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We discussed alligning the metrics for measuring te efficiency of service parts planning in a previous blog; they should be in line with the real objective for planning parts. The final goal is not just to have parts available but rather to have the right part mix to allow equipment repair in duly fashion. Equipment availability is the ultimate goal!

Performance Based Logistics (PBL) takes this one step further; it involves the equipment supplier to no longer sell equipment and parts but rather usage of the equipment. The customer no longer signs a purchase order for the material but puts together a contract that allows him to guarantee a certain required uptime of the equipment. After all, when you buy an airplane for instance, your goal is not to own it but to be able to fly it.

The PBL contract puts many constraints on the partnership and may involve extremely complex contracts. On the service parts level howvever, the main challenge is to no longer plan for mere fill rates but rather plan towards availability targets. The complexity of these contract negociations in making sure that all possibilities are covered often push military organizations toward an easier to achieve way of realizing the availability goal: Readiness Based Sparing. Essentially, through capturing the right requirements (see blog on Metrics) and applying the right principles (Availability target sparing instead of Fill Rate target sparing), the organization achieves similar results while retaining control of the process and inventories. The results from such an effort are usually; higher equipment availability with lower budget requirements or more efficient allocation of budget, exactly in line with PBL objectives – sometimes, several roads lead to the same target!

The linked article discusses Power by the Hour (PBH) which is a similar application in civil aviation.

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