Pitfalls of Supply Chain Optimization in Aeronautics
Identifies common inventory and service level practices that limit optimization in aeronautics and outlines steps to build a financial, company-specific optimization metric.
This whitepaper examines why risk-averse approaches in aeronautics supply chains, such as reliance on safety stock targets and service level KPIs, lead to excess inventory and conflicting objectives. It advocates replacing fragmented KPIs with a single financial metric that quantifies cost of inventory, cost of stock-out, and service value while explicitly modeling demand and lead time variability. The document provides a ten-step framework covering question framing, data representation, algorithmic decision-making, and change management tailored to maintenance and MRO environments.
Service level and safety stock targets conflict and cannot serve as optimization objectives.
A single, company-specific financial metric must integrate inventory holding costs, stock-out consequences, and service value.
Demand and lead time variability must be modeled as distributions rather than single-point forecasts.
Legacy segmentation methods such as ABC analysis oversimplify reality and reduce optimization potential.
Optimization requires collaboration between finance and operations plus algorithmic handling of non-linear trade-offs.
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