Working Capital Reduction Supply Chain Review

Client: An Australian Airline

Background

A major Australian airline was faced with a financial report card that revealed an unacceptable return on assets. Recognition of this under performance in working capital spawned a project to look at opportunities to:

• operate the fleet with fewer rotables/repairable, with the opportunity to sell the excess assets onto the open market; and
• reduce the on hand stock of consumables (break down spares) through the identification and sell-off/scrapping of excess stock.

Challenge

The project challenges included:

• accessibility and quality of data
• low repairable/rotable failure rates
• relationship management – particularly when working with staff from other areas of the business that are not supportive of the initiative
• working with staff at al level of the organisation over the course of the project to help them become comfortable with the approach, techniques, findings and recommendations; and
• managing expectations at all levels of the organisation

Approach

As a predominantly analytical piece of work GRA adapted its approach as follows:

• project briefing to stakeholders
• analyse a sample of inventory (~20%) and extrapolate findings
• data collection phase, validation and analysis phase
• map current business processes
• analysis of planning methodologies and inventory policies
• identify incremental opportunities as constraints are removed
• conduct disposals feasibility
• conduct potential return analysis; and
• identify potential working capital savings

Outcome

• identification of a 40% reduction in consumable inventory
• identification of an 8% reduction in rotable assets
• identification of 15% of consumable stock available for immediate sale or disposal; and
• formation of a project team to action disposal list