Southwest turns to i2 for spare-parts apps

Adopting a somewhat unique approach for its industry, Southwest Airlines Co. is turning to a third-party applications vendor to automate its spare-parts planning and replenishment processes.

The Dallas-based airline recently announced that it has gone live with the service and parts management application from ailing supply chain software maker i2 Technologies Inc. According to a statement, Southwest expects the software to cut overall parts-holding costs and at the same time ensure that the airline doesn't suffer from out-of-stock problems in crucial airport locations that could lead to flight cancellations or delays.

The first part of the i2 application, called Demand Planner, went live in February; it handles parts demand forecasting. In August the company flipped the switch on the latest installment, Service Parts Planner, which lets Southwest minimize required spare parts inventories while optimizing the processes used to meet service levels.

The combined system handles service and parts management for 368 Boeing 737 planes and is running on the IBM AIX Unix platform, using an Oracle database.

The last component of the rollout will be a service budget optimization application, due to go live early next year, said Jeffrey Hillis, director of systems maintenance at Southwest. That software allows users to work budget constraints into supply chain planning.

The overall installation, which began in last year, replaces "complex manual processes" that relied on Excel spreadsheets, Hillis said.

"It's a relatively new way of thinking," she said. "Other industries might have done this before, but this is kind of unique on an airline." Southwest went with i2 because it's located nearby in Dallas, and because its software met the airline's criteria for creating an integrated aircraft maintenance process.

Although the applications aren't industry-specific, Southwest avoided extensive customization by restructuring its processes around the i2 software.

"It was pretty much a model-based implementation, so you had to model the supply chain and business around it," said Hillis. I2 helped Southwest apply the software, typically used by manufacturers, to the airline business.

She declined to discuss software or implementation costs or the expected return on investment.

Although i2 lately has taken a financial pummeling and is now working to restructure and make its business profitable, those issues did not worry Hillis, who noted that other software makers are going through similar difficulties.

Southwest is indeed breaking new industry ground here, according to Karen Peterson, an analyst at Stamford, Conn.-based Gartner Inc.

"Enterprises which have complex aftermarket component requirements are just beginning to look at packaged applications as an enabler for inventory-reduction and customer service increases," Peterson said. And although the deal was signed more than a year ago, before i2 faced the worst of its financial crisis, the implementation will have a positive effect on the software vendor's bottom line, he said. If i2 can please an industry leader like Southwest, other airlines might line up at its door, too.

Moreover, i2 has a competitive offering for service parts planning that handles factors such as material requirements and capacity constraints, Peterson said.

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