15th INTERNATIONAL OPERATIONS & MAINTENANCE CONFERENCE IN THE ARAB

COUNTRIES
UNDER THE THEME: “SMART MAINTENANCE” CONICIDE WITH THE 15TH ARAB MAINTENANCE
EXHIBITION

EFFECTIVE SPARE PARTS

MANAGEMENT
TOMÁŠ HLADÍK
Logio
Eight rules for efficient SPM

1) Go for preventive maintenance!

2) Eliminate process problems
3) Segment your spare parts portfolio
4) Evaluate spare parts criticality
5) Spare parts management starts with good forecasting
6) Use special methods for intermittent demand items
7) Consider the whole life cycle of your equipment
8) Implement a good information system for spare parts and
maintenance inventory management

2
Go for preventive maintenance

3
Go for preventive maintenance!

MAINTENANCE

PLANNED UNPLANNED

STANDARD PREDICTIVE DEFFERED CORRECTIVE

PLANNED PROACTIVE CORRECTIVE (REPAIRS)

INVENTORY
PLANNED PROCUREMENT
MANAGEMENT

80% 20%? 4
Preventive or corrrective?

Number of preventive vs corrective tasks

Donwtimes caused by failure maintenance

Total maintenance cost

5
Eliminate process problems

6
SPARE PARTS PROCESS

7
 Eliminate process problems

SP NEED No direct responsibility of maintenance engineers/technicians for

IDENTIFICATION “their” items and spare parts levels.

REQUEST RFO created by someone else, not the technician who requested part.
FOR ORDER The step of RFO may not be necessary in the process.

How often are orders approved? Who approves?

Approving in IS workflow or by signing a paper copy? Or both?
APPROVAL Approving both RFO and then issued order again?
Too many approvers, complicated procedure and hierarchy.
Approving on high levels of management.

Insufficient information available to procurement, poor spare parts

identification – the buyer hardly knows what should be bought,
PROCUREMENT
additional communication with maintenance technician is needed.
Missing or incomplete procurement specification in the IS.

8
Eliminate process problems
Problems with missing (undelivered) documentation for the received
RECEPTION material (certificates, declarations).
Lost spare parts documentation – only “paper-based” archiving.

Insufficient identification of spare parts in the warehouse.

Problems to find items stored.
Inventory count discrepancies, physical stock different from
WAREHOUSING
information system data.
Non-real value of stock in the information system.
Out-of-system stocks.

Slow spare part issues in case of sudden need.

CONSUMPTION Issued spare parts are not consumed in fact. What happens then?
Consumption of external material even in case the part is on stock.

Refurbished parts return to warehouse while new are bought.

WAREHOUSE Accounting price of refurbished items is much higher (or lower) than
RETURNS AND the non-realistic value of items on stock.
REFURBISHED Problematic or impossible returns of parts issued but not consumed.
SPARE PARTS Insufficient control of parts dismantled from the maintained object
(the information system has no information about these).
9
Sklad NDHow do you store bearings?
Sklad NDHow do you store bearings?
Where are the spares?
An example from a large carmaker

Foundry
Spare parts inventory value [?]
200,000,000
180,000,000 Machining, engines
Pressshop Cental warehouse
160,000,000
140,000,000
120,000,000
100,000,000
80,000,000
Welding lines
60,000,000
40,000,000
20,000,000
0

1P493
1P497
1P896
1P943
1P999
01173
01894
01898
02894
02898
04863
04893
04897
07494
07498
08180
08881
08936
08984
09890
09896
12884
12896
13490
13494
13498
13758
14863
14894
14898

21894
21898
22498
22898
23499
23896
24893
29990
30892
39892
39897
52999
Warehouses A-Z

16
 SPARE PARTS PROCESS
Insufficient spares
identification

Are returns to
warehouse allowed?

Procurement
specification missing

Who is responsible Who/how often

for spares stock? approves?
17
Spare parts process – benchmarking

Internal best practice

18
Comparison of inventory turnover
0.7

0.6

0.5

0.4

0.3

0.2

0.1

0
1 2 3 4

PLANT 1 PLANT 2 PLANT 3 PLANT 4

19
Segment your spare parts portfolio

20
Service level x locked-in capital

Inventory
value
What items are really important?

90 % 95 % 98 % 99 % 100 %?
Service level / availability

21
What items are really important?

On-hand inventory value

Dominant categories C
and D are typical for
spares
Consumed quantity

22
ABC analysis – on hand inventory value

Value of available inventory

23
ABC analysis – consumed quantity

Quantity

In spare parts, C and D categories typically prevail

24
Spare parts inventories segmentation – consumption frequency
(in quantity)

25
Spare parts inventories segmentation – consumption frequency
(in value)

26
 Strategic segmentation of spare parts

WHEN? BUY BUY

HOW MANY? BUY BUY

CONSIDER CONSIDER

TYPE OF FORECAST
CONSIGNATION CONSIGNATION
HOW MANY?
CONSIDER CONSIDER
CONSIGNATION CONSIGNATION

CONSIDER
BUY BACK
CONSIGNATION
WHEN?
BUY CONSIGNATION

CONSUMPTION FREQUENCY
27
 Example of buyback application
20 pieces were purchased for turnaround in 2010 for 41.2 M CZK, but these spare parts
were not used during the turnaround and will be stored until the next turnaround in 2014.
Buy-back in this case can save 9 M CZK (360k EUR) on storage and locked-in capital cost

Between shutdowns

28
FSN and VED classification

Fast-moving F

Slow-moving S V Vital

Non-moving N E Essential

D Desirable

29
Evaluate spare parts criticality

30
Evaluate spare parts criticality
Price Part lifespan
% cost of capital Failure probability
Failure characteristics
Failure anticipation
Cost of
inventory Failure
holding probability

Leadtime and Impacts of

other spare part
parameters unavailability
Delivery time Effects of failure
Repairability Production losses
Number of items in use Links to asset register,
Maintenance planning critical assets (RCM)

31
 Criticality calculation

𝐶𝑖𝑛𝑣 = 𝐶𝑢𝑛 ∗ 𝐿𝑇 ∗ 𝑓
INVENTORY HOLDING UNAVAILABILITY LEAD TIME FAILURE RATE

10 000 EUR x 10% 100 EUR / day 100 days 1 per 2 years

1 000 EUR
< 5 000 EUR

KEEP ON STOCK
32
Criticality assessment phases

Advanced methods Optimum

Hold on stock
to set optimal levels SP stock

Economical Criticality
Potentially
assessment assessment
critical part

Technician Technician Consume

Do not stock Sell or
Scrap

33
Application for criticality assessment

34
Login a heslo

35
Postupné hodnocení kritičnosti

36
37
38
39
Spare parts criticality analysis result
Criticality score

Spare parts items

40
41

Spare parts management starts

with good forecasting
Quantitative methods x Common sense

MAXIMIZE! MAKE EFFICIENT!

Quantitative Common
methods sense

42
Quantitative methods x Common sense

Unexplained / Random Minimize

Uncertainty Common sense Make efficient

of future
consumption

Quantitative methods Maximize

43
Forecasting step-by-step

Visualisation of time series

1 For better understanding of the time series

2 Calculation of forecasts using all available methods

Calculation of accuracy
3 Absolute and relative errors, evaluation on testing season

Selection of the best method

4 Best accuracy and reliability

44
What forecasting method is best for spare parts?

2% Constant model
Konstantní model
1% 1% 3%
5% Regression model
Regresní model
9%
Holt’s exp.
Holtovo smoothing
exp. vyrovnání

Jednoduché exp.
Simple exp. smoothing

??? vyrovnání
Moving average
Klouzavý průměr
Winters
Winters
79%
Forecasting není možný
Forecasting impossible?

45
46

Use special forecasting methods

for intermittent demand items
 Spare parts – intermittent demand

4
ND (pieces)

QUESTION: What reorder level should be set in order to ensure

consumption

3
required availability of a spare part?
partspotřeby

2
Týdenní
Weekly spare

0
1 4 8 13 17 18 25 27 30 32
Weekly consumption history (weeks) 26 47
Historie týdenních spotřeb (týdny)
 Bootstrapping
Bootstrapping = random sampling from history of consumptions.
SP consumption for lead-time period is sampled from history

Sample 1: Example:
4 Consumption in SP lead time is
6 weeks
6 weeks = 5 pcs
3
spotřeby ND
consumption

2
Týdenní
Weekly SP

0
1 4 8 13 17 18 25 27 30 32
26 48
Historie
Weekly týdenních
consumption spotřeb
history (týdny)
(weeks)
 Bootstrapping

Sample 2:
Vzorek 2: Spotřeba
4 Consumption
za
in
66weeks
týdnů ==00kspcs
3
Týdenní spotřeby
Spare part consumption ND
(pieces)

0
1 4 8 13 17 18 25 27 30 32
26
WeeklyHistorie
consumption history
týdenních (weeks)(týdny)
spotřeb
49
 Bootstrapping

Sample 3:
Vzorek 3:
4 Consumption in
Spotřeba za
6 weeks =
6 týdnů = 12
12 pcs
ks
3
Týdenní spotřeby ND
Weekly SP consumption

0
1 4 8 13 17 18 25 27 30 32
26
WeeklyHistorie týdenních
consumption spotřeb
history (týdny)
(weeks)
50
 Bootstrapping

Sample 4:
Vzorek 4:
4 Consumption in
Spotřeba za
6 weeks== 2
6 týdnů 2 pcs
ks
3
spotřeby ND
consumpiton

2
Weekly SPTýdenní

0
1 4 8 13 17 18 25 27 30 32
26
WeeklyHistorie týdenních
consumption spotřeb
history (týdny)
(weeks)
51
 Example of 100 000 simulations
of SP consumption

Target: SP availability (Service level) = 99%

60 000 100 %
v jednotlivých intervalech

probability of consumption
Kumulativní pravděpodobnost spotřeby
(ze simulace)
of consumption

30 000
OPTIMUM INVENTORY = 9 PCS
(from simulation)
Četnosti spotřeb
Frequencies

Cummulative
0
0 5 10 15
Spotřeba během
Consumption LT – intervaly
during leadtime(ks)
(pcs)
52
Bootstrapping application – a case study

Original inventory: 17 000 EUR

(49 pcs)

Spare part lead-time: 32 days

Intermittent demand
Recommended inventory

99.9% availability 29 pcs

10 000 EUR

Savings
7 000 EUR 53
Bootstrapping in spare parts management information system

Minimum level 2 pcs

54
55

Life cycle thinking:

Consider the whole life cycle of your assets
 PROCUREMENT

COST

PROFIT?
PROFIT

RENOVATION
ASSET MAINTENANCE MAINTENANCE
LIFE CREATES VALUE!
CYCLE
56
Asset life cycle (Kari Komonen, EFNMS EAMC)

INVESTMENT UTILIZATION

$
$
57
 PROCUREMENT

COST

PROFIT?
PROFITPROFIT

RENOVATION
ASSET MAINTENANCE MAINTENANCE
LIFE CREATES VALUE!
CYCLE
58
59

Efficient spare parts management

Conclusions
Efficient spare parts management – 8 rules

Preventive maintenance Smooth SP processes

Segment your SP portfolio Assess criticality

Special methods for

Good forecasting
intermittent demand items

Life cycle thinking Good information system

60
Good information system for spare parts management

Forecast accuracy
Uncertainty and reliability
Minimize!

Input of technicians and

Common sense procurement Make efficient!
Criticality analysis

Forecasting
Quantitative methods Inventory levels Maximize!
Ordering

61
Efficient Spare Parts Management

SPARE PARTS
INVENTORY
MAINTENANCE MAINTENANCE
VOLUME VOLUME
SPARE PARTS
INVENTORY

62
Thank you
Tomas Hladik
Logio s.r.o.
Prague, Czech Republic
www.logio.cz
hladik@logio.cz