Certainly, Southwest Airlines is consuming its own inventory more efficiently these days. As of early November, the carrier ranked as the planet's largest operator of 737-700s, with 424 in the fleet. Bill Tiffany is Southwest's senior director for maintenance supply chain management. He says the parts supporting its full fleet of 737s are being winnowed meticulously, currently culling 10-15% of inventory with the ultimate aim of even deeper cuts.
What renders that possible, says Tiffany, is the size of the airline's all-Boeing fleet: 604 of its 692 aircraft are 737s. That means “we are kind of our own parts pool,” he says. “We probably have more [parts and components] than we need.” It is that situation that helped trigger efforts to pare back stocks significantly.
Tiffany says it's best to de-stock incrementally, lest “material planners . . . get a little nervous.” He says most of them have horror stories, when someone from the line or production pointed a finger at them and said, “We didn't have this part, and it's your fault.” The natural reaction is to overstock.
He believes by using measured de-stocking, carriers can build confidence among planners that the system works, that it can indeed accomplish more with less. Conceding it's a cliche, Tiffany nonetheless says, “I think it's true.”
It's also true no other airline has the breadth and depth of single-type parts stores. While Southwest may presently rely on internal economies of scale, most airlines cannot. They have to lean on more traditional parts pooling. A statement by Air New Zealand says one of its recent moves has been “to move into pooling deals, where the parts are held and provided by a supplier.”
Once predicated on ad hoc airline-to-airline pacts, parts pooling is a far more sophisticated undertaking these days, one pegged to the realization among airlines that “there's just a huge amount of . . . redundant material on shelves,” asserts David Marcontell, president and chief operating officer of TeamSAI. That overabundance resides there, he says, to assure airline executives “they they're going to have the part when they need the part.”
Over the last 5-7 years, that fear has subsided somewhat, assuaged by assurances that third-party managed parts pooling produces economies of scale without the scare. But, “There are airlines out there that are still unable to go fully lean,” says Carl Glover. “Because they've got operational demands. Or . . . because they've got the fleet dispersed over many line stations.”
Ingrained reticence to reduce stocks aside, economies of scale work to reduce inventory and cut component budgets. The price of at least some of those parts—the ones derived from cannibalizing select newer types—appears to be coming down. Marcontell says the valuation of such recently parted-out components has dropped by 10-20%.
Tiffany has yet to see evidence indicating either a bounty of 737-700 part-outs or resultant lower prices. He says, “We'll look forward to taking advantage of that” should it happen. As for that de facto internal parts pool at Southwest, he's not averse to taking the plunge into a more traditional pool. As both the network and fleet grow, “We're going to be actively looking at that.”
Parts pooling and parts de-stocking are here to stay. Industry observers are less sure about the present surge in part-outs. While agreeing that there are “more part-outs of newer equipment,” Adam Pilarski, Avitas' senior vice president, is not sure if the phenomenon is a trend or an aberration. The current crop of statistics supports the migration to newer aircraft. But the notion this is a long-term trend awaits compelling confirmation.