Inventory Management in the Aerspace Industry

The inventory management, in the Aircraft Industry is not a mature science, since failure of some parts like turbine blades are predictable, while others are not. The majority of maintenance expenses are incurred after the warranty runs out. Therefore, Companies like Rolls-Royce use their historical engine usage data to its advantage and assume the risk of maintenance of customers' fleets, which enables it to write long term high margin aftermarket service contracts with the airlines. This exercise is harder to do in military segment since the military does not provide usage data as openly as the commercial segment due to the related security concerns.

These parts are managed using advanced predictive software and tools which use engine use-data collected over several years. These tools predictive failure rates for various parts and

Rolls-Royce uses such forecasts to decide stocking levels and strategic locations for MRO parts.

These aftermarket services are quite profitable (as mentioned in chapters earlier), and Rolls-

Royce competes with different companies for this business. A capable inventory management technique for aftermarket services and parts is a key ability required to maintain market share in a high margin service offering. For example, it competes with its own customer Lockheed Martin in providing such services in connection with the C-130 fleet owned and operated by the U.S.

Department of Defense. Boeing is planning to enter the aftermarket segment too as Airbus started doing last year, to be able to offer a complete lifecycle support solution for the product to the airlines. It also competes against smaller firms that service engines with non-authentic parts. These parts reduce the maximum life of the engine, but are cheaper. Rolls-Royce uses its knowledge about the engine to price its services higher, in return for a promise to extend the maximum life of the engine.