Chapter 5

Maintenance Material Control

5.1 introduction
To be able to minimize downtime,
it is essential that necessary craftsmen, material, and spare parts are available.
Managers are required not only to minimize downtime but also to effectively
control maintenance costs.
Total maintenance costs generally comprise
1. maintenance labor cost
2. the cost of required material and spares,
3. the cost of production downtime when breakdowns occur
investment cost
• One critical cost of maintenance is investment in spares and material.
• If the investment becomes excessive, the results are high capital costs and high
maintenance costs.
• On the other hand, if the spares and material needed for repair and servicing
the equipment are not available when needed, then the cost of downtime will
increase immensely.

5.2 Maintenance Store Components

A typical maintenance store, among other categories of stores, carries spare parts,
normal maintenance stock, and tools. These are defined in the following section.

Spare Parts
Spare parts may further be subdivided into the following categories:
1. Relatively expensive parts;
2. Specialized parts for use on limited number of machines;
3. Spare parts having longer than normal demand lead times;
4. Spare parts having slow turnover; and
 5. Critical spare parts, the non-availability of which may cause expensive
downtime or have an adverse effect on safety

➢ Spare parts are stocked only when the risks involved in doing without them are
considered to out weigh the total cost of carrying them in stock

➢ A method of calculating this interval and the quantity

Normal Maintenance Stock

This category comprises items which do not have a specialized usage, but that have
a definite requirement and a short turnover

Decisions regarding how much to stock and when to order for normal maintenance
stocks can be handled in a more routine manner than in the case of spare parts.

Tools
This category usually comprises special purpose tools, which are issued on loan
whenever needed.

5.3 Maintenance Material Costs

To exercise an effective cost control over maintenance operations, records must be

kept concerning costs of the item, inventorying the item, and invested capital

Cost of the Item

Cost of the item comprises the sum paid to the supplier including freight.

Cost of Inventorying the Item

• Cost of inventorying the item sometimes is estimated as a percent of dollar value
• expressed as a decimal fraction.
• Normally, it varies between 15 and 20 % of the
item cost per year.
Cost of the Item at Its Time of Issue
By considering the following, costs, the cost of an item at the time of issue can
be estimated:

1. Cost of space and ancillary facilities per m2 of storage areas.

2. Cost of capital invested, which may be considered in between bank interest
and the return expected if an equivalent investment was made.
3. Cost of spoilage and deterioration caused by storage and arbitrary pilferage. It
is normal to use 10 % as a cost allowance for many inventory items.
4. Cost due to inflation and this may be estimated as 1 % per month of purchase
cost while the item is held in inventory.
5.4 Maintenance Store Control Procedure
Some of the important elements of a systematic control of maintenance
stores are
(1) the requisition (2) inventory record (3) deciding what to stock
(4) order points (5) order quantities.
 Requisition
• Requisition procedures are an essential step in withdrawing material from
maintenance store room.
• Among other uses, these procedures form the systematic basis for cost accounting
and inventory control.

Inventory Control

• Most control procedures make use of continuous inventory records on which

receipts are added and withdrawals are subtracted.
• This helps in establishing the demand rate of items.

Items to Be Stocked

It is a usual practice that parts and material for routine maintenance should always
be available.

Classifying inventory in the least costly manner may be achieved with ABC
analysis.

ABC Analysis

ABC analysis is based on Pareto’s Law

Major proportion of the inventory value, i.e., 70–80 %, will normally comprise
nearly 10 % of the number of items held in stock.

A step-by-step procedure for constructing a Pareto’s diagram is as follows:

• Select a suitable time period, usually one year, for inventory management.
• Calculate the cost of each item used in the selected period as a percentage of the
total cost of inventory items.
• Rank the items in descending order of percentage of cost of that item to the total
inventory cost. Starting from the items that contribute the most to the cost.
• Plot the graph with percentage of item used on the X axis and percentage of its
cost on the Y axis.

• Items in class “A” are about 10–20 % of total items but account for 60–80 % of
the total cost.
• Items in class “B” are about 20–30 % of total items and account for 20–30 % of
the total cost.
• Item in class “C” are about 60–80 % of total items but account for 10–20 % of
the total cost.

It is recommended that class A items

which have high capital investment, be ordered based on calculations of most
economic order quantities.
Items under this class need close control. Keeping in view the high cost of these
items, a minimum size of safety stock.
Items falling under class B may be ordered in larger quantities than class A items
and similarly larger safety stocks may be maintained.
Items belonging to class C amount to 10 % of the total inventory investment and
these need a minimal control and safety stocks up to 6 months may be maintained.
 5.5 Inventory Systems

• One practical way to establish an inventory system is to keep count of every item
issued and place an order for more stocks when inventories reach a predetermined
level (R)
• The order is fixed in a size which has been predetermined
• demand is known and constant.
• The inventory is steadily depleted until a level R1 (reorder level) is reached

In such a system, R1 = R2 and Q1 ¼=Q2.

This type of system is quite adequate for most of class B items and all the class C
items of inventory.

Economic Order Quantity (EOQ)

find the minimum cost of operating an inventory system and minimize overall cost.
All relevant costs that are considered to be significant are incorporated in planning
the system
Total Annual Cost = Cost of item + Procurement Costs + Carrying Costs

the cost of the item is taken as a constant, it is not included in this illustration.
A model can be formulated for determining Q* based on the following
assumptions:
• The demand is uniform and known,
• The item cost does not vary with order size, i.e., no order discount applies for
large orders,
• Complete orders are delivered at the same time.
• The lead time is known such that an order can be timed to arrive when inventory
is exhausted
• The cost to place and receive an order is the same regardless of order size, and
• The cost of holding inventory is a linear function of the number of items in
stock.

∗
2𝐷𝑆
𝑄 =√
𝐼𝑐
D annual demand;
S ordering cost
𝐼𝑐 Inventory carrying cost.
 The Reorder Level
The reorder level (point) corresponds to the number of items in inventory at which
point an order should be triggered.
It is established by taking lead time consumption into consideration, so that the new
order is received when an inventory level reaches zero

In case there is a lead time of 10 days, the policy would be to order 52 when
180
inventory on hand reaches 10 ( ) = 5 . If R is taken to be average demand
365
during lead time.

Safety Stock
Safety stock is the average amount on hand when replenishment orders arrive.
It can be thought of as the remaining inventory all year. It is usually used when the
demand for items is a random variable, and therefore, inventory may reach its
reorder level sooner or later than expected.
the time between successive replenishments is no longer constant.
There is no stock outage risk involved with demand fluctuations between the time
of maximum inventory and the time inventory level reaches reorder level.
The risk occurs after the reorder point has been reached.
Demand during lead time may turnout to be less than, equal to, or greater than the
reorder point.
A safety stock may be needed to prevent stock outage during the lead time period.
An approach to determine safety stock is to use the concept of service level.
A service level is the percent of times a particular item will not be outage of stock
when demanded
Service Level =1 - Probability of stock outage
Example 3 The lead time demand of a certain type of bearing is normally distributed
with a mean of 150 units and standard deviation of 5 units. The maintenance
manager wants to pursue a policy, whereby the bearing is not available only 1 % of
the time when demanded. Compute how much safety stock should be maintained.
Expected demand during lead time = μ = 150 units; Standard Deviation = σ = 5
units
 Effective Ordering Policy
Maintenance managers must make two basic inventory policy decisions:
• when to reorder
• and how much to reorder.
There are basically two reordering polices
• The first one is based on a specified level of inventory (number of items) below
which an inventory item is reordered
• The second one is a periodic review policy that calls for ordering an item periodically
• selected on the basis of economic considerations.

A well-known ordering policy is (s, S) policy, also known as (min, max) policy.
In this policy, an order size Q0 is placed when the inventory level reaches
s = R (reorder level).
The order quantity is expected to arrive when the inventory level dips to the safety
stock level.
A good choice for Q0 is the economic order quantity (EOQ)

An alternative policy is the two-bin policy which is usually adopted for inexpensive
fast-moving items. In this policy, items are kept in the maintenance shop or factory
in two bins of equal sizes. Items are drawn from one bin until it is depleted.
Then, this bin is red tagged to signal that it is empty and needs to be filled and the
second bin is opened for use. The sizes of the bin are the average demand in the
lead time plus a safety stock.

Ordering Policies for Repairs

Statistically, the failure rate of the equipment or component varies over its life
cycle. It usually depicts a definite pattern, called a bathtub curve. Figure 5.4
illustrates a typical bathtub curve.
 The terms used in the figure are defined below:
1. Infant mortality: early failures due to faulty material and faulty processing.
2. Constant failure rate: random failures that have a constant rate of failure.
3. Wear out failures: failures due to aging, fatigue, etc

The effectiveness of preventive or planned maintenance, it is generally agreed,

declines through the random failure period

Demand and Failure Rate Linkage

Component failure usually triggers equipment failure. To avoid downtime due to
non-availability of spares, the number of spares needed for smooth running of the
equipment for a desired length of time must be estimated and made available
when a demand for such parts occurs.

Estimating Units of Spare Needed for Replacing Failures

The two approaches for estimating demand of spares needed for desired service
level are the graphical and analytical approaches. These are described below.

1 Graphical Approach
The graphical approach is suitable when large populations of equipment and
failure data are available.
 This approach is explained with the help of an example in which it is assumed that
pumps of a similar type fail because of failure of a particular bearing which is being
considered for inventory.

The mean is 1011 h, so 50 % of the pumps are assumed to fail by this time.

If management wants 80 % of the pumps operational, then enough spares of the

component that causes pumps to fail should be maintained to give the desired
service level
The data show 20 % of the pumps can be expected to fail by 820 h.
The number of spares needed for this level of service can be calculated from the
operating hours per week by providing one for each pump for each 820 h of pumping.
2 Analytical Approach
The first step is to identify the failure rate of specific parts.

Example 4 Consider a part which has failed 200 times for 106 h of a particular
equipment’s operation. Estimate the number of parts needed for 1-year smooth
operation of the equipment with a confidence of 95 %.
 Spare Part Classification
Spare parts need to be evaluated in terms of cost and criticality. ABC analysis is
according to cost has already been discussed.
Criticality can also be analyzed using the following criteria:
1. Highly critical, CA: parts which are absolutely essential for the operation of the
equipment.
2. Moderately critical, CB: parts which if not available will have slight to moderate
effect on operation of the equipment.
3. Low criticality, CC parts which are not absolutely essential for the operation of
the equipment.

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