Stock Analysis – An Overview

Inventory accuracy and inventory reduction are the primary goals of all the airline operators and maintenance service providers. Hence, continuous monitoring and control of stocked parts becomes important. Most inventories consist of huge number of parts necessary to maintain Aircraft, Components, Tools, Facilities and also parts such as stationary and clothes to service non-maintenance activities.

Stock Analysis is an essential process that enables decision-making in Materials Management or Inventory Management in any organization. Organizations perform periodic inventory analysis with an aim to maintain inventory accuracy and to impose tight control on parts of high importance.

The best inventory investment and ease in operation can be achieved with the aid of various part classification methodologies performed through the “Stock Analysis” business component.

In the “Part Administration” business component, while defining the planning parameters, the materials personnel may define the various part classifications for each part based on the standard cost and anticipated behavior of the part in the organization. This business component assigns the actual classification to each part based on the classification methodology selected for the analysis and also on past records or current information provided by the organization. Stock Analysis for parts starts with setting up a limiting cut-off percentage for every class of item, under each classification methodology adopted by the organization.

The various classification methodologies adopted by the organization are ABC Analysis, FSN Analysis, XYZ Analysis and VED Analysis. The organization can conduct the analysis across locations, for a selected location or for a selected warehouse. The organization can also perform a combination of analyses. The different possible combinations are ABC-FSN, ABC-VED, ABC-XYZ, XYZ-VED, FSN-XYZ and FSN-VED Analysis.

ABC Analysis

ABC Analysis for the stocked part is based on the past consumption values for a given period. The ABC classification is based on the principle that states that effort and money can be saved, by applying less control over items that have a lower consumption value.

In this classification, parts are classified as A, B and C, based on the decreasing value of the total consumption value as shown in Table 1.

Table 1

FSN Analysis

FSN Analysis classifies parts on the basis of their movement in the Inventory system. The average stay of the part in Inventory and the consumption rate of the part are considered for this analysis.

Note: For a part, if the consumption rate is not available, then the part will be classified as “Fast” or “Slow” or “Non moving” based on the average stay of the part in the inventory.

Table 2 illustrates the FSN Analysis when the average stay and consumption rate of the part is available:

Table 2

XYZ Analysis

This analysis is done based on the current value of stock in the Inventory. The current stock value is calculated for each part and based on the specified percentages, the parts are classified into X Class, Y Class or Z class.

VED Analysis

VED analysis classifies inventory parts on the basis of their relative importance with respect to each other in the day-to-day operations. This classification depends on the perception and experience of the user. VED is specified during the creation of the part in the system. In this type of classification, parts are classified as “V - Vital”, “E – Essential” and “D – Desireable”.

Note: A part can be classified as “Vital” or “Essential” or ”Desirable” class only in the “Part Administration” business component.

This business component also enables you to compute the replenishment parameters such as reorder level, reorder quantity and safety stock details for the parts in the inventory and set the replenishment parameters.

Reorder Level

A fixed quantity level of the part below which, the purchase activity is automatically initiated by the system

Reorder Quantity

The quantity of the part for which the order must be placed, when the reorder level is reached.

Safety Stock

The quantity of the item that is stored in the location to meet the consumption rate fluctuations.

Getting familiar with the activities