6/1/2014 Aircraft Maintenance Module1 Aircraft Maintenance Management Module Inventory Costs Optimisation

04/10/23 Aircraft Maintenance Module 1

Aircraft Maintenance Management Module

Inventory Costs Optimisation

1.The Materials Inventory costs Optimization The airline Inventory aspect revolves around availability of

spares to support the maintenance requirement depending on the essentiality targets preset by both the OEMs and the airline itself. In addition to the essentiality comes the desired service level targets set by the airline as well.

Theoretically it is possible to achieve high availability by including more spares. However more spares mean additional resources such as cost, space, etc. Thus spares required for any system should be carefully determined and if possible optimized.

As the major portion of airline maintenance costs are costs linked to materials. We always need to find proper means of optimisation such costs.


1.1 Costs of Inventory (i.e. Holding, provisioning planning & stores)

The investment of the airline in the inventory domain is

quite significant, EK for example holds an inventory of

US$707868 (year 2010) Million excluding spare Engines

in order to support its operational requirements and meet

service level target set at 98%.

In addition to the inventory spares investment capital,

comes in the administration of this inventory.


1.1.1 Holding Costs

These costs include but not limited to following elements:

- Warehouse storage of all spares parts including Engines

and other bulky items.

- Insurance costs for loss or damage to warehouses

- Overhead costs for administration staff salaries

- Stock depreciation and Obsolescence costs

- Outstation stock rentals


1.1.2 Provisioning and planning costs These costs include mainly the staff admin cost spent on:

- Identification of required quantities, item descriptions,

suppliers, distributers, etc.

- Planning costs for the maintenance checks requirement to

meet on dock dates.

- Purchasing and accounts payables invoicing activities

logistics.

- Administration costs associated with purchase orders04/10/23 Aircraft Maintenance Module 5

1.1.3 Stores and Logistics support costs- Costs linked with shipping local and international freight

costs. These costs can be quite significant for bulky items

such as Engines where it could reach $100,000 per Engine

single one way shipment.

- Forwarding and handling costs.

- Receiving, inspection and binning costs of the items.


1.2 Inventory Parts classification & Operational categorisation

As a continuation to the familiarisation per the

aforementioned section on the inventory, it is

important to equally understand within this

industry, classification and categorisation of all

aircraft parts.


Classification of spares

Spares & Tools within Emirates Engineering have been classified into four sub groups as follows. Major classification is Rotables and non-Rotables.

Rotables ClassT Repairable Class R Expandable Class E Consumable ClassC T class spares are defined as Rotables and rest all as non-

Rotables. These classes are in line with industry norms. A brief

explanation of different classes is as under.04/10/23 Aircraft Maintenance Module 8

Parts classification cont’d

1.2.1 Rotables parts: These are defined as the items which are on condition and normally do not require repairs until they fail. These have no life limit and can well serve through the life cycle of aircraft. They are referred to in some occasions as the Assets where the airline could sell to other or return to OEMs for a good value.

These are generally, higher assemblies having break-down parts and replaceable units. Components, having CMM and strip down/re-assembly procedure. These units are repairable. Repair/Overhaul brings them at par with new unit, technically. Have infinite life in terms of hours & cycles (hard time). Have an individual serial no control. Are fairly expensive.Stock control of Rotables is by way of float. Example Engines& Pumps, control units & APUs.


1.2.2 Repairable Parts: Those parts would normally have a life span and can be repaired few times before they are eventually scrapped. These items are those, which are conditionally repairable i.e. an authorized procedure exists for repair, but an assessment is done to ascertain whether repair is economical. If the condition is B.E.R (Beyond Economical Repair), they are scrapped. These are generally structural items like fittings, frames, panels. These are moderately expensive items. Stock control of Repairable is by replenishment against scrap, review of usage, repair and scrap analysis. As example, these include valves, switches and some structural parts.



1.2.3 Expendables parts: Those parts are scrapped more often, though these are replaced and no repairs are performed, still if the value of the part is high a repair procedure can be drafted by the OEMs, in most occasions the repair price tag would be BER. Example of these parts includes fittings, ducts, tubes, hoses and brackets.

1.2.4 Consumable parts: These parts have no repairs at all and only be used one time such as oil, dye, grease, filters, screens, etc.


Expendables ( E class) Consumables ( C class) Expendables, This particular group of spares generally

contains hardware items. There is no authorized procedure for repair, however they have a salvage value, by way of

cleaning, NDT and re-use. Stock control of Expendables is by way of ROL (Re-order levels).

Consumables, This group represents dope and paints, gas, sealants, Grease, Oil and other similar items. Once issued these are charged to consumption and should not be re-used. These have shelf life control.

Stock control of consumables is by way of ROL (Re-order-levels) and replenishment against scrap.



The operational categorisation of these parts varies according to the Airline policy due to the essentiality established codes of the airline. The parts categories were drawn along the industry standards with a little differentiation in the application.

Using the industry common rule of thumb that the materials costs in most of defects rectification form approximately 70% of total DMC cost, we can easily derive that a strict control and attention must be given to Inventory costs.


As we have seen through out this whole chapter, the airline has many tools within its capability to contain such costs and optimise the inventory by mainly administering the Product support remedial actions through the full term.

Therefore, Proper processes should be deployed within the relevant engineering Departments to religiously implement the Warranty and Reliability programs for Aircraft rotables as committed by the OEM as this contributes dearly to inventory cost optimisation.

Additionally, the airline inventory holding value is normally huge,


Holding Cost reduction steps

hence any small percentage in costs reduction will be large in terms of financial savings across the whole inventory stock as follows:

1.Work out a plan with OEMs to envisage many available plans to reduce inventory holding such as advance exchange schemes or local distribution centers

2.Implement effective warranty and reliability processes to ensure that all contractual remedies are recovered including availability of the required spares. This will prevent high expenditure of purchasing units to increase the float to cater for operational requirement when such units can be availed from OEMs through warranty and reliability claims.


3. Airlines must work hard on their materials provisioning math models and where practicable reduce the safety level from 98% to 96% per the industry Norms in order to optimize the materials stock and keep at bare sufficient minimum provided a due diligence is given to the No Go items to avoid operational issues.

4. Compare PMA to “OEM policy” in terms of Purchase and/or Repairs. With the current development in the manufacturing and maintenance organizations, Airline is required to evaluate PMA parts and MRO repairs services due to significant savings in those fields.


5. Review Supply Chain Management (SCM) to introduce a

SCM strategy and approach as well as SCM performance

measurement framework that aims at optimizing the

supply chain performance and inventory.

6. Automation and deployment of sophisticated systems

such as inventory optimization tool should be evaluated

by Airlines as it can bring about the following potential

benefits:04/10/23 Aircraft Maintenance Module 17

6.1 Highlight the slow or non-moving parts whether rotables or expendables in order to either return back to OEMs or sell in the surplus market. Normally and within the OEM Product Support Agreements, there are many terms related to buy-backs of unused parts against the full value within a period of Five years post Aircraft Entry into service.

6.2 Provide a list of parts to the respective Depts of the fast moving parts in order to take necessary steps to avoid any operational disruptions due to material requirement.


6.3 Generate a frequent report of Nil or approaching

zero stock items due high number of removals in order for

respective Depts pursue further in case of reliability

performance issue to acquire from OEMs all contractual

remedial actions.

6.4 Induce effective process to discover overprovision

or under provision parts to mitigate the situation and

optimize the spares holdings.04/10/23 Aircraft Maintenance Module 19

Material Planning & Inventory Control Support ServicesINITIAL PROVISIONINGManufacturers are obligated to provide product support, including the Initial Provisioning Data, IAW appropriate ATA specifications. These must be fully exploited and agreed upon in the contract, so as to ensure the airline maximizes all necessary support from the Manufacturer. Examples of these are listed as follows :a) Data for material planning and initial provisioning;b) Data for a sound technical basis to establish usage;c) Performance measurement e.g. reliability, usage rates, redundancy, costs and Supply information.


Maintenance of stocks of certain range of items at the customer’s Base;

Availability of parts for lease, hire, loan and subsequent purchase;

Provision for supply of spares on an emergency/AOG. Extent to which the Manufacturer does the provision of

“standard parts”; Provision for withdrawal / “buy back” of non/moving/

obsolete parts; Supply of catalogues, manuals, guides, models related to

inventory management.


Initial provisioning process steps IP parameters to manufacturers 4.1. Engineering. Material Planning Section is responsible

for collecting and compiling the IP parameters from various sections of Engineering and provide it the Manufacturers to enable them to calculate and recommend the RSPL and to prepare and provide various Data Files required for Operation. This will enable us to determine the range quantities of spares and materials to be procured as Initial Provisioning.

Normally OEMs of aircraft, engines and components would send a Spares Planning Data Questionnaire & the details required there-in include fleet size, investment levels, annual utilization, Repair Turn Around Time (RTAT) and “spares protection/ service level”.


Attend IP Conference

Initial Provisioning Conference called by the Manufacturers is attended by the persons responsible for the Materials Services to Engineering. This provides an opportunity to discuss the options and facilities offered by OEMs, and a forum for negotiation on company's behalf.

Examples of options and facilities: Manufacturer’s AOG services, OEMs supported pool, OEMs/ Vendors keeping the stock on behalf of customer, Manufacturers establishing spares support at regional centres, Vendors’ supply lead time, and other airlines’ data if available, etc.

After this process, and if need be, modify the Spares Data questionnaire filled/ sent earlier for the Manufacturer to provide the simplified provisioning list (RSPL).


IP Process steps cont’d

Request Manufacturers to provide RSPL listing with various options and parameters. This may be either a single list showing the quantities required for varying Service Level percentages and RTAT ranges, or as many lists with a combination of parameters.

The latter options could be six different RSPLs for the following parameters, or such other appropriate parameters and/or combinations:


IP Process steps cont’d

This is to enable Material Planning to differentially select the right range and quantities of the spares under different categories, viz. (a) Components of Essentiality Code (EC) 1, 2 and 3; (b) Components which are repaired in-house; (c) Components which are repaired outside and having different RTATs; and (d) Spares and components which are required to be positioned at Line Stations.

Request for and ascertain the time of availability of the Electronic Data Files (S, T, and other files) for aircraft, engines, equipment and tools. EM&S to request the Manufacturers to identify the PNs which may be common with the existing fleet/equipment.


Manufacturer establishes customized data files On the basis of the spares planning data provided by

Emirates and as agreed at the IP Conference, the Manufacturer establishes a customized spare parts recommendations for all kinds of spares.

As soon as possible after receipt of the data submitted by Emirates , the Manufacturers will prepare “provisioning lists (RSPL)” for different options requested such as different Service Levels and RTATs. [ see 5-4 above]. Normally the RSPL data is sent in electronic form(PC Diskettes), but some vendors may send hard copies only.


Manufacturer lays down the IP data provided by the customer and other history data available with them in the various Provisioning Data Files (S, T and other files) according to the specifications. Processing of these electronic data files, and their dispatch to customer, is considerably later than the simplified RSPL listings.

The Manufacturer’s data files, including the simplified RSPL, will indicate the recommended quantities of parts and their budgetary cost in US dollars.

The recommended quantities are usually determined by a Poisson probability model reflecting a constant average failure rate and the replacement of a failed part in the system during the repair turnaround time and other related factors.


The purpose of processing an RSPL is for a quick calculation of the range and quantities of the Initial Provisioning spares and components, well in advance of the receipt of Electronic Data Files, to enable meet the budgetary and the cash flow.

Provision. When considering a significant investment a more dynamic approach, than a mere Poisson model, or a generalized ground rules and approach, must be in place. To arrive at the recommended quantity it is necessary to consider individual component’s characteristics and the airline peculiarities with reference to that component. The following are the steps of Initial Provisioning exercise, using the RSPL data.


Convert the RSPL diskettes with several options and combinations, received from the Manufacturers, into an in-house database PC format (such as Excel) to enable sorting and selection from within such groupings any subset to form the Initial Provisioning recommendation.


Establish initial provisioning with s and t files Based on the parameters provided by the airline,

Manufacturer establish various provisioning Data Files. These are customized and are processed in electronic forms. (These files are dispatched to customer six to eight months later than the simplified RSPL listings) These are :

S file : Includes all items contained in IPC (of aircraft and engine manufacturers)

T file : Includes all items contained in IPL (of aircraft, engines and components manufacturers)

V file : Combination of S and T files, under Spec 2000 (all line maint spares, overhaul and repair spare parts)


Establish initial provisioning with s and t files cont’d Others: Other data files are : U, W, Z, X Y and G IPC : Illustrated Parts Catalogue - detailed parts list for

aircraft and engine, with illustration IPL : Illustrated Parts List - includes End-Item Detail parts list of the CMM, with illustration

The S, T and other Data Files and their subsequent revisions are more accurate as they have been established with greater details and more current component information. This procedure involves Data Control staff in Material Planning and IT (M&E) first processing the Data Files, and the Materials Planner reviewing and recommending the range and quantities of spares and materials for Initial Provisioning.04/10/23 Aircraft Maintenance Module 31

Establish initial provisioning with s and t files cont’d Material Planning receives S and T spares provisioning

data files from Manufacturers. (While S File is an electronic file, T Files in respect of some of the Component Manufacturers may be in hard copy form)

Forward S and T files to IT for processing, i.e. uploading in mainframe.

IT uploads S and T file into EMPACS to compare with existing parts basic data base in the system.

Conduct a run to check on S file to establish Vendor information existence in the part basic database in mainframe, and/ or its accuracy (conformity to the records existing in the system)


Line stations provisioning

Airlines holding their own stock, or having access to Pool stores, is an insurance against flight delays as a result of materials shortages. Emirates Line Stations requirement of spares and materials are met by one of the following options : (a) Self stocking, (b) IATP Pooling , (c) Bilateral arrangement with an airline at the station, or by (d) carrying such essential items on board as a Fly Away Kit/

The process starts with first establishing the total requirement to support the airline’s flight handling and maintenance at the outstations, and then identifying the components and spares that are to be provided by Emirates (station stock or by FAK), IATP Pooling and Bilateral arrangement with local airlines. If the stock is to be provided by Emirates, then such requirement would also be included in the Initial Provisioning.


Pooling Arrangement

Pooling Decision : Go through pool documents for availability of the parts in Pool, Pool provider airline, number of Pool partners, and if the local airline has, etc. to decide EK's options.

Decide the final quantity requirement for EK to stock (Pool is an "insurance" and does not replace IP for the station), particularly minimizing quantity if Pool option is

not available. Compile a proposed list of Station Imprest draft, indicating

part, part number, quantity required, proposed provision by : stock by EK, stock location, Pool, on request from OAL, Pool provider, etc.


Send messages to Pool provider / local airline (and/or "handling" airline) querying about "availability" of the part, alternate parts, etc.

Receive confirmation on availability and/or alternate availability; update the Station Imprest list

Attend twice-yearly IATP-Pool meeting to ratify Pool Agreements (including last minute dynamic changes on basis of the number of operators sharing the costs and the probability of service on demand) and to establish co-ordial relations with other airlines/operators and aircraft handling agencies. The updated Station Imprest is distributed to all concerned. Particular Station's

Imprest is sent either to the Station Engineer or to the Technical Handling Agency.


Parts re-provisioning

Electronic Inventory Reports (EIR): Generally for the purpose of re-provisioning and other pre defined alerts, system generates Inventory report electronically.

Function: This report gives comprehensive information on a part no. required for re-provisioning planning and answering other general queries.

EIR Handling – Objectives a) Meet operational requirements b) Optimize investment in inventory c) Follow quality & safety policy.


Periodic review of component float

The post-IP review relates to all future changes adjustments made to the range and float quantities of items in the Initial Provisioning list. The changes are two types :

(a) increase in float quantity, and (b) decrease in float quantity. The review to increase the float quantity is an IR triggered reactive action (Shortage/ Nil-stock, NSU,.). At that time the component’s removal rate, actual repair TAT, and other factors affecting the float level are reviewed, and then the float quantity may be revised upwards and necessary purchase made.

On the other hand the review to decrease the float quantity has to be a proactive approach.


This calls for the availability of data to Material Planning about the component removal rate, actual repair TAT and other parameters determining the float level. The proactive review is to be carried out every six months, after the first aircraft has completed its first 'C' check.

The float quantity may be reduced if the components’ actual MTBUR (reliability) has improved from the manufacturer’s MTBUR, and also if the actual repair TAT (repair cycle days) reduced from that used in the original calculation of Initial Provisioning.


The Materials Planner should be in the full knowledge of all those provisions relating to and effecting the float levels. Float level reduction should result in any of the following actions:

a) Invoke Reliability Guarantee provisions in the contract to claim reliefs, such as “Buy Back” or FOC Loans.

b) Invoke Repair Guarantee regarding free of cost repair and/or replacement of the item/FOC Loans.

c) Buy additional quantities as/if necessary. d) Declare the items as surplus to our requirement , and

move into surplus stock; and Initiate disposal action.


Documents

6/1/2014 Aircraft Maintenance Module1 Aircraft Maintenance Management Module Inventory Costs Optimisation