You are on page 1of 4

CASE STUDY ON POOL STORES

Submitted byDivya Boddu (07) Rohini Mukhopadhyay (19) Dhaval Parmar (25) Sachin Lakade (32) Raj Saxena (35) Zahid Anwar (48) SIIB, MBA-AB (Jr)

Executive Summary
The National Authority of Civil Aviation, NACA, is a public sector undertaking reporting to the Ministry of Civil Aviation, Government of India. It is responsible for maintaining the facilities and services at 72 civilian airfields across the country. These airfields are categorized as A, B or C, depending on the facilities available there as well as the time required for these facilities to come on in case of an emergency. At any given time, every airfield has a system that is working and another one on standby. Apart from NACA, the Indian Air Force manages 54 airfields in the country and requires a high quantum of spares. With rapid advances in technology and a change of philosophy from repair to replacement, the chances of breakdown have reduced considerably, sky rocketing the cost of spares. Both NACA and Air Force identified their respective non-moving stores that store spares for airfields from which items had not been used in the past 40 months. The summary of the number of items and costs associated with them are as followsNumber of Non-Moving Items Cost (in Crores of Rupees) NACA 2012 902 Air Force 2007 777

In spite of the high costs involved, both organizations treat these stores as Assurance Stores. NACA states that they could not take chances with modern airliners costing Rs. 400 to 600 crores carrying over 250 human lives. The Air Force says that these stores provide protection against stock out during emergencies because these spares are sourced from foreign suppliers and have a long lead time. It must be noted that both these organizations have facilities to airlift spares whenever needed. The non-moving stores are studied and it is observed that many of the airfields maintained by these organizations are quite close to each other. Most of the non-moving items (929) are common to both and costs can be reduced if both purchase these items together. The spares that are being sourced from foreign countries are being produced by Indian manufacturers as well. Even the foreign suppliers have opened spares holding depots that can meet urgent requirements of their customers. Based on the above observations, it has been suggested to NACA and the Air Force, that they set up ‘Pool Stores’ to store common non-moving items. These stores should meet all the demands of all the airfields within 150-200 km within 1 to 1.5 hours. This suggestion has been rejected by both NACA and the Air Force stating that it would fail during emergencies like military operations.

Problem Statements
1. The High Cost Of Non Moving Inventory : One of the major concerns of both NACA and Air Force is the high cost of non moving spares which may become a dead stock in future. 67% of the maintenance stores of NACA which have a total of 2012 types of items had not been used in the last 40 months. The total cost of this inventory amounts to Rs 902 crores. On the other hand 54 air Fields managed by Air Force have non- moving inventory of 2007 items costing Rs 777 crores. The total non- moving inventory of both amounts to Rs 1679 crores, which has been blocked because of their non usage. The problem here is that the inventory needs to be maintained, firstly because of its uncertain demand, secondly as these items are procured from foreign manufacturers, their lead time is high. The other problem here is that, this non moving inventory cannot be cashed as the higher authorities are not willing to take chances with human life and national security. Thus these stores are treated as assurance stores. 2. Problem Stemming Up After Setting Pool Stores If the Pool Stores store the items catering to both the civil airports and the Air Force bases, it would help in reducing the cost of the inventory. And also, the Pool Stores can meet the demands of all the Air Fields within a radius of 150 to 200 Km and availability of spares within a time period 1 to 1.5 hours. But a major problem of availability may become an issue during an emergency (such as war) and high traffic airfields in case of any failure of a system. Thus this idea of Pool Stores cannot be considered for all the airfields.

Solutions
Since, creating pool stores, as suggested, gives rise to secondary problems as stated above, a better alternative that we suggest is that, the airfields should first be identified as1) High traffic airfields under NACA. 2) Airfields maintained by the Air Force located at sensitive areas in the country. The airfields that fall in the above categories should have their own maintenance stores for keeping assurance spares. The other airfields that do not fall in the above categories, should-

1) Set up pool stores that store only the non-moving common items of both NACA and the Air Force. 2) Purchase common items together. 3) Try to purchase the items that are produced by indigenous manufacturers instead of foreign suppliers to reduce the lead time for replenishment. This shall reduce the inventory cost for both and shall make sure that the required amount of spares is available at all places at all times. This way, we do not compromise on national security as well as on human lives. These stores should be located at places that are equidistant from all the airfields they supply to.