Automated Inventory Management of Rotable Items

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COPYRIGHT © SYNCRON INTERNATIONAL AB 2015

Automated Inventory Management of Rotable Items

Erik Lindholm – Presales Director

June 2015

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Syncron is the global leader in aftermarket service

optimization

• Dealer Aftermarket Specialist

– Inventory management

– Price Management

– Analytics

• Customers are multinational

companies

– Active users in more than 100

countries

– R&D intensive, investing >20% of

revenue

Meet the Presenter:

• 15 years experience of

inventory management

• Product manager for

inventory management

application

• Program manager for

several dealer inventory

management projects

Erik LindholmPresales Director

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Agenda

• What is a rotable item?

• Managing rotable items

inventory

• Optimizing rotable items

inventory

• Daily work with rotables in a

best-of-breed inventory

management system

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What is a rotable item?

• Rotable items are spare parts that, through repair, can be returned to an ‘as

new’ condition.

• The demand for new items can be fulfilled by either:

– Repairing a broken item in a repair workshop

– Purchasing a new item from an external supplier

• Rotable items are scrapped when they are broken beyond repair

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An automated inventory management system will reduce

administration, improve service and decrease inventory

• Advanced best-fit forecasting algorithms

• Optimize inventory to meet a target service

level

• Automated replenishment

• Network stock optimization

• Alerts and reports

• KPIs

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Rotable items are complex and expensive

• They often stand for a significant part of

the inventory value

• Due to their nature, they are traditionally

subject to a manual purchasing process

• Rotable items are typically complex

products:

– Often make-to-order leading to long

purchase lead times

– Expensive to purchase, hence we

wish to repair them if possible

20% of the parts

80% of the stock

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Rotable team members face many challenges

• Ensuring that new items aren’t ordered to replace items that are out for repair

• Deciding when to purchase replacement items and scrap the repairable item

• Providing visibility of the status of items

– Requires cooperation between maintenance and planning department

• Managing the purchasing process

• Averaging the value of both new and repaired items in the inventory

• Sizing the buffer stock correctly to meet the target service level

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Optimizing rotable inventory – Definitions and assumptions

• Status of an item:

– A broken item is called an unserviceable item

– A new or repaired item is called a serviceable item

• There is no distinction between new and repaired

items

• It is assumed that when customers buy serviceable

items they also return unserviceable items

• Rotable items are sometimes scrapped

– When customers return the unserviceable item

– During the repair process

Repair WS Supplier

Scrappingat return

Scrappingat repair

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Objective to use repair workshop

• The objective is to use the repair workshop as the primary source of supply

due to:

– Lower cost of carrying unserviceable items

– Lower cost to repair unserviceable items

– Quicker to repair unserviceable items?

• Rotables planning is an integrated

module in Syncron GIM:

– Standard GIM inventory

optimization features should apply

to rotable items as well

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Rotable challenges are very difficult to manage manually

• How to calculate the safety stock to achieve a correct

rotable pool so that:

– A correct target service level is achieved

– The average stock is kept as low as possible

– The supplier orders are placed in the right time

• In the rotable case, we not only need to take demand

and supply randomness into account buy also:

– Different lead times

– Return/repair efficiency

– Availability of unserviceable items

Repair WS Supplier

LT - repair LT - supply

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To plan efficiently for rotable items, consider 2 different

situations

• Supplier Lead Time > Repair Lead Time:

– Order in advance from the supplier to account for

scrapping and availability of unserviceable items

• Supplier Lead Time < Repair Lead Time:

– We can wait for unserviceable items

– Use the shorter supplier lead time only in the case

when we have nothing to repair

• In both cases, we need to take the effect of scrapping

into account

Repair WS Supplier

LT - repair LT - supply

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Stock due – Supplier lead time > Repair lead time

Unserviceable

Supplier

Warehouse A

Stock balanceserviceable items

Serviceable

Time

Customer

Supplier orders

Warehouse A

Stock balanceunserviceable items

Repairworkshop

Repair lead time

Repair orders

Customer returningunserviceable items

Supplier lead time

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Stock due – Supplier lead time < Repair lead time

Unserviceable

Supplier

Warehouse A

Stock balanceserviceable items

Serviceable

Time

Customer

Supplier orders

Warehouse A

Stock balanceunserviceable items

Repairworkshop

Repair lead time

Repair orders

Customer returningunserviceable items

Supplier lead time

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Syncron GIM standard principles will further optimize rotable

inventory

• Dynamic inventory policy – Right

breadth and depth of stock

• Redistribution – Use excess stock in the

network

• Virtual planning – Efficient management

of slow moving items

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Daily work with rotables in a best-of-breed inventory

management system

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1. Review pending orders

Indication for different order types

Rotable item icon

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2. Click the rotable item pop-up for more information

Serviceable item info Unserviceable item info

External supplier info Repair workshop info

Scrap rates

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3. Stock details pop-up displays serviceable as well as

unserviceable stock information

Stock informaton duringthe supplier and workshop lead timesrespectively

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4. Graphical prediction of stock for accurate planning

decisions

Prediction of total stock

Prediction ofserviceable stock

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A best-of-breed inventory management system expedites

and improves management of rotable items

• Best-of-breed inventory management systems can perform advanced

optimization also for rotable items

• Advanced inventory management features can be applied to rotable items to

further improve inventory and service

• For your rotable team members:

– Managing rotables is not an easy task

– An inventory management system can reduce their workload

– An inventory management system lets them focus on the exceptions –

the cases where their experience really makes a difference

Automated Inventory Management of Rotable Items

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