A large original equipment manufacturer of electrical
distribution, auxiliary power equipment and environmental controls for
Boeing and Airbus applications had a serious problem with inventory and
customer service level on service parts. Many parts were for aircraft
applications that have been out of production for 20 years or more.
In many cases, the OEM had 25 to 30 years of inventory in
stock. Other parts were difficult, if not impossible, to source using
traditional approaches. Customer service level had fallen to 55% to customer
request date.
The cost to procure these difficult spares was significantly
higher than normal purchases due to the small lot size requirements and
difficulty in finding sources that had either gone out-of-business, been
purchased, facilities closed and/or tooling and test equipment destroyed.
The reserves for excess and obsolescence was approaching
several million dollars and management was facing the possibility of
utilizing the reserve to actually dispose of the material.
Hi-Tech Aero Spares used sophisticated forecasting tools and
unique techniques and was able to develop a program where HTAS purchased
existing OEM stock. For a program fee structure based upon a percentage of
list price, HTAS performs all backroom supply chain operations (inventory
planning, purchasing, warehousing and distribution) and the OEM maintains
all direct customer interface.
Benefits for the OEM included sales of slow moving parts to
HTAS, ability to reduce E&O reserves and an increase in customer service
level from 55% to 95%. In addition the OEM was able to reduce