APICS - Spare Parts Availability

7/30/2019 APICS - Spare Parts Availability

1/31

AchievingSupplyAvailability

in

the

Face

of

Highly

Uncertain

Demand

ACaseStudyofSparePartsforMilitaryAviation

WilliamKillingsworth

ExecutiveDirector,MITForumforSupplyChainInnovation

6November

2008

1


2/31

Itstough

to

make

predictions,

especiallyaboutthefuture.

YogiBerra

2


3/31

ThereAre

Serious

Challenges

inDemandForecasting

forMilitary

Aviation

Spare

Parts

VeryLong ProductionLeadTimesand

AssociatedForecast

Horizons

UncertainOperatingEnvironments

UncertainOperating

Levels

UncertainImpactsofPolitical Processand

Public

Opinion AdequacyofFundingforPurchases 3


4/31

4

ACaseStudy


5/31

ATypicalChallenge

inProviding

Spare

Parts

AHelicopterBladeCostsRoughly$175,000;

RecentDemandHasBeenRunningatRoughly22/Month;

ProductionLeadTimeisRoughlyTwoYears;

HowManyNeedtobeOrderedNowtoMeetLikelyDemandinMayof2010?(DontForgettoFactorintheForecasttheElection

Results

of

November

2008!)

IsThereAnythingThatCanBeDonetoDevelopAdaptability

andProvide

Risk

Mitigation?

What

might

have

been

done

in2000?5


6/31

StepsintheAnalysis

IdentifyCurrentRoleofDemandForecastin

Supply

Planning;

Are

There

Problems

in

the

Process?

UnderstandStructureandDetailsoftheSupply

Chain;

DevelopStrategyforRiskMitigationand

MinimizingImpacts

of

Forecast

Error;

AssessImpacts,CostsandBenefits

6


7/31

TheRole

of

Forecast

Demand

in

the

Supply

Process

forAviationSpares

TotalAvailable

Assets

Demands

RepairActions

ProcurementBuys

Total Net Assets

ProcurementReorder Point

Assets Applicable to Repair Review

RepairAction Point

Forecast Demands

+

-

+-

HistoricalDemands

7


8/31

DataElements

Used

in

the

Supply

Process

TotalAvailable

Assets

On HandDues inDues out- Serviceable Inv- Recoverable

UnservInventory

Demands

RepairActions

Procurement

Buys

Total Net Assets

Procurement

Reorder Point

Assets Applicable to Repair Review

RepairAction Point

Forecast Demands

+

-

+-

Below Depot RequirementsWar ReservesSafety Level RequirementsALT RequirementsPLT RequirementsRepair Cycle RequirementProcurement Cycle Requirements

Below Depot RequirementsWar ReservesRepair Lead Time QuantityRepair Safety Level QuantityOne Month of Gross Demands

Historical

Demands

Serviceable Stock on HandDues In From RepairDues In From ProcurementRecoverable Unserviceable Stock onHand- Dues Out

Serviceable Stock on HandDues In from Repair ActionDues In from Procurement (RLT+1 Months)- Dues Out

8


9/31

Observations

HowDo

You

Spell

Trouble?

Theorderingprocessisdrivenbyforecastdemand,

typicallycalculated

as

arolling

twenty

four

month

average;

Recommendedbuysandoverhauleffortsareeachcalculated

as

the

difference

of

two

large

numbers;

Theorderingprocessisextremelysensitiveto

forecasterror

and

common

data

errors

such

as

the

productionleadtime;

Shortagesandbackorders,andinsomecases,excess

inventories,

are

not

uncommon.

9


10/31


11/31

11

Supply Chain Map for Blade Assembly(1 of 2)

Prime

180(M)

NoseCap

Anodize

Final

Assembly

Notes:

(A) Administrative Lead Times provided by supplier (calendar days)

(M) Manufacturing Lead Times provided by supplier (calendar days)

(PA) Prime Administrative Lead Times including dock to stock time (calendar days)

TubeAssembly

56(PA)93(M)

56(PA)130(M)

490 (M)

7(M)

7(A)

HeatTreat&Mag Part

14(M)

10(A)200(M)

165(M)100(M)

100(M)87(M)

LowerTip

Weights

56(PA)56(PA)


12/31

12

Supply Chain Map for Blade Assembly(2 of 2)

Prime

180(M)Final

Assembly

Strip

Notes:

(A) Administrative Lead Times provided by supplier (calendar days)

(M) Manufacturing Lead Times provided by supplier (calendar days)

(PA) Prime Administrative Lead Times including dock to stock time (calendar days)

56(PA)28(M)

Processing28(M)

56(PA)

81(M)14(M)

7(A) Endcap

56(PA)98(M)

7(A)14(M) Bracket

112(M)7(A)

TieDown56(PA)107(M)

5(A)42(M)


13/31

LogicTools InventoryAnalyst

CreatingA

Push

Pull

Boundary

13


14/31

KeyAssumptions

Thereareninecriticalitemsinthebladesupplychain(NoseCap,TwoTubeAssemblies,TipLower,EndCap,Strip,TieDown,

Weight,

Bracket) AllotheritemsarecategorizedasRemainingItems Thecostofthebladeis$175,790

TheOEMpays50%ofthatcostforthepartsneededtoassemblea

blade,

broken

down

as

follows: TheNoseCapandEndCapeachcomprise15%oftheOEMss costfortheentireblade

ThetwoTubeAssembliesandtheTipLowereachcomprise10%oftheOEMscostfortheentireblade

The

Strip,

Tie

Down,

Weight,

and

Bracket

each

comprise

5%

of

the

OEMs

costfor

the

entire

blade

Theremaining20%isthecostoftheremainingitems

Firsttiersupplierspay50%oftheOEMscostforthepartsneededtoassembletheirproducts

14


15/31

StructureofIAModel

Govt

OEMNew

Spare

OEM

Overhaul

CommittedServiceTime


16/31

Committed

Service

Time:

750

days0 16.2 0.127 0.127NoseCap:

0 0 1.27Weights:

0

0 0.127 0.127TubeAssy:

0.254


17/31

Committed

Service

Time:

240

days0 53.7 0.127 0.127NoseCap:

197 0 142Weights:

0

0 20.7 0.127TubeAssy:

28.2


18/31

Committed

Service

Time:

30

days0 53.7 0.127 23.1NoseCap:

197 0 214Weights:

0

0 0.127 25.6TubeAssy:

28.2


19/31

19$Investment

Readiness

or

SupplyAvailability

CurrentApproach:

Increase$toIncreaseReadiness

OptimizationApproach:

Moveto

aNew

Curve

MovetoNewPerformanceCurve

ThroughOptimization


20/31

WorkingCapitalVs.CST

Demand Forecast Error = 6

$0

$10

$20

$30

$40

$50

0 200 400 600 800 1000 1200

Maximum CST

(Days)

WorkingCapital(M

illion)

Nostocking Stocking,OEMPLT=120daysStocking


21/31

ReductioninWorkingCapitalVs.CST

NonStocking

Vs.

IA

Optimization


($2.00)

$0.00

$2.00

$4.00

$6.00

$8.00

$10.00

0 200 400 600 800 1000 1200

Maximum CST (Days)

Change(Mill

ion)

NoStocking Stocking


22/31


($5.00)

$0.00

$5.00

$10.00

$15.00

$20.00

0 200 400 600 800 1000 1200

Maximum CST (Days)

Change(Million)

NoChangeinPLT(180days) PLTReducedto120days


23/31

InventoryAnalyst

Conclusions

Increasingsafetystocklevelsinthemanufacturingsupplychaincanbothreducelead

times

and

reduce

the

amount

of

working

capitalinvestedtoachievedesiredservicetimes;

Increasingsafetystocklevelsevenfortheonecomponent

with

the

greatest

lead

time

producesnoteworthyresults;

Increasingsafetystocklevelsfurthermore

reducesthe

risk

of

shortages

and

longer

lead

timesintheeventofanunexpectedincreaseindemand,aproblemthathasexistedforaviation

spares.23


24/31

StrategyEvaluation

UsingDynamicModeling

24


25/31


26/31

SharpIncreaseinDemand2003

26


27/31

Base

Case:

Blade

Inventories

27


28/31

AlternativeCaseA:

InventoriesWith

Stocking

Policy

28


29/31

AlternativeCaseB:InventoriesWith

StockingPolicy

&

OEM

PLT

Reduction

29


30/31

Summary&

Conclusions

Forecasts

Are

Always

Wrong; TheLongertheForecastHorizon,theWorsetheForecast;

HoldingInventoryofFinalGoodsisaVeryExpensiveWayofDealingwithUncertainty;

PushPull

Boundaries

Enhance

Abilities

to

beAdaptiveandResponsiveandEfficiently

MitigateRisks

of

Forecast

Errors

30


31/31

Questionsor

Comments?

BillKillingsworth

[email protected]

31

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