The Definitive Guide to Initial Provisioning of Spare Parts

Everything you need to know

This guide was designed to provide you with as much information as possible on the subject of initial provisioning of spare parts, so that when you are in the market for procuring either new or used aircraft you can make an informed decision on how to invest in your airlines future.

In this definitive guide to Initial Provisioning of Spare Parts, we will look into the specific factors that contribute to initial provisioning of spare parts being a smart investment in a time where many external factors contribute to operational instability. We will look into the parameters that are right for initial provisioning so that you can determine whether it is the right solution for you. We compare the differences between to types of spare parts provisioning – Initial Provisioning and Power-by-the-hour. We investigate how initial provisioning for aviation spare parts has benefits that extend beyond the first 15 months. And finally, we take a deep dive into how the Airbus Initial Provisioning process works.

So if you find yourself seeing the current global situation as an opportunity to grow your fleet when others might be reducing theirs—know that you will have an advantage when the next growth period begins—then look no further. This Definitive Guide to Initial Provisioning is precisely what you need.

Investment - How can Initial Provisioning provide peace-of-mind?

Chapter 1 of 5

In an industry where spare parts for every nut, bolt, spring and gear must be in the right place at the right time, to avoid unnecessary AOG times, having more managerial control over your spares inventory most certainly helps to eliminate some of the uncontrollable factors that contribute to stock shortage.

Initial Provisioning is a larger up-front investment in comparison to a Power-by-the-hour solution, but in contrast, is not as subject to extraneous factors that can keep you from having the spare and repair parts that you need, when you need them. It’s an investment in peace-of-mind.

To elaborate, there are a number of these uncontrollable variables that Initial Provisioning can help mitigate.

1.1 Economic Downturns

Now, more than ever, is a prime example of how unexpected situations that affect the world can cause disruptions within the industry, supply chains and aircraft operations. The same could be said during the economic crisis of 2008.

While an investment in Initial Provisioning of spares, can by no means protect airlines from disruptions of the scale and magnitude of a global recession. However, it can provide airlines with some degree of security by delivering primary control over their spares and parts inventory during the 10 to 18 months of the operation of an aircraft—should that initial provisioning phase occur during an economic downturn.

1.2 Geopolitics

Geopolitics can play an influential part in the stability of supply chains and aircraft operations. Sudden shifts such as Brexit can fundamentally disrupt the process for receiving certification statuses for repair stations and maintenance workers.

Contentious or fluctuating borders can also create logistical bottlenecks due to import/export regulations. All of these factors can potentially create delays for airlines that do not manage their own spares stock—as would typically happen in a Power-by-the-Hour provisioning service.

When bringing a new aircraft into operation, working with an Initial Provisioning solution has advantages of circumventing the challenges that various geopolitical or legislative factors that can hinder or slow operational processes.

1.3 Service Performance Reliability

The looming threat of a shortage of technically and digitally savvy labour workers is a topic that we have covered on several occasions.

As far back as 2019, we have been reporting on Industry Concerns About MRO Labour Capacity. We also looked at how to Prepare the Supply Chain for the Challenges of Tomorrow.

It's safe to safe that the "tomorrow" that we envisioned then is not quite what it is now. The labour shortage could well turn in to a labour surplus as a result of the global economic downturn.

That being said, when the growth period begins again, the need for more technically skills mechanics and material managers will also resume, which leads us to how that will affect new aircraft procurement.

As power-by-the-hour solutions have grown—which we can only assume will happen again after the downturn—airlines have increasingly been relying on outsourcing options for all, or part of, their maintenance activities. This, of course, led to a significant increase in independent MROs globally.

The challenge with this is that not all MROs abide by the same set of standards. We recently covered the enactment of the Safe Aircraft Maintenance Standards Act in November of 2019, a US bill which gives the FAA more oversight into the standards of international MRO's.

In contrast to Power-by-the-hour spares provisioning services which are subject to these issues, Initial Provisioning for spares offers more control with regards to maintenance activities—as it can be controlled by the airline itself, or negotiated within the initial provisioning processes.

1.4 Market Shifts and a Shortage of Resources

In a 2018 report issued by Global Market Insights, the major pitfalls, or challenges, to the PBH market is the looming threat of material resource shortage. The Used Serviceable Materials market has grown exponentially in recent years as we covered in our pieces on Used Aircraft Parts: Investigating one of the fastest-growing MRO segments and Will aircraft retirements create a potential USM goldmine?

Whether this market will expand even further as a result of the current economic downturn and more aircraft hit the market or are prematurely retired, it remains to be seen.

However, one issue with this in regards to Initial Provisioning of spares is whether airlines will be willing to fulfil their RSPLs, recommended spares parts list, with USM.

In the end, Power-by-the-hour solutions are more determinate on logistical processes; one slight bottle-neck can have detrimental ripple-effects along the supply chain. This is by and large a non-issue with initial provisioning of parts, as spares material is owned and managed by the airline itself, which usually means faster replacement of failed parts as well as more independence in stock management.

Chapter Summary

Initial Provisioning is an investment in peace of mind and can mitigate many of the disruptions that a lack of spares inventory control can cause to airline operations

Choice - Is Initial Provisioning the right choice?

Chapter 2 of 5

Whether you are a small airline, large airline, or simply the owner of an aircraft, every aircraft procurement deal is going to be unique. But what is the best way to determine whether a Power-by-the-hour service or an Initial Provisioning solution is the best option for you?

Initial Provisioning of spare parts does require a more significant up-front investment, but at the same time it offers some attractive benefits that make that investment worth it. So what factors should you consider, before deciding whether initial provisioning of spares is right for you?

2.1 New Aircraft or Old Aircraft?

One of the major determining factors deciding on an Initial Provisioning solution is whether you are in the market to purchase new aircraft, or used aircraft. Initial Provisioning solutions are available for each option but differ in specificity.

Power-by-the-Hour (PBH) solutions are also available for those procuring both new or used aircraft, and we get into the comparisons between Power-by-the-hour and initial provision in Chapter 3, or you can find more information in our article When is Initial Provisioning the right option for you?

2.2 Do you want to manage your spares stock?

Initial Provisioning of aviation spare parts can open up the door for creating a company culture of efficient spares and inventory management. It can be an excellent starting point for companies with no experience in material management. It can also be an opportunity to improve material management methodologies and ensure that the short-term initial provisioning process extends into positive long-term inventory habits.

Initial Provisioning does require material management expertise, and that can be a factor in whether you want to invest in Initial Provisioning. By providing your team with the expertise they need in order to manage your spares stock effectively, it can open further opportunities down the line.

Looking for Material Management training? We have a seminar for that.

2.3 Getting an accurate spare parts list

The Recommended Spare Parts List (RSPL) is an essential part of the initial provisioning of spares. However, there are some aspects to consider when going into the process.

One of the more significant challenges when working on drafting an accurate RSPL is making sure that all relevant stakeholders have access to the right information. It is essential to get an overview of the various suppliers, and partners' stock policies to access their sensitivity to market demand and supply fluctuation.

Therefore, when you are entering into an initial provisioning solution, it is smart to access the accuracy of the RSPL information. What predictive and analytical models are being used to develop your recommended spares during the first 10 - 15 months of service.

Chapter Summary

There are many factors that can determine whether Initial Provisioning is the right choice for your airline, but the top 3 considerations are as follows:

Comparison - Initial Provisioning vs. Power-by-the-hour

Chapter 3 of 5

Both Initial Provisioning and Power-by-the-hour solutions for aircraft procurement have been around for decades, so there is no question that there is viability in both.

However, there are stark differences between the two. Arguably, Power-by-the-hour is more for airlines that want to take a more hands-off approach to the management of their spares stock and maintenance. PBH requires a tremendous amount of trust in your suppliers and partners to deliver the parts and service effectively and efficiently.

In contrast, Initial Provisioning is more for airlines that prefer keeping everything in-house—where control of the maintenance service and stock availability is not subject to outside factors.

While there are benefits and challenges to both options, let's look at some deciding factors in more detail.

3.1 What is the overall cost?

On paper, Initial Provisioning of spare parts seems to have a clear disadvantage when it comes to cost analysis, as the initial investment can be much higher—to account for full spares stock procurement, storage and potential material management training for staff.

However, this initial cost assessment can be a bit of a misnomer. IP is not necessarily more expensive than a PBH coverage. PBH fees usually depend on the contract time, part-number scope, fleet size and utilisation, potential on-site stock, lead time for availability of covered spare parts from central PBH warehouse, amongst others. Typically, PBH fees also need to be paid if there are no replacements during a year or a defined period, meaning the customer is not credited if no usage is made of the PBH contract.

In short, the cost difference between Power-by-the-hour and Initial Provisioning can be marginal when looked at over an extended period. And while IP does require more up-front investment, it also provides the security of available stock and reliable MRO that is arguable an equally valuable currency.

3.2 Spares Availability

At the end of the day, the race to minimise AOG times during an initial service period all comes down to having the right (and recommended) spare part at the right time. Both Power-by-the-hour and Initial Provision solutions approach this challenge in different ways.

Initial Provision, in contrast, typically centralises in one location, sometimes paring that with MRO facilities. Thus, mitigating the risk that external factors can have on spare parts availability.

Power-by-the-hour solutions may circumvent some of the more cumbersome requirements of maintenance and material management by out-sourcing those to various operators bases. It can be subject to many uncontrollable factors that can hamper material availability. As we mentioned in Chapter 1, market shifts, geopolitical situations like Brexit, and shifts in maintenance certification requirements can contribute to unpredictability when it comes to having a specific part available, exactly when it is needed.

3.3 Stock Management

Power-by-the-hour often follows the logic of central warehousing with optional on-site stocks at the operator's bases.

For the majority of the part numbers covered by a PBH, a logistics process is also needed to make those spare parts available to the customer. Generally—for any parts outside of on-site stock—this means it takes longer to have a PBH spare part available for replacement on the aircraft compared to an own IP stock. It becomes even less reliable when outside variables disrupt that logistics process.

In comparison, Initial Provisioning solutions typically cover the first year of operation of a new fleet out of one central base. This means that customers can adapt their stocks depending on their unique operational experience or specific demand. Furthermore, any issues with overstock or unused parts are mitigated through buy-back options negotiated at the start of the Initial Provisioning process.

RELATED LINK:
Pros & Cons of Vendor Managed Inventory: Is it right for you?

3.4 Vulnerability to external factors

As discussed in Chapter 1, there are an exceedingly large amount of factors that can contribute to the unnecessary downtime in operations due to a lack of spare parts availability.

In this regard, PBH is at a clear disadvantage, as customers are subject to having to trust that their partners and suppliers will mitigate the risk to spare supply when any external factors arise.

In the case of an Initial Provisioning solution, customers are less vulnerable to external threats due to the majority of spares supply being pre-stock in a centralised facility, which is managed by the customer.

Chapter Summary

Initial Provision and Power-by-the-hour both have their strengths and weaknesses, when in comparison might influence your considerations:

Long-term Benefits - Beyond the Initial Provisioning Phase

Chapter 4 of 5

When entering into an Initial Provisioning solution, it is essential to remember that the up-front investment can lead to opportunities that extend far out into the future.

While the higher starting cost may seem like a challenge, it is important to remember that this cost will balance out over time in comparison to Power-by-the-hour. In addition, the long-term benefits of IP, such as more efficient stock management and increased trust in data-prediction technology, will have lasting positive effects on an airline's operations.

4.1 Efficient supply management starts at the beginning

In most material management scenarios, there is a risk of overstocking to ensure parts availability. However, with Initial Provisioning of spare parts that stock is precisely planned for the duration over the initial operation cycle. There is also continuous evaluation of stock in relation to actual use.

When a customer investigates whether Initial Provisioning is the right option, they must remember that a detailed level of inventory management leads to a customer gaining a valuable competency and expertise in material handling, which can have lasting effects far beyond an Initial Provision period.

4.2 More data, better analytics

The use of Big Data is an unavoidable reality in the future of the aviation industry, and Initial Provisioning is an effective way for supply managers to acclimate themselves with relying on predictive analysis. During the IP phase, they will learn to address uncertainties that they might face during the 10 to 18 months of the operation of an aircraft. This knowledge and trust in data predictions can then be applied to many other aspects of airline operations.

On our Knowledge Hub, we have discussed in many articles the future of supply-side material management and MRO is going lie firm in the realm of data analytics. In Predictive maintenance & the road to a proactive supply chain, we investigated the relationship between predictive analytics and supply chain management.

In Survival strategies: Supply chain management in the aviation industry, we explore the trend that will reshape the aviation supply chain—Big Data being one of them.

Initial Provisioning is not only a secure process and method by which a customer can ensure effective management of the stock they need for their new aircraft. It is also a means for creating a culture of efficiency, which means that operators and supply managers are going to know how to understand and rely on data predictions to foresee and prepare for future operations.

Chapter Summary

Stretching into the future beyond the initial 10 - 15 month operational period, Initial Provisioning can have clear benefits in the long-term:

MRS - Outlining the Material Readiness Roadmap

Chapter 5 of 5

The Airbus process for which an Initial Provisioning solution can be implemented starts by defining what they call a Material Readiness Roadmap.

This process entails a detailed inspection and analysis of a customer's specific purchase—a new aircraft, a used-aircraft, or a fleet. The Roadmap outlines a series of meetings and conferences to determine this information, and subsequent parts requirements and provides you with the recommended parts documentation, along with details of handling and delivery of parts.

In this chapter, we go into detail about various parts of the process.

5.1 The assessment meetings and process

The current guidelines for Initial Provisioning timelines stipulated in the Supplier Support Conditions, arguably do not reflect the urgency within modern aviation. Therefore, Airbus has prided itself with providing short lead times into entry-into-service.

According to ATA SPEC 2000, the transmission of provisioning data should begin well in advance of the first delivery. This is to permit ordering and establishment of support inventories in time for initial operations.

Near the start Airbus Initial Provisioning process, customers with be asked to attend a small Material Readiness set-up meeting. This is an assessment meeting to obtain preliminary requirements and operating parameters that will be discussed in the Material Readiness Conference (MRC).

The primary focus of the MRC will be to establish an agreement on the final parts and service recommendations (provided by Airbus) between Customer, Satair and the Suppliers.

5.2 Developing the documentation

Following the MR Set-up Meeting, the process of producing, revising, and refining the initial provisioning documentation will begin. A preliminary Recommended Spare Part Lists (RSPL) will be drafted and sent to specified suppliers for their comments and review. Once approved, this will be provided to the customer during the Material Readiness Conference (MRC).

Due to their substantial initial provisioning investment percentage, establishing the supplier Line Replacement Units (LRU) can take up the majority of the discussion during the material readiness conference.

The time dedicated to LRUs during the conference is related to their relative importance. Typically, a conference will last one week. Suppliers, who represent the majority of the proposed LRU investment, will be invited to the conference on behalf of the customers.

Chapter Summary

The Airbus process for determining the specifics of Initial Provisioning solutions follows what they call the Material Readiness Roadmap. It covers: