Assignment Task
Brief
Managing aircraft maintenance spare parts is a key area of investment in running an airline, even before commencing airline operations. There are certain spare parts that must be provisioned to support schedule requirements which will have an increase in capital investment for procurement of the components and associated consumables.
Once the airline operations begin, apart from scheduled maintenance there may be failure/malfunction of components that may require immediate replacement to avoid operational disruption. The major cost factor of aircraft maintenance is major assemblies, components and purchase of associated consumables. The recurring operational costs in the maintenance cycle are required to return the removed components to serviceable condition throughout the airline operations and to purchase the consumables for maintenance activity.
However for new airlines, there are very high possibilities of over-provisioning or under-provisioning because it will be fleet of new aircraft and no historical data to be compared for provisioning. If spares are over-provisioned it causes a huge cost impact and it may lead to surplus inventory at a later stage. On the other side, if it is under-provisioned it will cause operation disruption and it may lead to aircraft grounding. In both the above cases there are financial impacts. Hence, the aim is to strike a balance between minimizing the risk of excess investment and attaining the expected service level target. While maintaining optimal inventory for aircraft maintenance activity and minimizing the cash flow for running a technical supply chain operation.
This dissertation will examine the topics on OEM’s recommended spare parts list for scheduled and unscheduled maintenance activity and how reduction in total cost of ownership can be achieved by analyzing the below objectives:
1. How are contracts can be made to reduce the inventory footprint? What kind of contracts? What is an inventory footprint?
2. What are the parts that cannot be contracted and ways of optimizing?
To achieve the objective, essential information like the classification of the spares that is ESS code (Essentiality codes) and MTBUR (Mean time between unscheduled removal) is required to be analyzed. This information will be obtained from OEM Recommended spare part list (RSPL).
For understanding the industrial best practices on different types of component contracts like pooling contracts, fixed price contracts and PBH contracts (Powered by the hour), information will be availed from open sources. IATP guidelines will be referred to understand the industrial best practices on exchange and loan agreements. Data source from the aircraft manufacturer, another airline with a similar fleet, MRO (Maintenance, Repair and Overhaul). IATA Guidance Material and Best Practices for Inventory Management document, product support agreements, and research papers on supply chain inventory optimization, cost avoidance, operational risk mitigation and lean process implementation.