Case Study: Iberia Maintenance Engine Shop Material Planning
The advanced DSS capability of RIOsys supported Iberia to plan through the pandemic, managed cash and contributed to a 24% reduction in material in stores over the initial 12 months post go-live.
In 2020 Iberia Maintenance collaborated with Armac Systems to enhance their Engine Shop Inventory planning and strategy. The objectives were to increase material service levels and inventory turnover to provide an on-time, reduced cost service to Iberia customers. Not only did the project achieve both of those objectives but it also contributed to delivering a 24% reduction in engine shop inventory over 12 months.
Iberia Maintenance is one of the world’s most respected independent maintainers of large commercial jet engines. Material represents the largest cost element of jet engine repair and overhaul and the largest risk of delays (which are costly in themselves). Delaying engine shop visit completions can disrupt customers’ aircraft availability. Additional costs to the overhauler include reduction of the capacity to induct engines and the consequent impact on revenues.
The challenge is to balance delivering high service levels without overspending. Like all maintenance, much of the material demand depends on the condition following disassembly of equipment, so there is a high degree of demand uncertainty. Having worked with Armac for over three years Iberia already had a very successful implementation of the RIOsys MRO inventory optimization software supporting Iberia plan inventory in their Rotable and Component Shops. This new collaboration expanded the scope of the solution and enhanced the RIOsys software adding new features specific to Engine Shop Visit inventory planning which provides transparency on material requirements for future engine inductions and enables optimal decision making
ABOUT IBERIA MAINTENANCE
Iberia Maintenance is a leading provider of MRO services to the IAG group airlines, OEMs and wider industry. With Airframe Line and Base maintenance capabilities covering all group Airbus fleets including the state of the art A350 and A320neo.
Iberia Maintenance also provides maintenance and engineering services for Jet Engines and a wide range of related accessories. They are global leaders in the maintenance of CFM56, V2500 and RB211 and in the near future GTF and LEAP-1X engines and run continuous improvement programs to minimise costs and improve performance for their many customers.
They have 30 years experience with the CFM56 and RB211 Engines. In the 5 years from 2015 to 2019 the number of maintenance visits grew by more than 10% each year to several hundred visits in 2019.
Iberia Maintenance supports customers around the globe and continues to adapt its business model to the changing demands of the market and its customers. Iberia Maintenance provides the highest quality and safety standards combined with a flexible and competitive commercial approach. Iberia Maintenance well trained and experienced employees provide services from the main operational hubs in Madrid and Barcelona to ensure the best service now and into the future.
INVENTORY PLANNING FOR JET ENGINE MAINTENANCE OVERHAUL
Like all inventory planning for maintenance activity, engine maintenance and overhaul has the challenges of: diverse work scopes, uncertain demand based upon equipment condition, sub components are repaired and reused within the same or another engine to provide future availability. The demand uncertainty is a combination of part number demand frequency, the probability that a part will be required, and what quantity will be required, i.e. the demand size variation probability. The basic maintenance challenge already requires a solution beyond standard ERP material planning capabilities; however, engine overhaul has a number of additional but important nuanced characteristics which must also be addressed to truly optimize the planning. There are highly uncertain macro demand drivers such as; actual shop visit arisings by engine type, module work scopes and TSN (time since new) / TSO (time since overhaul) that must be considered and managed.
Life Limited Parts (LLP) replacements can drive additional module disassembly which can significantly alter the inventory demand profile for a shop visit.
For certain parts the end Customer can have a significant bearing on the demand levels. The customer’s operation, hour to cycle ratio, operating environment (for example when flying over the desert sand erodes compressor air foils and when flying over the sea salt corrodes turbine air foils), specific work scope and service bulletin requirements can impact demand levels. The application of Machine Learning (ML) and statistical modelling can assist in identification, categorisation and enhanced forecasting of such material.
Another consideration is the lead-time for the part. Certain parts must be ordered well in advance of the shop visit to avoid delaying the engine production, and consequently there is greater uncertainty. Other parts can be ordered in the early phase of the shop visit when there is greater work scope certainty and perhaps post inspection. There are also parts that can be purchased in advance to exploit the lower cost of Used Serviceable Material (USM) in the aftermarket or take advantage of benefits derived from OEMs pre-purchase initiatives. In the latter case it is necessary to optimize and prioritize the upfront investment with the forecast rate at which parts will be consumed over a longer planning horizon. If executed successfully it can significantly lower the cost of engine shop visit maintenance for customers. All three part categories: pre-shop visit purchases, during shop visit purchase and USM purchases require different service level policies to optimize investment vs. service level that balance the relative uncertainties, costs and risks.
THE RIOsys SOLUTION FOR JET ENGINE OVERHAUL
In 2020 Iberia Maintenance made the decision to consolidate inventory management into a single function across its maintenance business units. Armac System’s RIOsys software had been successfully applied and proven its capabilities to optimize the planning of Rotable and C&E material for Iberia’s aircraft and component maintenance. Additionally, it provided Iberia management with greater control over the investment and spawned several Continuous Improvement Initiatives; such as enhanced data management and policy review processes. While there is more complexity in planning material for jet engine maintenance it was recognised that the forecasting, categorization, optimization and prioritization methods applied within RIOsys for the hangars and other workshops could also be applied in the Engine Shop. This presented an opportunity for Iberia to operate off a single planning solution integrated into its ERP. Over a two month project in early 2020 RIOsys was implemented in the engine shop and reconfigured to take the additional engine shop data. Some minor product enhancements were accomplished to augment the data to make it analysable to provide further insights, such as historical work scope consumptions patterns and probabilities and managing customer specific material part number requirements or supply. Iberia specifically requested enhancements to provide greater transparency to the Inventory Planners on the impact of changes in the engine shop visit input on material consumption forecast. They also required greater visibility on the probabilistic demand profile associated each shop visit type. The development resulted in delivering valuable insights to Planners on material consumption patterns and eliminated the “black box” feel of the target recommendations. This allows planners understand the drivers of inventory recommendation levels, have confidence in system recommendations and enhances the quality of decision making. While the initial results were impressive, over the next twelve months Armac and Iberia collaborated to refine and further enhance the software, the data and hone Iberia’s use of the solution. The RIOsys solution provided Iberia with:
- A system to reliably set the optimal inventory levels to support the planned maintenance visits to address all of the identified challenges.
- Optimize and prioritized list of material to buy within a specified timescale pre shop visit, during shop visit and advance purchase USM over a longer planning horizon to reduce shop visit costs (or teardown material, avoidance disposal of teardown material that will be required, prioritization of WIP material to be repaired from teardown engines).
- Capability to utilise the data from their ERP system and restructure and augment the data to support modelling and analysis of complex scenarios.
- Advanced probabilistic forecasting, incorporating statistical models, ML and cloud computing for scalability and performance, on material requirements taking into account the many complex dimensions of engine shop inventory planning.
- A customer engagement model to facilitate go-live in 6 weeks and Continuous Improvement (CI) through Armac’s Inventory Planning Capability Framework (IPCF).
- DSS for normal and emergency planning. Evaluate service level policies and select the best for the desired business outcome.
- Controls and a feedback loop to review and enhance planning parameters. Understand variance from the plan and measure adherence to policy.
- A systemised and repeatable process. Continuously adjusting to shop visit planning and sales forecasts adjustments.
COVID-19 had the dual impact of reducing MRO activity and limiting project resource availability. To the great credit of the joint team, the project continued remotely with on-target progress. The team has held remote road-map brainstorming and planning sessions without a drop in stride. The RIOsys decision support (DSS) capabilities became particularly useful; to support planning and policy setting during a period of uncharted operational disruption, to analyse risk and perform sensitivity analysis associated with different policy decisions and to understand the impact of decisions on investment, cash flow and service levels.
RIOsys provides Iberia with the strategic insights to understand the balance between part criticality, the service levels delivered and the material investment costs. The advanced DSS capability of RIOsys supported Iberia to plan through the pandemic, managed cash and contributed to a 24% reduction in material in stores over the initial 12 months post go-live.
Other benefits included:
- The capability to explore many different provisioning strategies, quickly run dozens of scenarios identifying opportunities to improve cashflow and avoid surplus build-up.
- Reduce surplus build by 60% each quarter.
- Maintain increased availability, weighted appropriately by Part Criticality
- Retain an additional 35% cash in the business and delay cash out in purchasing material by up to 80% until orders/shop visits are firm.
- The solution allows targeted reduction in cost for material trending towards surplus before they become problematic.
Commented on the implementation project, Mr. Iván González Vallejo, Director Supply Chain Iberia Maintenance said,
Innovation is at the heart of Iberia Maintenance’s supply chain strategy and embedding data analysts into our inventory planning team has made analytics a core competency. Data led decision making is a prerequisite to drive efficiencies for Iberia and our customers in a modern MRO. We are delighted with the best of breed inventory planning capability that the RIOsys software provides to Iberia Maintenance and we look forward to working closely with Armac to continue this journey.
In relation to the engagement he went on to say,
Armac’s team have considerable subject matter expertise in the area of inventory planning for aerospace maintenance and provided great thought leadership to support our innovation agenda.
Micheál Armstrong, Armac’s CEO stated
This was an outstanding project that has enriched both parties’ knowledge and expertise. We were delighted to work with and support the Iberia team to optimize its engine inventory. Armac is proud to work with Iberia as the charter customer to extend RIOsys capabilities in becoming a market leading solution for jet engine maintenance inventory planning.