The Service Business

Inventory optimisation in aerospace & defence

Waste inventory in the supply chain is undesirable regardless of the sector the business operates in. But in today’s troubled economic (and politically sensitive) climate, such inefficiencies in the aerospace and defence industry can cause serious repercussions.

For many, embracing a lean approach, optimising and streamlining inventory management, represents the first step in the process of turning a cost centre into a profit centre and exceeding customer demand. But identifying where the problems exist in the first place presents a significant challenge, considering the variables associated with spare parts provision, pre and post assembly line stock – not to mention the obstacles unique to the sector.
    
Inefficiencies in inventory management can prove grave for front line military personnel, so the need to streamline processes and operate a zero tolerance approach to waste is more than just a ‘nice to have’ - it’s a critical investment. But is it possible to achieve this level of efficiency in reality? Does implementing the latest scheduling and optimisation software represent a quick fix or a long term solution? And what other factors need to be considered?

Striking the right balance

Having the right part available, at the right time and in the right place is what the supply chain strives to achieve. But whether or not it is possible to achieve this in practice, whilst under the constraints posed by the aerospace and defence (A&D) sector, is another question altogether.

Demonstrating value for money to customers, and ensuring tax payers’ money is spent wisely, requires suppliers within A&D to eliminate waste wherever possible. But with security issues around obtaining long-term usage forecasts, this can be a tough balance to get right. Graham Gall, head of supply chain (Support Programmes, Global Combat Systems - Vehicles) at BAE Systems points out, “The data needed for scheduling in an A&D  setting is often highly sensitive, which can make planning difficult and often means meeting a variable demand at short notice and under tight deadlines.

Gall continues, “But nevertheless, it’s an essential part of the service we provide and, whereas in other sectors the consequences of an inefficient inventory management structure will mean certain products aren’t on the supermarket shelves in time, or Mrs. Jones has to wait an extra day for her washing machine to be fixed, in A&D inefficiency in the supply chain can really mean the difference between life or death. And that’s something that just can’t be compromised.”

Mapping and gapping

Ensuring customers get the biggest bang for their buck without risking service levels means weeding out the waste and fine tuning the entire inventory management process.

Finding out how your business is performing, identifying the areas of waste and benchmarking current performance (against the ideal), are the building blocks of tangible inventory optimisation according to Graham Best, director and co-founder of specialist consultancy The Service Business. Best comments, “It’s easy for businesses to get stuck in a rut when it comes to inventory management and it’s sometimes difficult to see the wood for the trees when you’re dealing with the same problems day in and day out.

“Taking a step back and looking at the bigger picture, questioning the efficiency of existing processes, people and technology is the foundation of inventory optimisation.”

Utilising technology

In the past decade, technology’ has come far – changing and simplifying the way many businesses operate. And after sales service, specifically inventory management, has been no exception. Scheduling and planning software has the ability to optimise inventory management, eliminate waste from the supply chain and ultimately save thousands of pounds on excess stock.

Obtaining a clearer visibility of forecasting needs and working closely with suppliers and customers alike, will not only open up clearer communication and pave the way for more productive working relationships, but provide a holistic view of supply and demand - what the real cost drivers are and how much lead times are costing in terms of inventory timings and parts availability.

Technology’s role in achieving this level of visibility, and a subsequent reduction in waste, is significant. Yet many companies, that have such technology infrastructure in place, are failing to shed the excess fat. One reason for this, as Best points out, is that “Implementation is one thing and utilisation is another., underutilisation of technology is a universal theme across sectors. When it comes to scheduling and planning software, buy in from all relevant personnel is a must. Businesses often underestimate the investment needed to encourage workers to swap the old for the new, which leads to inconsistent working and breeds inefficiencies.”

Investing in people

Acting on information supplied by such technology becomes a problem if the workforce in question fails to trust the data produced. Gall, who has been instrumental in BAE Systems recent inventory management culture overhaul, believes that without adequate staff training technology is rendered useless. Gall explains, “Implementing the best technology on the market is the easy part – ensuring staff know how to use it to its full potential requires investment of both time and resource. But, if you’re serious about the end goal, it needs to be a priority. You wouldn’t try to drive a car with an empty fuel tank but if you purchase technology and fail to consider staff training needs, that’s exactly what you’re doing”.

But it’s not all about technology. Equipping personnel with the right knowhow is fundamental. Planning on such a scale, at short notice and to tight deadlines requires a high level of competence which comes from hands on experience, joined up and consistent working practice and an ability to prepare for the unexpected.

Gall supports this theory, “Many inventory systems in standard manufacturing environments embrace a just in time approach to their spare parts provision, in order to ensure a lean operation. But in A&D, this approach has to coincide with being in a position to react quickly to changing or unanticipated demand. Being prepared for the unexpected is rule one for the armed forces and therefore needs to be a top priority for their suppliers. Getting the balance between having enough stock to fulfil unexpected need and keeping static stock to a minimum is a difficult balance to achieve – but necessary all the same. In my experience, this can only work if planning personnel within Defence and Industry work effectively together.”

Fine tuning the process

Achieving an efficient inventory management structure is a continuous process, involving a high degree of commitment in terms of people, processes and the correct utilisation of technology. This said, it is attainable and, now more than ever, should be at the top of every corporate agenda if staying ahead in a competitive market is a priority. Gall concludes, “Remaining lean and agile when it comes to inventory management puts BAE Systems in a position of readiness and sustainment. It is a never ending process but worth the investment when it means we’re able to become more responsive to a variable demand, , recognise and satisfy the unspoken requirements of our customer base and ultimately maintain the high standards associated with the BAE Systems brand.”

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