Avoiding inventory losses: How to manage expired and obsolete parts

Managing shelf life and obsolescence represents a critical challenge for aerospace MRO (Maintenance, Repair, and Overhaul) providers, often leading to significant inventory loss. Without robust strategies in place, these organizations can experience significant financial drains due to expired or outdated stock. This article will delve into the component categories most susceptible to these problems, examine effective techniques to mitigate inventory loss, and offer practical advice for inventory management.

Avoiding inventory losses: Understanding the financial ramifications

Expired or obsolete components directly increase costs for aerospace MROs through disposal and replacement expenses. Additionally, running out of best-selling items can lead to lost sales opportunities and discourage customers from returning. For hazardous materials with shorter shelf life, disposal fees can be exceptionally high. Indirectly, MROs also suffer from lost sales due to unavailable parts, and added storage expenses for holding unsellable inventory. These financial burdens highlight the necessity of careful shelf life management. Furthermore, if outdated parts inadvertently reach clients, additional costs from returns or customer disposal efforts become a factor.

Component categories susceptible to shelf life issues

Many components in aerospace MROs can be considered perishable goods due to their susceptibility to degradation and obsolescence.

Batteries: Due to chemical degradation, batteries possess a limited shelf life. Improper storage, especially under extreme cold, can hasten this breakdown, causing premature expiration and potential leakage. This is particularly critical for aviation-specific battery types, such as lithium-ion aircraft batteries, which are increasingly common in modern aircraft. These batteries require strict adherence to regulatory handling requirements due to their potential for thermal runaway and the safety hazards associated with improper storage or disposal. Failing to adhere to these regulations can result in significant safety risks and compliance penalties.

Fluids (oils, coolants, hydraulic fluids): These fluids can degrade over time, especially when exposed to environmental factors. Maintaining their performance requires strict storage conditions. Temperature fluctuations can significantly speed up this degradation, directly impacting their usability by an MRO. It’s vital to adhere to OEM specifications for fluid type, storage conditions, and shelf life. Furthermore, frequent changes in formulations, often driven by environmental regulations, can exacerbate obsolescence issues. MROs must be diligent in monitoring formulation updates to avoid holding onto outdated or unusable fluids.

Rubber components (o-rings, seals, hoses): Rubber components can deteriorate and crack, even in storage. High humidity, temperature extremes, water exposure, and, notably, sunlight greatly reduce the shelf life of these products. These items often exhibit variable demand due to specific aircraft models and maintenance timelines.

Electronic components (sensors, avionics modules): The rapid pace of technology can cause electronic components to become obsolete quickly. They typically have shorter product lifecycles and pose higher obsolescence risks to aerospace MRO inventory. The rapid obsolescence in avionics can be particularly challenging and may require compliance with standards such as DO-254 (Design Assurance Guidance for Airborne Electronic Hardware). Furthermore, MROs must be aware of the implications of OEM parts availability, as limited or discontinued production from the original equipment manufacturer can force a shift towards costly or potentially unreliable alternative sources. Managing obsolescence in this category is crucial for efficient MRO operations.

Filters (air, oil, hydraulic): Filters are vulnerable to damage based on packaging integrity and environmental factors, especially humidity. Despite high turnover, they can still accumulate excess stock if not well-managed. Specifically, paper-based filters are prone to mold growth when exposed to moisture.

Strategies for inventory loss prevention

Establish lower service level goals: Effective inventory management is crucial for items with shelf life or obsolescence risk, and setting lower service level targets can help minimize excess stock. This proactive approach minimizes excess stock that could expire before use. MROs should regularly review and update these goals based on market demand and inventory trends.

Maintaining safety stock is essential to prevent stockouts and ensure a smooth operational flow. Regularly monitor and adjust safety stock levels based on historical sales data and dynamic market conditions to maintain essential levels of goods available for sale.

Employ First-In-First-Out (FIFO): Consistently prioritize picking the oldest inventory first. Effectively tracking inventory ensures that older stock is used before it expires. If inventory tracking isn’t in place, simple rules (like placing new stock behind existing stock) can effectively implement FIFO. Additionally, using radio frequency identification (RFID) technology can enhance inventory tracking and management efficiency.

Utilize dynamic pricing and promotions: Employ dynamic pricing strategies to move older inventory before it is rendered obsolete. This might include offering discounts for products nearing expiration to boost sales. Plan targeted promotions and discounts for at-risk items, clearing out old stock to make space for new parts. Inventory management software can track inventory levels and implement dynamic pricing strategies more effectively.

Implement structured stock rotation with vendors: Establish agreements with suppliers for systematic stock rotation. An example would be exchanging unsold inventory within the first 90 days for newer products, without incurring restocking charges. This practice ensures inventory remains current and lowers the risk of obsolescence. Regularly evaluate and update stock rotation policies based on market trends and inventory records. A cooperative relationship with suppliers can significantly ease the financial challenges posed by obsolete inventory in the MRO supply chain. Regular audits of stock data can further ensure that stock rotation policies are being followed and inventory remains current.

Conclusion

Inventory loss prevention is fundamental for aerospace MRO operations, and managing shelf life and obsolescence is a key aspect of this. By focusing on specific component categories susceptible to these issues and applying effective risk management tactics, MRO providers can prevent significant financial drains.

Lowering service level targets for at-risk parts, creating supplier stock rotation programs, using technology for enhanced inventory control, and conducting regular inventory audits are all vital steps. By consistently applying these practices, MROs can optimize inventory, boost customer satisfaction, and drive overall business success.

Contact us to learn more about how we can help optimize your MRO supply chain.

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