of your units, or trying to resolve an AOG.

Whatever it is, everything has an opportunity cost.

If your department is spending to much time on processing orders there's something else they're missing out on.

What’s their opportunity cost?

Aircraft component pooling helps you to focus on core activities, while making it easy to access mission critical components.

Reduced administrative costs

When you focus less time on processing orders and fixing problems, you drastically reduce your administrative costs.

Just imagine the costs you could save if you didn't have to process POs.

You would save time and money on:

• Data entry
• Order follow-up
• Expediting
• Working with freight forwarders
• Managing vendor issues
• Getting approval from finance
• Determining if the quality meets your QA standards

The list goes on and on, and all of these activities have a cost.

A cost that is controlled through a pooling strategy.

Less money lost to holding costs

According to Jetblue, they spend 20% on holding costs per unit, per year.

Yes, 20%!

That's crazy.

So if they held a $10,000 actuator in stock it would cost them $2,000 per year to hold that actuator in stock.

I'm sure your holding costs aren't much different.

By utilizing a pooled inventory you no longer carry this stock burden.

You'll save $2,000 a year just on this one component. Now imagine if you had 52 similar parts.

That's $104,000 in savings on holding costs alone.

Now doesn't that sound like a no-brainer?

More cash and less financial burden for inventory investments

Who wouldn't want more cash?

Let's say you have a new aircraft being added to your fleet. There's 52 no-go components that could leave your poor bird stranded if something happened.

Those 52 components would cost you $500,000 to acquire and put in to inventory.

And don't forget your holding cost.

If you're like Jetblue this inventory would cost you an additional $100,000 per year in holding costs.

By utilizing a component pooling program you would avoid the upfront capital expense and holding costs, giving you an additional $600,000 for year one.

You could use this additional cash for anything, but I'm guessing it would be best spent on expanding or fine tuning your operation.

Increase in productivity

Similar to saving time, a pooling strategy will increase your departments productivity.

Gone are the days having to chase a supplier for an AOG component, worrying if a freight forwarder picked up, and checking your email every 5 minutes for a status update.

When you have the right components, at the right place, at the right time, your productivity skyrockets.

You'll be able to focus your attention on other things that matter most.

Whether you think this is a dream or not, streamlining your operation has the potential to save you millions of dollars every year.

Of course, every airline is different, but think hard about the possibilities.

Spending less money on inventory, and having more time for mission critical activities is a good place to be.

P.S. We offer an aircraft component strategy based on your unique operation. Click here and tell us what issues you need to resolve.

3 Ways Not To Be Consumed By Consumables

In a world of non-stop AOGs, the evaluation of the aircraft can give us one more hurdle...

Consumables.

Many years ago (years I rather not try to recount) Legos was my toy of choice.

Besides the GI Joes and Hot Wheels of course.

Lego is a toy that inspires creativity and it's something to build from scratch. Piece by piece, color by color. You can make something spectacular or have a pile of useless toy bricks.

These toy bricks are a lot like aircraft consumables.

Use the wrong piece, order the wrong product, lose an important component, and you have a messy maintenance project. One that’ll lead to AOGs, lost revenue and a stressed out you.

Consumables are an integral part of airlines maintenance operations. But of course you know this.

Any way you think of it, it’s difficult keeping up with new sealant specs, higher assembly numbers and bad information. More importantly, chasing down problems is counterintuitive...and costly to you.

Dealing with hundreds of airlines, I've heard and seen it all.

Not being consumed by aircraft consumables takes a strategy.

Create a plan of attack

How do you go about ordering your consumables?

Is it a blind RFQ to hundreds of people, or do you have a method behind your madness?

Whether it's 3M 398FRP white cloth tape or window sealant, sit back and think about the most effective distribution for you.

Some things to think about are your future needs, expiration date, HAZMAT, and transport.

If you have a long consumable list think about the logistics and the time it'll take you to process the requirement. Once you start getting into multiple line items you risk increases for possible problems.

Don't process your long consumable list immediately. Think about how your requirement will best be served and follow a plan of attack that accomplishes just that.

Establish a forecast

If there's one word that can cause stress and resolve hundred of problems at the same time, it's forecast.

When you think of forecasting you're bound to think of reports, list building, statistics, and 10 others things that are "hair pull" worthy.

Relax.

Forecasting is actually not that difficult and it will save you countless of hours processing orders and thousands of dollars in inventory.

Lets look at a good example I mentioned above, the 3M 396FRP tape. Lets say last year you bought a total of 144 rolls divided between 3 orders. Now factor in the cost of each roll, processing time, and freight and you get close to an accurate per unit cost.

Over the next 12 months you forecast the same consumption rate. Building this forecast allows you to have the tape in stock when and as you need it. No overbuying or stocking for long periods of time. It significantly cuts processing and holding cost.

This is the primary purpose of our JIT program. You would receive 12 rolls per month as a part of your monthly JIT consolidation. No POs, no shipping instructions, it just shows up at your door.

Forecasting generates simplicity and simplicity saves you time and money.

Having a “go-to” resource

When you have a problem, whose your external resource?

Having internal resources is great but what if engineering tells you need Cargo Gel Tape?

Where do you go, who do you ask, who can best serve your needs?

Having a professional external resource that has your best interest at the front of everything they do is crucial.

They'll help you solve consumable hurdles, answer your questions about specification, and most important they’ll work with you to streamline your consumable distribution.

Relying on that "go-to" source will save you countless hours.

Your time is scarce and consumables have a tendency to peak their little heads and consume much of your day.

Problems are inevitable and it takes pre-thought planning, accurate forecasting, and reliable partners to alleviate most of your headaches.

Are you being consumed by consumables? Comment below.

6 Essentials For Every HAZMAT Shipment

What’s worse than an AOG? I’ll tell you what.

It’s dealing with an aircraft parts supplier who has no idea what to do. Even if they specialize in consumable distribution. Scary.

Yes, they might be certified (make sure they are) to ship HAZMAT, but are they competent enough to work with you?

This may sound a little harsh, but it’s true.

We’ve all dealt with our fair share of clowns. Ouch! [CLICK TO TWEET]

They cost you more time and money than you and I care to admit.

A few things to be aware of when purchasing aircraft HAZMAT consumables

Speaking of clown (the amazing, superstar kind), Colin our Skylink TV personality is going to share some tips with you.

These key essentials to every HAZMAT shipment could be the thing that causes your order to be delayed.

Or even hit the AOG status!

When you purchase HAZMAT material, make sure your partner knows a thing or two about shipping consumables.

As Colin said, the biggest thing to be aware of is who you're working with.

If you can’t reach your account manager 24/7 and they aren't there to resolve any problems that arise...move on.

Have you had problems with HAZMAT shipments? Are you in dire need of a HAZMAT logistical overhaul? Comment below.

9 Ways To Reduce Stock & Increase Order Efficiency

Want to know how you can carry little inventory and still support your maintenance projects? Drumroll please.

Through proper planning.

On the eve of a particular Monday I received a “list” of a 100 line items in the form of a good ‘ole consumable / expendable RFQ. You know, the sealants, wire, tape, nuts and bolts type.

Myself and the sales support team began processing the RFQ but something was off.

Something wasn’t right.

Each line item I looked at was ordered last quarter.

I began to wonder why this particular airline was re-creating a process they had already completed the prior quarter.

My mind immediately envisioned a simpler way.

Through proper planning and communication this exaggerated process is 100% avoidable. [CLICK TO TWEET]

After they purchased this requirement “again” they spent an additional $10,000 on labor, processing, shipping and other nuances.

No prices increased and some items had lead times that they had to accommodate.

With proper planning they could have saved $10,000, increased efficiency and avoided stock out delays.

Stock out delays result in increased purchases which leads to excess inventory do to “trying” to avoid the issue in the future.

An inefficient purchasing system

Sending out RFQs to the entire world is a common practice but is it the most efficient?

Industry norm of the send RFQ and watch the flood of quotes come in is okay, but it isn’t efficient.

And it isn’t a viable way to increase vendor reliability as the floodgates of various sources rush in.

This creates improper forecasting, stock buildup, and additional costs to your procurement process.

By the time you receive the quotes, process them and cut the PO, the order cycle has been dramatically extended.

This is especially true for repeat purchases where 95% of the processing time could be avoided, saving money, time and excess stock through vendor demand forecasting.

9 ways to reduce stock and increase order efficiency

Holding onto stock isn’t your primary goal.

It’s not what gets you up in the morning, what you think about during the day or what pays the bills.

Simply put, it’s not your profit generating activity.

Here are 9 ways to reduce your stock and increase order efficiency:

• Use vendor managed inventory & vendor stocking programs: With the right incentives, letting VMI suppliers take the responsibility for replenishment of your inventory, because of their visibility into both their own inventory and your demand data, will always reduce your inventory. Primarily used for maintenance inventories VSPs require your supplier to commit to an extremely high service level for delivery of specific products within a fixed time at a pre-defined mark-up over cost. VSPs can reduce or eliminate inventories for slow-moving products.
• Reduce lead times: When supplier lead times are reduced below the required lead time you set it’ll help remove the requirement to hold much stock, especially consumables. Cutting lead times in half will reduce safety stocks by about 30% for the same availability.
• Improve reliability of supply: Unreliable supply is one of the reasons for holding safety stocks. If delivery is guaranteed on the due date then safety stock can be reduced what's needed to cover common-cause variability. A good start is sharing demand, forecast and stock positions with suppliers. When there’s heightened transparency of information throughout the supply chain it’ll improve reliability and mitigate Bullwhip/Forrester effects.
• Order more frequently: This reduces cycle stock and will often cut it in half. There is a cost as each order will require additional administration overhead and a labour cost to receive the goods. The former can be mitigated with automation and management by exception or through better planning in a Just In Time inventory program.
• Expedite more effectively: Solving supply chain failure quickly will undoubtedly improve service. We’ve all had AOG nightmares. Strong relationships with suppliers means that your expediting process will contribute to 1% point to availability. Without that, availability would have been at 95% – or put another way, good expediting reduced service failure by 20%.
• Forecast more accurately: Better forecasting means lower safety stocks and higher levels of availability. It also means a reduced exposure to excess and obsolete stock risk (a large contributor to your holding cost of stock).
• Liquidate: There’s always a short-term price to pay on the profit and loss (P&L) and the balance sheet, when it’s clear that the value to be gained through liquidation is greater than the most optimistic estimate of future gross margin from conventional product sales, then liquidation is the best decision. You are not in the conventional product sale business so liquidation of absolute or unnecessary stock is highly optimal.
• Strangers strategy: Where there’s a lot of slow moving product in the range, seriously addressing the fulfilment rules of your maintenance activities can make a big difference. Integrating closely with suppliers may enable a back-to-back ordering process and removes the need to hold stock altogether. A close relationship with your supplier is crucial.
• Change the network configuration: The general rule is that the safety stock in the system is proportional to the square root of the number of locations. A hub and spoke approach. Apart from this, understanding the relationship between main store availability and satellite availability is vital. This allows the right balance to be struck between stock in different tiers of the supply chain. Fixing a typical imbalance could reduce stock by up to 10% overall.

Whether you choose one of these strategies or all 9, your primary goal is to reduce stock and increase efficiency.

I challenge you today to implement one and began to make a shift of mass RFQs to structure and deliberate action to your RFQs.

Is your procurement process out of control? Do you have surplus inventory? Are your maintenance projects consistently over budget? Comment below.