Spare Parts Inventory Management. Phillip Slater
In terms of spare parts inventory management, understanding the maintenance management policy and the chosen technical aspects of the approach to maintenance will help inform spare parts management through understanding how the demand signal for spare parts is generated.
For example, with equipment that is subject to fixed-interval maintenance, the timing of parts requirements should be known well in advance of the need for those parts. Even with condition-based maintenance, the time between potential failure and functional failure may be able to be estimated, at least at a ballpark level, and therefore the time horizon for needing the spare parts is also able to be estimated.
Planning and Scheduling
This activity is about organizing the work. That is, who will do the work, when will it be done, how will it be done, and what tools and spares will be needed. This is the function that generates the job lists (sometimes called work orders) that instruct the maintenance team on what needs to be done and when. These job lists should also include details of the parts required (sometimes referred to as a bill of materials, or BOM).
Planning and scheduling is often the place that spare parts management breaks down, because there is an assumption that parts will be available rather than an actual check of parts availability. In a well-managed system, it is planning and scheduling that triggers the need to order parts when those parts can be supplied within the planning horizon. This means that those parts do not need to be held in inventory. (The planning horizon is the time between when the need for a part is identified and when the part is actually needed. See Section 2.2.) Conversely, if the planning horizon is shorter than the lead time, then you will need to hold the parts in inventory. Often major improvements in inventory holdings can be made by reviewing the planning and scheduling activity and the associated planning horizon.
Data and Cost Management
Data and cost management consists of collecting data and recording and reporting costs so that the effectiveness of the work can be determined—both the operational effectiveness and the cost effectiveness. Of course, the same information is also required to measure whether or not the activities are achieved within the available budget and cost constraints. The issues with data and cost management are:
• Alignment with asset register. Ensuring that the costs are collected in a way that reflects the asset breakdown used by maintenance.
• Cost allocation. Ensuring that the costs are correctly allocated.
• Work order records. Ensuring that these reflect the actual usage of parts.
Understanding data and cost management can help the spare parts inventory manager with checking the actual usage of items and from that help inform future plans.
Materials Management
The management of the materials and spare parts required to complete the work, including inventory management and procurement, is a very important but often underappreciated aspect of maintenance activity.
Materials and spare parts management is as critical to the entire process as each of the other steps. It actually doesn’t matter how well your costs are tracked, or how well you plan and schedule, or how appropriate your technical solutions are, since if you don’t have the right materials and spare parts, you cannot do the work. In fact, if you don’t have the material to do the work, nothing happens. The key issues to consider include:
• Direct purchasing.
• Supplier management.
• Cataloging.
• Reorder levels.
• Materials usage.
• Returns to store.
• Squirrel stores.
• Repairs management.
In an ideal world, the people responsible for spare parts inventory management would have at least a basic grasp of the maintenance aspects discussed above. This would help with integrating maintenance and spare parts activities in order to produce better results. Failing this, there needs to be even greater collaboration between the maintenance and spare parts functions so that there can be a more streamlined, efficient, and effective approach to managing the funds tied up in the spare parts inventory.
1.7 Maintenance Alone Won’t Solve Your Spare Parts Problems
Is it true that spare parts held as inventory for maintenance use are primarily captive to the sophistication and execution of the maintenance system that they support? Is maintenance and reliability execution really the driving force behind the spare parts holding levels? Would improvements in maintenance planning, scheduling, and condition monitoring make a significant difference in inventory levels?
There is a persistent belief among many in the maintenance community that these things are all true, that is, that the best way to reduce spare parts holdings is to improve maintenance practices. Visit any maintenance or reliability forum, attend a maintenance conference, or strike up the discussion at your local professional group meeting, and you will no doubt hear someone saying, “Our spare parts problems would be fixed if only we could improve our maintenance.”
Unfortunately, for many companies, this belief then results in little being done to improve spare parts management, while everyone waits for maintenance system changes to take effect. This, in turn, results in those companies spending maybe millions of dollars more than they need to on spare parts because they are not addressing the real reason that they hold too much inventory. While the preceding section of this book has discussed why it is important for spare parts managers to understand maintenance, it does not automatically follow that improvements in maintenance will drive major improvements in spare parts holding levels.
It’s Not Just About Supply and Demand
It is easy to see where the belief about supply and demand comes from. Spare parts are held as supply to satisfy maintenance demand. Therefore, if companies were better able to reliably predict demand, they could better match the supply and so hold only the inventory they need in the quantity that they need it. If only the machinations of people and process were so simple!
The belief that maintenance improvements will have a major impact on spare parts holdings is only true in this idealized and theoretical world. However, in the real world, spare parts management is subject to a wide range of forces that have little or nothing directly to do with maintenance. These forces include human behavior, different attitudes and management of risk, supply chain variability, procurement myths such as use of the EOQ formula, storeroom management, and administrative practices. In terms of the investment that companies hold as spare parts inventory, the maintenance system is not the main driver of spare parts holding values. The proof of this is as simple as checking the results that companies have achieved in reducing spare parts inventory and increasing parts availability while largely ignoring the maintenance system. (Visit PhillipSlater.com for