effective spare parts management - 8 rules
DESCRIPTION
The management of spare parts and other materials needed for realization of the maintenance process is one of the key functions in physical asset management.TRANSCRIPT
Effective Spare Parts Management: 8 Rules
Tomas HladikLogio s.r.o., Prague, CZwww.logio.cz
Efficient Spare Parts Management
MAINTENANCE VOLUME
SPARE PARTS INVENTORY
MAINTENANCE VOLUMESPARE PARTS INVENTORY
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
Eight rules for efficient SPM
8
Go for preventive maintenance
STANDARD PLANNED
PLANNED
MAINTENANCE
CORRECTIVE(REPAIRS)
UNPLANNED
PREDICTIVEPROACTIVE
DEFFERED CORRECTI
VE
PLANNED PROCUREMENTINVENTORY MANAGEME
NT
Go for preventive maintenance!
Prevention or correction?
Number of preventive X corrective actions
Downtimes due to corrective maintenance – repairs
Total maintenance cost
Eliminate process problems
LIFE CYCLE OF A SP IN A COMPANY
Eliminate process problems
SP NEED IDENTIFICATI
ON
There is no direct responsibility of maintenance engineers/technicians for “their” items and spare parts levels.
REQUEST FOR ORDER
RFO created by someone else, not by the technician who had identified the need.The step of creating RFO may not be necessary in the process.
RFO APPROVAL
How often are RFOs approved? Who approves?Is RFO approved by means of IS workflow or by signing a paper copy? Alternatively, are both ways needed?After RFO is approved, the issued order must be approved again.Too many approvers, complicated approval procedure and hierarchy of responsibilities.Approving on high levels of management.
Eliminate process problems
PROCUREMENT
Insufficient information available to procurement, poor spare parts identification – the buyer hardly knows what should be bought, additional communication with maintenance technician is needed.Missing or incomplete procurement specification in the IS.
RECEPTION
Problems with missing (undelivered) documentation for the received material (certificates, declarations).Only “paper-based” archiving of spare parts documentation.Problems to find documentation when needed.
WAREHOUSING
Insufficient identification of spare parts in the warehouse.Problems with finding items stored in the warehouse.Inventory count discrepancies, physical stock different from information system data.Non-real value of stock in the information system.Existence of out-of-system stocks.
Eliminate process problems
CONSUMPTION
Slow spare part issues in case of sudden need.Issued spare parts are not consumed in fact. What happens then?Consumption of external material even in case the part is on stock.
WAREHOUSE RETURNS
AND REFURBISHE
D SPARE PARTS
Refurbished parts return to warehouse while new are bought.Accounting price of refurbished items is much higher (or lower) than the non-realistic value of items on stock.Problematic or impossible returns of parts issued but not consumed.Insufficient control of parts dismantled from the maintained object (the information system has no information about these).
Spare parts’ life cycle – benchmarking
Internal best practice
PLANT 1 PLANT 2 PLANT 3 PLANT 4
1 2 30
0.1
0.2
0.3
0.4
0.5
0.6
0.7
Comparison of inventory turnover
Segment your spare parts portfolio
Service level x locked-in capital
Inventory value
90 % 95 % 98 % 99 % 100 %?
Service level / availability
ABC analysis – on hand inventory value
Value of available inventory
ABC analysis – consumed quantity
In spare parts, C and D categories typically prevail
Quantity
Spare parts inventories segmentation – consumption frequency (in quantity)
Quantity (pcs)
Spare parts inventories segmentation – consumption frequency (in value)
Value (CZK)
WHEN?
HOW MANY?
WHEN?
HOW MANY?
Strategic segmentation of spare parts
CONSIGNATION
CONSIGNATION
CONSIDER CONSIGNATION
CONSIDER CONSIGNATION
BUY
BUY
BUY
BUY
CONSIDER CONSIGNATION
CONSIGNATION
BUY BACK
BUY
TYPE
OF
FORE
CAST
CONSUMPTION FREQUENCY
VALUE
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
Value of inventory 41 230 000 CZK
Percentage of storage fee per year 3%Average cost of capital 5%Time of storage 4 years From turnaround 2009 to turnaround 2013Buy-back fee 10%
Storage cost 4 947 600 CZK In four years Capital cost 8 246 000 CZK In four yearsTotal cost 13 193 600 CZKBuy-back cost 4 123 000 CZK
Savings 9 070 600 Maximum suitable buy-back fee 32% Space for negotiation
Turnaround spare-parts buy back example
Between shutdowns
Evaluate spare parts criticality
𝐶𝑖𝑛𝑣=𝐶𝑢𝑛∗𝐿𝑇∗ 𝑓
10 000 EUR x 10% 100 EUR / day 100 days 1 per 2 years
1 000 EUR 5 000 EUR
KEEP ON STOCK
<
Criticality calculation
INVENTORY HOLDING UNAVAILABILITY LEAD TIME FAILURE RATE
Criticality assessment phases
Preliminaryassessment
Technician
Hold on stock
Potentially critical part
Do not stock
Advanced methods to set optimal levels
Criticality assessment
Technician ConsumeSell orScrap
Optimum SP level
Effects of failure Technical places
Consequences of unavailability
Delivery timeRepairabilityPossibility of maintenance planning
Part lifespanFailure probability
Failure characteristicsFailure anticipation
Price% cost of capital
Cost of inventory
holdingFailure probability
Impacts of spare part unavailability
Leadtime andother
parameters
Evaluate spare parts criticality
No need to pilot test
How to assess criticality? 2 step or 1 step
Create questionnaire
Pilot test
Plot resultsSet
criticality line
Create questionnaire
Evaluate
Set criticality line Calibrate Evaluate
Re-evaluate(Validation)
Not suitable for regular evaluations
Less time consumingCan be made a part of process
Need to calibrateProcess for disagreement needed
1 step
2 step
Spare parts criticality analysis result
Criticality score
Spare parts items
Is it safe to evaluate in one step?
95%
5%
% results reclaimed by maintenance engineers
Agreed Reclaimed
-24 -13 -11 -9 -7 -5 -3 -1 1 3 5 7 9 11 13 15 17 19 210
200
400
600
800
1000
1200
1400
1600
Results of criticality evaluation 1 step
2-5 14-17
18-21
22-25
26-29
30-33
34-37
38-41
42-45
46-49
50-53
54-57
58-61
62-65
66-69
70-73
74-77
78-81
0
50
100
150
200
250
300
350
Results of criticality evaluation 2 step
94%
6%
% results disagreed by maintenance engineers
Agreed Reclaimed
2 step
1 step
1 step evaluation in SP process
I need a spare part on stock
Filling a questionnaire
Stock level OK?
Reclaim and escalation to
manager
Reclaim OK
Setting of stock level in IS
No spare part on stock
How much time is needed?
16 minutes or less in 80% of cases
Time
Criticality assessment application
Login = Příjmení Heslo = Jméno
Příklad:tokac miroslav
Login a heslo
Postupné hodnocení kritičnosti
Spare parts management starts with good forecasting
Quantitative methods x Common sense
Quantitative methods
Common sense
Quantitative methods x Common sense
Quantitative methods
Common sense
Unexplained / Random
Uncertainty of future
consumption
Maximize
Make efficient
Minimize
Forecasting step-by-step
Visualisation of time seriesFor better understanding of the time series
Calculation of accuracyAbsolute and relative errors, evaluation on testing season
Calculation of forecasts using all available methods
Selection of the best methodBest accuracy and reliability
1
3
2
4
Which method is the best for spare parts?
1% 1% 2%3% 5%
9%
79%
Konstantní model
Regresní model
Holtovo exp. vyrovnání
Jednoduché exp. vyrovnání
Klouzavý průměr
Winters
Forecasting není možný
Constant model
Regression model
Holt’s exp. smoothing
Simple exp. smoothing
Moving average
Winters
Forecasting impossible
???
Use special methods for intermittent demand items
Týde
nní s
potř
eby
ND
Historie týdenních spotřeb (týdny)4 13 17 30
0
1
2
3
4
81 18 25 2726
32
Spare parts – intermittent demand
Weekly consumption history (weeks)
Wee
kly
spar
e pa
rt c
onsu
mpti
on (p
iece
s)
QUESTION: What reorder level should be set in order to ensure required availability of a spare part?
Týde
nní s
potř
eby
ND
Historie týdenních spotřeb (týdny)4 13 17 30
0
1
2
3
4
81 18 25 2726
32
BootstrappingBootstrapping = random sampling from history of consumptions.
SP consumption for lead-time period is sampled from history
Sample 1: Consumption in6 weeks = 5 pcs
Wee
kly
SP c
onsu
mpti
on
Weekly consumption history (weeks)
Example: SP lead time is
6 weeks
Bootstrapping
Vzorek 2: Spotřeba za
6 týdnů = 0 ks
Týde
nní s
potř
eby
ND
Historie týdenních spotřeb (týdny)4 13 17 30
0
1
2
3
4
81 18 25 2726
32
Sample 2: Consumption in6 weeks = 0 pcs
Weekly consumption history (weeks)
Spar
e pa
rt c
onsu
mpti
on (p
iece
s)
Bootstrapping
Vzorek 3: Spotřeba za
6 týdnů = 12 ks
Týde
nní s
potř
eby
ND
Historie týdenních spotřeb (týdny)4 13 17 30
0
1
2
3
4
81 18 25 2726
32
Sample 3: Consumption in6 weeks = 12 pcs
Weekly consumption history (weeks)
Wee
kly
SP c
onsu
mpti
on
Bootstrapping
Vzorek 4: Spotřeba za
6 týdnů = 2 ks
Týde
nní s
potř
eby
ND
Historie týdenních spotřeb (týdny)4 13 17 30
0
1
2
3
4
81 18 25 2726
32
Sample 4: Consumption in6 weeks = 2 pcs
Weekly consumption history (weeks)
Wee
kly
SP c
onsu
mpi
ton
Četn
osti
spot
řeb
v je
dnot
livýc
h in
terv
alec
h (z
e si
mul
ace)
Spotřeba během LT – intervaly (ks)0 5 10 15
60 000
0
30 000
Kum
ulati
vní p
ravd
ěpod
obno
st s
potř
eby
100 %
Example of 100 000 simulations of SP consumption
Target: SP availability (Service level) = 99%
OPTIMUM INVENTORY= 9 PCS
Consumption during leadtime (pcs)
Cum
mul
ative
pro
babi
lity
of c
onsu
mpti
on
Freq
uenc
ies
of c
onsu
mpti
on (f
rom
sim
ulati
on)
Bootstrapping application – a case study
99.9% availability
Original inventory: 17 000 EUR (49 pcs)
Spare part lead-time: 32 days
Recommended inventory
29 pcs
10 000 EUR
Savings
7 000 EUR
Intermittent demand
Life cycle thinking:Consider the whole life cycle of your assets
Life cycle thinking:Consider the whole life cycle of your assets
Bermuda triangle of asset
management
Life cycle thinking:Consider the whole life cycle of your assets
PROCUREMENTINSTALLATION
OPERA
TION
MAINTENANCE
RENOVATION
DISPOSA
L
COST
COST
COSTCOST
COST
PROFIT?PROFIT
MAINTENANCE CREATES VALUE!
ASSET LIFE CYCLE
Asset life cycle (Kari Komonen, EFNMS EAMC)
INVESTMENT UTILIZATION
$$
PROCUREMENTINSTALLATION
OPERA
TION
MAINTENANCE
RENOVATION
DISPOSA
L
COST
COST
COSTCOST
COST
PROFIT?PROFIT
MAINTENANCE CREATES VALUE!
ASSET LIFE CYCLE
PROCUREMENTINSTALLATION
OPERA
TION
MAINTENANCE
RENOVATION
DISPOSA
L
COST
COST
COSTCOST
COST
PROFIT?PROFIT
MAINTENANCE CREATES VALUE!
ASSET LIFE CYCLE
PROCUREMENTINSTALLATION
OPERA
TION
MAINTENANCE
RENOVATION
DISPOSA
L
COST
COST
COSTCOST
COST
PROFIT?
MAINTENANCE CREATES VALUE!
ASSET LIFE CYCLE
PROFIT
Efficient spare parts management Conclusions
Efficient spare parts management – 8 rules
Preventive maintenance Processes without problems
Segment your SP portfolio Assess the criticality
Good forecasting Special methods for intermittent demand items
Asset life cycle Good information system
Good information system for spare parts management
Quantitative methods
Common sense
Unexplained / Random
Maximize!
Make efficient!
Minimize!
ForecastingInventory levels
Ordering
Input of technicians and procurement
Criticality analysis
Forecast accuracy and reliability
Efficient Spare Parts Management
MAINTENANCE VOLUME
SPARE PARTS INVENTORY
MAINTENANCE VOLUMESPARE PARTS INVENTORY
Thank youTomas HladikLogio s.r.o.Prague, Czech [email protected]+420 731 151 276