Many companies that operate fleets or systems require high operational availability to meet mission requirements. Failure of system-critical parts is low, but when it occurs, parts must be replaced quickly. Because parts can be expensive, however, it’s difficult to stock enough to address immediate needs.
To meet customer service level agreements (SLAs) guaranteeing repair responses in under six hours, an electronics manufacturer maintained large parts inventories and thousands of service technicians. Expanding the quantity of parts in local inventories did not significantly improve service performance, but did increase inventory costs.
The manufacturer engaged Booz Allen Hamilton to help it improve operational performance without increasing inventory costs.
When numerous parts are critically needed but seldom required, the right inventory strategy requires focusing on the company’s mission—fast repairs—rather than on its inventory quantity. Booz Allen recommended a new objective for the manufacturer: Get the right part to the technician in time to meet SLAs, without increasing costs.
The tools and metrics Booz Allen developed enabled an efficient delivery and replenishment process, and also helped the manufacturer predict which parts were needed in specific territories and tailor storage inventories to match local demand.
By implementing these and other inventory optimization measures, the manufacturer estimates that inventory expenditures will drop by at least 40%, and repair response rates will improve from 70% to 85% SLA compliance. The new processes and tools will also support continuous improvements in inventory and repair operations.
Download a PDF version of the case study entitled, "Designing the Right Inventory Strategy for Mission-Critical Parts."
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