Automated Inventory Management of Rotable Items

COPYRIGHT © SYNCRON INTERNATIONAL AB 2015

Automated Inventory Management of Rotable Items

Erik Lindholm – Presales Director

June 2015


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


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


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


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


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


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


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


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


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


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


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


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


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


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

management system


1. Review pending orders

Indication for different order types

Rotable item icon


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

Serviceable item info Unserviceable item info

External supplier info Repair workshop info

Scrap rates


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

unserviceable stock information

Stock informaton duringthe supplier and workshop lead timesrespectively


4. Graphical prediction of stock for accurate planning

decisions

Prediction of total stock

Prediction ofserviceable stock


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

Software

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