The document describes the evolution of the service parts distribution network at Sundstrand Corporation over several years. It began with all parts coming from a single production stockroom, which caused delays and poor customer service. A dedicated spares stockroom was then created, improving delivery times. Later, a repair stockroom was added, treating the repair operation like an airline customer. Over time, the spares and repair stockrooms were separated physically from production and put under customer service control, further improving performance. Variations of this network structure were then implemented across Sundstrand's different business units and locations.

1. The Service Parts Distribution Network
Mr. D believesthatthe distributionnetworkis amajorkeyto the successful operationof aservice parts
business. The followingisashort historyof the evolution of the distribution network atSundstrand
Corporationoverthe course of several years,andsome commentsaboutthe differentschemes.
First,some definitiononthe typesof service partsastheywere definedatSundstrand.
NewPart – a part that has neverbeenshippedto acustomeror a repaircenter.
Used Part – a part that has beenshippedtoa customeror a repaircenter.
Expendable Part – a part that cannotbe repairedandmade usable again.
Repairable Part– a part thatcan be repairedandmade usable again.
Mr. D’sinventory planningresponsibilitieswere mostlyfornew parts–both expendable andrepairable.
However,the systems Mr.D developedwere alsousedtomanage the repairbusiness andthe repairable
inventoryitused;hence these networkdiagramswill also address the reparable partsstockrooms.
Just a couple ofnotes are in order.
SundstrandCorporation isinthe aviationmanufacturingbusiness. Aviationisahighlyregulated
business,andthe definitionsof new/useditemsare asstatedasabove. This meansthat,technically,
whena new itemwasshippedfromthe sparesstockroomtothe repairstockroomit became,byFAA
definition,a“used”part. However,there was a processavailable to returnthatitembackto sparesand
therefore “make itnew”- providedithadneverbeeninstalledintoanendunitor sub-assembly.
Because of this Mr. D will talkaboutrepairstockroomshavingtwodistinctsections:the new parts
sectionandthe repaired/rotable partssection, - althoughtechnicallythe new parts thatresidedina
repairstockroom were byFAA definition “used”parts. Also,note thatnew and rotable partswere in
the same physical stockroom,butnotin the same bin.
Mr. D usesthe term“part number”and“itemnumber”interchangeably.
Mr. D alsousesthe terms“repairable item”and “rotable item”interchangeably. He prefersthe term
rotable as itindicatesthata part is a “usedrepairable item”,where asjustusingthe term “repairable”
can be ambiguous.
Thisdiscussionwill focuson Sundstrandlocations thatassembledandshippedenditems. Sundstrand’s
remote manufacturingsitesandtheirassociatedstockroomsare treatedlikeanyothervendorandtheir
internal workingsare notgermane tothispaper.
Sundstrandhadseveral locationsthatassembledenditems:RockfordPlant1, RockfordPlan10, Rockford
Plant6,San Diego,andPhoenix. Therefore,thesedistributionschemeswere replicatedateachof those
locations. Mr. D callsthem“parallel pipes”.
The Spare parts stockedatsub-distribution warehouses andthe over-seasrepairoperationsare not
shown. The partsrequiredforthose operationswere processedoutof the spareswarehouse likea
shipmenttoa repaircenteror customer.

2. The Service Parts Distribution Network
In the beginning…
Figure 1 showsthe networkpriortodevelopmentof anyspecializedstorage locations forservice parts.
Thisis whatexistedpre 1977, and pre Mr. D.
Figure 1
Sundstrand Distribution Network
Pre-Service Parts Stockroom
Production
Stockroom
(MRP)
Airlines
OEM
Repair
Center
Plant
Site Vendor
Repair
Rotable
Stockroom
There wasonlyone stockroom- the productionstockroom. Itsmainpurpose wasfor the accumulation
of the productioninventory thatwasusedto buildthe end itemsthatwere shippedto the original
equipmentmanufacturers(OEMs) I.e.BoeingandMcDonald-Douglas. Shipmentsof spare parts to
airline customershappenedmostly asunscheduledpullsfromthe production stockroom,andwere
typically shiped atfull manufacturingleadtime. The issuingof partsto the Sundstrand repaircenterwas
alsounscheduled. There wasnoSparesstockroomor Repairnew-partsstockroom.
The repairrotable stockroomdidnot existinthe MRP & Accountingsystemsbutitdidactually physically
exist,soitisshowwithdashedmargins.
A terrible network! Thisbecame clearasno one evergottheirparts on time.All customers, bothOEM
and airlines, wereveryunhappy.

3. The Service Parts Distribution Network
The big bang…
Figure 2 showsthe network circa 1978, whenthe aftermarket-focusedCustomerService organization
and the associated stockroomswere created- the bigbang,as Mr. D callsit. Mr. D came to Customer
Service in1979.
Figure 2
Sundstrand Distribution Network
Phase 1 - Service Parts Stockroom
Production
Stockroom
(MRP)
Airlines
OEM
Repair
Plant
Site Vendor
Spares
Stockroom
Repairable
Stockroom
The spare parts stockroomwassetup as a “customer”of the productionstockroomandparts were
delivered tospares atthe productionspecifiedleadtime. Sparesplanningput“requirements”intothe
MRP system,andthe productionpeople delivered the partsseveral monthslater.
Airline orderswere scheduled(usingapunchcard batch system) andshippedfromthe spares
stockroom. Issues tothe repaircenterwere still unscheduled,butnow mostly came outof the spares
stockroom. There wasstill noRepairnew-partsstockroom, andthe rotable inventorywasstill off the
books.
The productionpeople likedthisnew approach. Theiron-time deliverytothe OEMsbecame almost
100%. It shouldhave been! The sparesstockroomwasstill physicallylocatedinthe productionarea
and wasstaffedandmanaged byproductionpersonnel. Infact, production’spartsand spares’parts
were physically co-locatedinthe same binand were onlyseparated viathe accounting&MRP computer
systems. Thisconstitutedahuge pile of safetystockforthe productionpeople. Costfree,too,as
sparesheldthe bag forall the costof the parts inthe spareslocation. Nowonderthe productionpeople
likedthissystem!
Because of thisimprovednetwork,the shipmentservicelevel of spare partswasimproved.However,
the unscheduledissuestorepairstill causedproblems.
From Mr. D’s perspective thiswasanimprovement,butstillhadsome majorstructural problems. This
was mostly due tothe fact that the people runningthe sparesstockroom were fromthe production

4. The Service Parts Distribution Network
groupand they put theirneedsaheadof spares’needs. Thislead Mr.D to devise tworulesfor
understandinghowthingsworked whenitcame toissuingpartsto fill the sparesrequirements: Rule 1.
Productiondoeswhatproductionwantstodo. Rule 2. Whenindoubt,referback to rule number1.
Repair comesof age…
Figure 3 showsthe network circa 1982 at the time the new on-line customerservice software system
was installed. COOP,asitwascalled,wasa systemthat managedthe booking,picking,shippingand
invoicingof customerordersforservice parts,andalso providedthe frameworkforthe inventory
managementof same.
By thistime an official repairstockroom hadbeen created.The repairoperation wasnow treatedlikean
airline customer,so Repairhaditsowncustomercode in COOP. Thismeantthe repairinventory
planners placedordersfornewpartsthroughthe CustomerService Administrationgroup,justlike
airline customersdid. Those orders were treatedasjust like anyothercustomerorder.
Thiswas a huge leapforward. It putthe repaircenterandthe airline customersinto the same process.
Thisallowedforimprovedschedulingand prioritization of partsshipments.
The remainderof the 1980’s saw no majorstructural changesin the distributionsystem. However,the
inventoryplanningfunctionfor the newpartsin the repairstockroomwastakenout of the repair
operationandplacedin Mr. D’s group. Atthat time,Mr. D’s planningsystemwas available foruse by
the repairpersonswhoplannedthe rotable inventory. Mostly,theychose nottouse it.

5. The Service Parts Distribution Network
Spares take over…
Figure 4 showsthe networkcirca 1999. The onlydifference fromthe previous networkshown inFigure 3
isthat the sparesstockroomwasphysicallysplitfromthe productionstockroom, andthe supervision of
those stockroompersonnel came underthe control of the CustomerService organization.
Of course,there wascost incurredtodo this,as the parts sentfromproduction tosparesnow hadto be
pickedfromthe productionstockroomandre-stockedinthe sparesstockroom. Thatcost wasminor
comparedto the benefits toCustomerService incontrollingtheirownstockroom.
For example,Spares wasable getthe pick/pack/shipcycle downfromanaverage of 7 daysunder
productionmanagementtoabout1.1 days underCustomerService management. The practical upshot
of thisresultwasa fourpointimprovementinontime delivery tothe sparescustomersanda five day
improvementincashflow. Noadditional stockroompersonnelwere hiredtoaccomplishthis.
Figure 4
Sundstrand Distribution Network
Phase 2B – Service Parts & Repair Stockrooms
Production
Stockroom
(MRP)
Airlines
OEM
Repair
Plant
Site Vendor
Spares
Stockroom
Repair New
Parts
Stockroom
Repairable
Stockroom
OSS
New &
Rotable
The OSS (OnSite Support) stockroomisa repairstockroomlocatedat an airline’sfacility. There were
five of these OSSstockroomsduring Mr. D’stenure. The OSS stockroomswere managed Mr.D’s
planninggroupand planningsystem. The OSSlocationsalsowere treatedlike anairlineinthe COOP
system:theyeachhad a unique customercode and the replenishmentordersforthemlookedandacted
like anyairline’sorders.

6. The Service Parts Distribution Network
HelloSan Diego…
Figure 5 showsa variantof the networkthatcame to existinthe SanDiegobusinessunit. Sundstrand
boughtthe San Diego businessin1991. Atthe time of purchase the San Diego operation haditsown
systemsand wasstructuredlike the networkshowninFigure 1- i.e. Withno sparesor repair
stockrooms.
A projectwas initiatedtobringthe San Diegooperationintothe Sundstrandsystems. However,the
projectplanningwasdone withoutanyinputfromthe CustomerService organization. The San Diego
production/accounting/ITpeopleallowedforasparesstockroom, but theydidnot create a repair
stockroom.(Again,the Rotable stockroomphysicallyexisted,but itwasoff the books.)
One monthbefore the startup of the projectMr. D’s group wasinformedaboutthis arrangement. Mr.
D objectedtothe structure but was toldnochangescould be made. ThenMr. D and was toldto figure
out howto getnewparts to the San Diegorepairoperationwithoutthe benefitof arepairstockroom.
Well, Mr. D and the CustomerService ITgroup did make itwork.There are too manydetailsto
illuminatehowitwasdone inthispaper. Thisscheme became Mr. D’s preferreddistributionnetwork.
The unique pointof thisnetworkisthatthe new parts neededbythe repair operation were issued
directlyfromthe sparesstockroom anddidnot passthrough a repairstockroom.
Of course, since repairisa fastmovingbusinessandrequiresalmostinstantaccesstoparts,this
variationonly worksforrepairoperationsthatare inthe same buildingasthe sparesstockroom - or at
leastwithinafewminutes’drive.
Eventually,anofficial repairstockroomwascreatedinthe MRP & Accountingsystems,sothe rotable
inventorywasfinallyonthe books.
Figure 5
Sundstrand Distribution Network
Phase 2C – San Diego Service Parts & Repair Stockroom
Production
Stockroom
(MRP)
Airlines
OEM
Repair
Plant
Site Vendor
Spares &
Repair
Stockroom
Repairable
Stockroom
There are several advantagestothismethod.

7. The Service Parts Distribution Network
1. It eliminatesredundantinventory (new repairparts) -acouple millionbucksinthe SanDiegocase.
2. It improvedthe availabilityof partstofill customerorders.Sometimes the onlypartsavailable to
fill customerorderswere locatedinthe repairstockroom. Shippingparts tocustomers froma
repairstockroom waspossible but requiredmore time andmanpower. Thisscheme keeps those
parts ina sparesstockroom,therebymakingthem“more”available.
The disadvantage isthatthismethodrequired slightlymore planningeffortbythe sparesplanners.
Mr. D was able toplanthe SanDiegospareswarehouse toprovide twodifferentservice levels –one to
airline customers andahigherone to the repaircenter.
The law of Serendipity…
Mr. D and the CustomerService organizationhad limitedinputintothe evolution of muchof the
distributionnetwork. The original sparesstockroomwascreatedbythe productionorganization,and
it wasdone to meettheirneeds. Theydictatedleadtimes. Theykeptall the purchasingand
stockroomfunctionsundertheircontrol. Essentially,the sparesstockroomwascreatedforthe
benefitof the productionorganization.
Still,the resultinghierarchical network - Productionfeedsspares,Sparesfeedscustomersand also
feedsrepaircenters - isa bestpractice for the followingreasons.
1. All demandisrolleduptothe sparesstockroom – makingforecastingmore accurate.
2. Parts are keptinthe sparesstockroomuntil justa few daysbefore neededinarepair
stockroom– therebymaximizingpartsavailability toall users.
3. The linesof communicationare clear – customers & repairtalkto spares,sparestalksto
productionandproductiontalkstoplantsites& vendors.
4. Prioritizationof the needforpartsisseenat the top level,andonlyone voice istalkingto
the supplier.Of course,Rules 1& 2 still apply. The decidingissue onwhogetspartsinshort
supply isusuallysalesdollars. Typically,productionhadpriority.
Sundstrand’s networkcouldhave developedwithrepairbeingacustomerof production,therefore
becomingacompetitorof spares.Doingsowould splitdemandforspare partsintotwo streamswhich
wouldmake forecastinglessaccurate,andwould resultinincreasingthe incidence of mal-distribution
of parts.
Considerthe Caterpillarnetworkshow inFigure 6. Mr. D worked forCaterpillarfora shorttime before
the economiccrash of 2009.

8. The Service Parts Distribution Network
Caterpillar…
Figure 6 showsthe caterpillarnetwork. Itisnota hierarchical system. The importantpointof this
figure isthat boththe sparesand repairoperationsgottheirpartsfromthe productionsystem.
Whenproduction received partsfromthe vendora“production”person or process hasto decide how
to allocate them….Andwe all knowthe squeakiestwheel getsthe grease.
Mr. D believes thatinsome casesboththe CAT sparesstockroomand CAT repairstockroomsmay
have gottenparts directlyfromavendor,but he is not positive aboutthis.Inaccordance withthis
uncertainty those pathsare shownas dashedlines inFigure 6. Such a processwouldbe particularly
poor,as it makesthe vendordue the parts allocation - usuallytothe groupmakingthe mostnoise or
the group whichislastto contact the vendor. Thismaynot be the group with the greatestneed.
Figure 6
Caterpillar Distribution Network
Production
Stockroom
(MRP)
Dealers
Plant
Site Vendor
Spares
Stockroom
Repair
Stockroom
Spares Sub
Stockroom Repair
Of course,approachingthe CATbusinessfromthe Sundstrandparadigmis notalwaysadvisable.
Almostall of Sundstrand’spartscouldbe boxedupand shipped overnightFEDEXtoanywhere inthe
world. CAT makeshuge heave parts. The economicsof shippingthose heavy partsmay,at times, drive
the parallel pathsystemshowninFigure 6.
While workingatCAT,Mr. D dida projectthatdealtwith a CAT facilitythatrepairedengines. During
the course of that projectitbecame clearto Mr. D that there were a large numberof engines atthat
repairfacilitythatwere waitingforparts that were due infromthe production/MRPsystem. Thisis
whyMr. D believesthe CATsystemwasalignedasshown inFigure 6.
Mr. D foundthat manyof these backorderedpartswere available inthe sparesstockrooms. Hadparts
beensupplied torepairfromthe spares stockroominsteadof fromproduction manyenginescould
have beenrepairsooner.

9. The Service Parts Distribution Network
The resultof thismulti-pathsystemwaslongturntimesforthe enginesinrepair,anda very poor
service leveltothe dealers.
The economicimpactof thiswassignificant,as itwasCAT’spolicythat if a dealerwanted arepaired
engine and one wasnot available anew engine wouldbe shippedinitsplace - butsoldat the repaired
unitprice. Thiswas costingCAT millionsinlostrevenue,andmillionsininventory. Mr. D believes a
hierarchal systemlike Sundstrand’swouldhave servedCAT alotbetter.
In summary,here are Mr. D’sofficial rulesonthe distributionnetwork.
1. The productionplanners/purchasingagentsare the single contactwiththe production plantsites
and vendors. The spares& repairorganizationshave almostnopurchasingfunction,exceptforthe
processesnecessaryforrepairof rotable items. I.e.dealingwithavendorwhospecializesinweld
repairof magnesiumhousings,etc.
2. Sparesordersparts at full leadtime viarequirementsputintothe MRP/ERPsystem. The spares
planneristhe single pointof contactwiththe productionplanner/purchasingagentforall
customerand repairneedsforparts.
3. Repaircentersare a customerof the sparesorganization. Thismaymeanthat eachrepaircenter
has an assignedsalesrepresentative/administratorinthe orderadministrationarea –justlike
outside customershave. See Note1.
4. The sparesstockroomis the preferredstockinglocationforpartssince there isa standardprocess
for picking/packing/shippingpartstocustomersandrepaircenters. Avoidshippingpartsfrom
repaircenters. It isbestto RMA parts back to the spareslocationif time allows. See Note2.
5. Keepitsimple andrigid. Flexible processesare fraughtwitherrors.
Note1.From 1980 to 1989 the Sundstrand repaircentersorderedpartsthroughthe COOPspares
group- justlike an airline would. Eachrepairsite wasassigneda customerrepresentative inthe
SparesAdministrationgroup. If repairhada questionon the availabilityof partstheycontactedthe
orderadministrationgroup,notthe inventoryplanninggroup. The sparesadministratorwouldthen
contact the inventoryplanner.
In 1989, whenMr. D’sgroup tookoverthe planningof the repaircenterinventories,they alsoby
defaulttookoverthe administrationof the repair replenishmentorders. Mr. D developedabackorder
trackingsystemforeach repairsite sothat the inventoryplannerswouldbe aware of the critical needs
for parts.
Note2. Per the FAA regulations,the SundstrandRepairOperationshadadifferentqualitysystemthan
to Production/Sparesoperations. Because of this,the repaircenterscouldnotissue the FAA-8130
certificationthatwas requiredtoshippartsto customers. Thisiswhyparts were returnedfrom repair
back to sparesviathe establishedRMA process.
Well there itis:anothertastyentrée inMr. D’s smorgasbordof ideas. Take what youwant,and leave
the rest.
Contact Mr. D at MisterD@windstream.netwithquestions.