To keep aircraft ready to fly, you need quick and easy access to spare parts. But with so many different ways to approach spares access, how do you decide which solution is best?
Airlines and MROs know that always having spare parts on hand is a crucial element of aircraft maintenance. When a part is needed, it’s typically needed right away. That’s why most airlines and MROs have tended to stock parts in their own warehouses.
But there’s been a shift within the industry’s approach to spares management and access. More and more companies are choosing to outsource certain material management and supply chain activities.
“There are two major ways of having access to spare parts,” Satair’s training services manager Ansgar Heuser explains. “The obvious one is that I buy the materials myself and put it on my own stock. The other is that I use a performance-based service, where a service provider helps to source the parts or takes over the risk of ownership.”
Home fridge vs hotel minibar
Outsourcing spares access to a service provider often takes the form of a vendor managed inventory (VMI) agreement. With VMI, a service provider will manage and continuously replenish parts at the customer’s consumption location. The service provider has access to the buyer’s data and maintains its inventory levels. This is typically used for low value and non-repairable material.
As Heuser explains, a good way to think about the difference between VMI and stocking your own spare parts is to compare your home refrigerator to a hotel minibar.
“The fridge at home describes the stock at our consumption place. All the content is owned by the airline,” Heuser said. “With a hotel minibar, the stock is at the airline's consumption place, but it’s only paid for and owned when the airline takes something. It’s a ‘pay as you take’ solution."
That ‘pay as you take’ idea also applies to another popular spares access concept: pooling. As the name implies, a service provider pools parts together and offers access to a number of airlines and MRO providers.
“Rather than each airline having their own stock of all kinds of expensive parts in case they need to be exchanged on the aircraft, one big pool of parts is created and many airlines can have access,” Heuser explains. “The buyer pays a monthly fee for access to the spare parts.”
There are two primary pooling options. The airline or MRO that needs a part from the pool can either buy and own it or can lease the part for a specified period before returning it to the vendor’s pool.
“In both cases, there's a contract in place for these access rights to materials,” Heuser says. “This contract usually includes guaranteed availability per item only for a specific part number range. The service provider manages the stock levels and modification status of the parts. This concept is usually used for high value and repairable items.”
How to decide
When choosing between owning your own stock or entering into a VMI or pooling agreement, it’s important to consider the advantages and disadvantages of each solution.
When stocking your own parts, you don’t have to pay any vendor fees, but you’ll have to cover the cost of carry, invest in labour and make the initial investment on your repair and modification activities.
For VMI and pooling agreements, airlines and MROs will save on order administration and transport costs and will have fewer capital investments, but will of course have to pay for the VMI service itself. There may also be additional costs in ensuring that their IT setup will work with the vendor’s systems.
“No matter which concept you go with, there will always be a trade-off between savings and costs,” Heuser said.
But cost is just one factor in deciding which spares access concept is best, Heuser says. He says it’s also important to consider certain basic facts like fleet size and material category, existing aspects like your parts and materials know-how and your current stock, and operational and management decisions like investment willingness and supplier relationships.
Heuser, who says “there’s no one size fits all solution” when it comes to spares access concepts, breaks down the three main options and how to go about making your decision in the video embedded above.