Many companies Fail, not

because of more consumption but

due to maintenance of huge
spare inventory which remains
unutilized.
Spare part
Spare part means a part or sub-unit or a major assembly
which is available in stock for substitution when needed.

Factors which necessitate scientific spare parts management

are:

• Random and unpredictable pattern of failure of

machines and equipment's.
• Long lead time required for procurement of spare
parts from original equipment manufacturers.
• Difficulty in manufacturing of spare parts because of
non-availability of special materials.
• High tendency for obsolescence of machines and
equipments.
 Classification of Spare Parts
• Regularly used spare parts
• Irregularly used spare parts

Classification of spare parts based on movement analysis

• Fast moving
• Slow moving
• Non-moving

 Classification of spare parts based on functional characteristics

• Capital spares
Capital spares are spare parts which, although acknowledged to have a
long life or a small chance of failure.
• Repairable spares
Repairable parts are parts that are deemed worthy of repair, usually by
virtue of economic consideration of their repair cost.
• Consumable parts
Parts that are not repairable, are considered consumable parts.
Consumable parts are usually scrapped, or "condemned", when they are
found to have failed.
Overhauling spares–
These spares are those spare parts which must be replaced
every time the equipment is dissembled and re-assembled.

Wear and tear spares-

These spare are those spare parts which have regular wear
and tear in the course of operation of the equipment and need
to be replaced after definite number of hours of equipment
operation.

Insurance spares
• An insurance item is a spare part that will be used to replace a
failed identical part in operating equipment whose penalty cost
for downtime is very high.
 Inventory Analysis

• It is essential to analyze the spare parts inventory based on various

characteristics such as the frequency of issues, the annual consumption
value, criticality, the lead time & the unit price.
• This is essential as it would not be possible to exercise the same type of
control for all items & may not really be effective.

Commonly used inventory analysis are :

1. FSN analysis
2. ABC analysis
3. VED analysis
4. SDE analysis
5. HML analysis
5
Classification based on frequency of issues/ use:
F:- Fast moving
S: -Slow moving= items that are issued less
than
N: -Non
onceMoving=
a monthitems that are not issued/ used for more than 2 years.

This classification helps spare parts management in

• establishing most suitable stores layout by locating all the fast moving
items near the dispensing window to reduce the handling efforts.
• Also, attention of the management is focused on the Non-Moving items
to enable decision as to whether they are required in the future or they
can be salvaged.
Experience shows that many industries
which are more than 15 years old have
more than 50% of the stock as non-
moving spares.

Even if a few of them are disposed off & the locked up capital is made
available, it will make available additional working capital to the
organization. Action for disposal should be taken based on the value of each
item of spare.
Classification based on the lead time:
This classification is carried out based on the lead time required to
procure the spare part.

The classification is as follows:

Scarce (S):= items which are imported & those items which require
more than 6 months’ lead time.
Difficult (D):= items which require more than a fortnight but less
than 6 months’ lead time.
Easily available (E):= items which are easily available i.e. less than a
fortnights’ lead time.

This classification helps in reducing the lead time required at least in case of
vital items. Ultimately, this will reduce stock-out costs in case of stock-
outs. A comprehensive analysis may ultimately bring down lead time for
more & more number of items. This will also result in streamlining the
purchase & receiving systems & procedures.

7
Classification based on criticality:

Heavy Production loss

V High cost in emergency
Spare purchase
Criticality (vital)
Example: Kiln: Bearing

Moderate
Non E
Loss
Availability (Essential) Example: Bearing for
Auxiliary Pumps

D
(Desirable)
Loss not significant

Example: Gasket for

piping connections

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Classification based on consumption:
Method for classifying spares is on the
basis of annual consumption value. As it
is true for any inventory situation,
Pareto’s principle can be applied to
classify maintenance spare based on
consumption value.
Pareto principle: the
significant items in a given
group normally constitute a
small portion of the total
items in a group & the
majority of the items in the
total will, in aggregate, be of
minor significance.

In a specific spares control system, it is quite possible that in a single year,

many spares would not have been consumed at all. In such cases, it is
better to perform ABC analysis on longer consumption period data, say 3
years. Then only spares will not be left out in this classification.
Policy for ‘A’ items
• Minimum control
• Bulk orders
• More items from same supplier
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 Classification based on unit price:

Unit cost is very High

H
(high cost) Example: Say Rs. 10,000/- & Above

M Unit cost is Medium

High (Medium
Cost cost) Example: Say Rs. 1000/- & Above

Unit cost is Low

L
(Low cost)
Example: Say Rs. 100/- & Above

This analysis helps in exercising control at the shop floor level i.e.
• Clarity
• Proper Authorization
• Issue against replacement
• Exploring ways to enhancing left (Reconditioning & repair) 19
Problems and issues in spare parts management
• The major problem in the supply of spare parts, is planning, executing,
the required spares planning.

• Drawing/specification should be confirm to standards.

• The Purchase order should given correct description, code no:
drawings and amendments if any in due course.
• The major problem in spares part management is identification and
procurement of exact match.
• Identification of spare parts is not a problem, but keeping inventory of
the spares is the biggest problem.
• Major problem is human error.
 
STORE KEEPING
 
Store keeping is a specialized and important function of materials control
that is especially concerned with the physical storage of goods.
The storekeeper is responsible for safeguarding and keeping the
materials and suppliers in proper place unit required in production.

Objectives of storekeeping:

1. To ensure uninterrupted supply of materials and stores without delay to

various production and service departments of the organization.
 
2. To prevent overstocking and understocking of materials,
 
3. To protect materials from theft, fire and other risks.
 
4. To minimize the storage costs.
 
5. To ensure proper and continuous control over materials.
Functions of Storekeeping

1. Issuing purchase requisitions to Purchase Department as and when

necessity for materials in stores arises.
 
2. Receiving purchased materials from the purchase department and to
confirm their quality and quantity with the purchase order.
 
3. Storing and preserving materials at proper and convenient places so
that items could be easily located.
 
4. Storing the materials in such a manner so as to minimise the
occurrence of risks and to prevent losses due to defective storage
handling.
 
5. Issuing materials to various departments against material requisition slips
duly authorized by the respective departmental heads.
Advantages of Stores:
• It is economical because there is economy in floor space, office
overheads, stationery etc.
• It facilitates inventory checks.
• The amount of capital invested in stock is minimized.
• Since all stores are located in one place, it becomes convenient to
control the physical stock balances more effectively.
• Better security arrangement can be made.

• Disadvantages:
(a) It takes time to deliver materials to production departments if store is
situated at some distance from many departments. So it causes
inconvenience and delay.
 
(b) There is a greater risk of loss by fire because of concentration of all
types of materials in one place.
 
(c) There is increased transportation cost.
(d) Administration becomes too complicated in a very large store.
TYPES OF STORES

Stores may be centralised or decentralised.

 
• Centralized storage means a single store for the whole
organization,
• whereas decentralized storage means independent small
stores attached to various departments.
• Centralized storekeeping ensures better layout and control
of stores, economical use of storage space, lesser staff,
saving in storage costs and appointment of experts for
handling storage problems. It further ensures continuous
stock checking.
• Decentralised stores involve lesser costs and time in
moving bulky materials to distant departments and are
helpful in avoiding overcrowding in central store.
Advantages of a Centralized Store:
 
• Better supervision is possible for using specialized skills and equipment.
 
• Administration cost relating to stock recording is less.
 
• Better layout of Stores is possible which results in efficiency in stock control.

• Absence of any worker does not affect the work since staff become
acquainted with different types of stores.
 
• Better security arrangements can be made.

Disadvantages of Centralized Stores:

i. It involves increased transportation costs.
 
ii. It causes inconvenience and delay in supply of materials as the production depart­
ments have to obtain supply from the store situated at a distance.
 
iii. More frequent movements of small quantities of materials may increase
costs and cause production control problems.
 
iv. Greater risks of loss by fire.
STORE LAYOUT

• The layout of the stores department requires thoughtful

considerations. Racks, bins, shelves etc. must be
arranged for easy access.
• There must be enough provision for open space for the
passage of trucks.

• Special arrangement should be made for the storage of

materials which are affected by atmospheric conditions.

• Heavy and bulky goods which cannot be kept in racks or

bins are to be kept on floor.
• In that case, the area of the floor where these materials are
to be kept should be marked with white lines indicating
the area kept reserved for storing those materials.
Store Design and Layout - Different Floor Plans
and Layouts
Location
Make sure your store is in a prime location and is easily accessible to the end-users.
Floor Plan
1.Straight Floor Plan
The straight floor plan makes optimum use of the walls, and utilizes the space in
the most judicious manner. The straight floor plan creates spaces within the retail
store for the customers to move and shop freely.

2.Diagonal Floor Plan

According to the diagonal floor plan, the shelves or racks are kept diagonal to each
other for the owner or the store manager to have a watch on the customers.
3.Angular Floor Plan
The fixtures and walls are given a curved look to add to the style of the store.
Angular floor plan gives a more sophisticated look to the store. Such layouts are
often seen in high end stores.

4.Geometric Floor Plan

The racks and fixtures are given a geometric shape in such a floor plan. The
geometric floor plan gives a trendy and unique look to the store.

5.Mixed Floor Plan

The mixed floor plan takes into consideration angular, diagonal and straight layout to
give rise to the most functional store lay out.
Tips for Store Design and Layout

• The trial rooms should have mirrors and must be kept clean. Do not
dump unnecessary boxes or hangers in the dressing room.
• The retailer must choose the right colour for the walls to set the
mood of the customers. Prefer light and subtle shades.
• The fixtures or furniture should not act as an object of obstacle.
Don’t unnecessary add too many types of furniture at your store.
• Never play loud music at the store.
• The store should be adequately lit so that the products are easily
visible to the customers. Replace burned out lights immediately.
• The floor tiles, ceilings, carpet and the racks should be kept clean
and stain free.
• There should be no bad odour at the store as it irritates the customers.
• Do not stock anything at the entrance or exit of the store to block the
way of the customers. The customers should be able to move freely in
the store.
 FACTORS TO CONSIDERED IN DECIDING A STORE LOCATION

Before choosing a retail store location, define how you see your business
now and in the future.
• What are the demographics of your core customers?
• Can you visualize your building?
• Do you know what you want to sell and what you want your business to
be known for?
• Have you determined how much retail space, storage area, or the size
of the office you need?

If you do not answer these basic questions, it will be hard to find the
perfect location for generating the maximum amount of profit for your retail
store.

Type of Goods Sold

Examine what kind of products you sell, as some goods will require
certain types of locations.
Would your store be considered a convenience store, a specialty shop
or a shopping store?
Population and Your Customer
When choosing a city or state to locate your retail store, research the area
thoroughly before making a final decision. Read local papers and speak to
other small businesses in the area.

. Any of these sources should have information on the area's population,

income brackets, and median age. You know who your customers are, so
make sure you find a location near where your customers live, work and
shop.

Accessibility, Visibility, and Traffic

• How many people walk or drive past the location?
• How well is the area served by public transportation?
• Can customers and delivery trucks easily get in and out of the parking
lot?
• Is there adequate parking?

Depending on the type of business, it would be wise to have somewhere

between 5 to 8 parking spaces per 1,000 square feet of retail space.
When considering visibility, look at the location from the customer's
viewpoint.
In many cases, the better visibility your retail store has, the less
advertising is needed.
A specialty retail store located six miles out of town in a free-standing
building will need more marketing than a shopping store located in a
mall.

• Signage, Zoning, and Planning

Before signing a lease, be sure you understand all the rules, policies and
procedures related to your retail store location.

Contact the local city hall and zoning commission for information on
regulations regarding signage.

Ask about any restrictions that may affect your retail operation and any
future planning that could change traffic, such as highway
construction.
• Competition and Neighbors
Other area businesses in your prospective location can actually help or hurt your
retail shop.
Determine if the types of businesses nearby are compatible with your store.

For example, a high-end fashion boutique may not be successful next door to
a discount variety store. Position it next to a nail or hair salon, which tend to
draw the same demographic of customers, to more optimal results.

• Location Costs
Along with the base rent, consider all location-based costs involved when
choosing a retail store location.

• Who pays for lawn care and security?

• Who pays for the upkeep and repair of the heating/air units?
• Will you need to do any painting or remodeling to have the location fit
your needs?
• Will the retailer be responsible for property taxes?
Personal Factors

If you plan to work in your store, think about work-life balance issues such
as the distance from the shop to home and other personal
considerations.

• Final Considerations
Your retail shop may require additional handling when it comes to choosing
a location. Make a list of any special characteristic of your business that
may need to be addressed.

• Will the store require distinct lighting, fixtures or other hardware

installed?
• Are restrooms for staff and customers available?
• Is there adequate fire and police protection for the area?
• Is there a sanitation service available?
• Does the building have a canopy that provides shelter if raining?
PRINCIPLES IN STORES MANAGEMENT

There five key principles of inventory management:

1. demand forecasting,
2. warehouse flow,
3. inventory turns/stock rotation,
4. cycle counting and
5. process auditing.
1. Demand Forecasting

Depending on the industry, inventory ranks in the top five business costs.
Accurate demand forecasting has the highest potential savings for any of
the principles of inventory management.
Both over supply and under supply of inventory can have critical business
costs.
Whether it is end-item stocking or raw component sourcing, the more
accurate the forecast can be.
2. Warehouse Flow

The old concept of warehouses being dirty and unorganized is out dated
and costly.
Lean manufacturing concepts, including 5S have found a place in
warehousing. Sorting, setting order, systemic cleaning, standardizing,
and sustaining the discipline ensure that no dollars are lost to poor
processes.
3-Inventory Turns/Stock Rotation

In certain industries, such as pharmaceuticals, foodstuffs and even in

chemical warehousing, managing inventory down to lot numbers can
be critical to minimizing business costs.
Inventory turns is one of the key metrics used in evaluating how
effective your execution is of the principles of inventory management.

4. Cycle Counting

One of the key methods of maintaining accurate inventory is cycle

counting.
This helps measures the success of your existing processes and
maintain accountability of potential error sources.
There are financial implications to cycle counting. Some industries require
periodic 100% counts.
5. Process Auditing

Proactive error source identification starts with process audits. One of the
corner stone principles of inventory management is to audit early and
often.

Process audits should occur at each transactional step, from receiving to

shipping and all inventory transactions in between.

By careful attention to each of these critical core principles, your business

can increase efficiency and reduce costs.
Thank u