Application of fault tree analysis to assess inventory risk: a practical case from aerospace manufacturing

Abstract

In this case study, an aerospace manufacturer seeks to decrease inventory and improve its turnover rate using fault tree analysis (FTA). Historically, the company controlled its inventory using material capacity planning, material requirement planning modules provided as part of Enterprise Resource Planning and a self-developed inventory management system. Historical data indicated a rising trend in the inventory turnover rate, and the total inventory cost is substantial, up to US$260 million. This study uses a FTA approach to prioritise improvement options on the basis of risk reduction. Study results showed that risk-based decision-making, supported by FTA, is useful in handling the inventory problem. Inventory turnover rate indicates that inventory level has been improved 30% using the FTA.