Management Of Spare Parts Inventory In A Manufacturing Organization

4401 words - 18 pages


Proper planning and control of spare parts inventory is a critical component of an effective asset management program. If the right parts are not on hand when needed for routine maintenance or repairs, downtime is prolonged. If too many parts are on hand, the enterprise absorbs excessive costs and the overhead of carrying the inventory.

There are tried and true strategies to manage spare parts in support of effective asset management, along with some that can be considered questionable, and a variety of new and innovative practices. Advanced enterprise asset management (EAM) solutions support the proper implementation of these capabilities. Following are examples of each. ...view middle of the document...


Automatic replenishment. Automating the thought process related to reorders has generated proven savings. Suggested reorder functionality creates requisitions based on reorder points (ROP) and reorder quantities (ROQ) that are stored in the inventory record. Once inventory levels for a part fall below the reorder point threshold, a suggested reorder is placed for the reorder quantity, which in turn creates a requisition. This saves time and prevents the delays and errors that can occur with manual purchasing processes.
When a simple ROQ value is not enough, an economic order quantity (EOQ) algorithm can be used to calculate the right quantity of a spare part to purchase when replenishment is needed. The EOQ can consider volume discounts, the cost of placing an order, carrying costs, and other factors.

Vendor service levels. Capturing supplier service level data within the inventory record helps bring to light the most efficient, dependable, and cost-effective vendors. Preferred suppliers can be identified based on historical lead times, pricing, quality, number of short- or over-shipments, how often goods are received damaged, frequency of backorders, and other criteria. Preference can be given to these vendors in the procurement process.

Where used. A view of where a part is used, for example on which assets a certain ball bearing is installed, provides benefits to both the plant floor and storeroom. This view enables inventory personnel to understand how extensively a part is used throughout the operation, and helps the maintenance planners to determine the item number and quantity of parts installed on an asset.

Multi-stores capability. Taking where-used one step further, a multi-stores capability enables an enterprise-wide view of spare parts inventory that is stored at more than one warehouse or off site by a third party. In a multi-plant environment or when maintenance departments are distributed, visibility into inventory at the various storerooms permits monitoring of parts availability and service-level agreements across the enterprise as a whole or on an individual basis.

Controversial methods
Just-in-time (JIT) replenishment is a popular but sometimes controversial concept of storing minimal inventory in the warehouse and replenishing it only when and as needed╛just in time. Although enabling significant carrying cost savings, there are risks involved. The best replenishment formulas cannot predict an emergency breakdown, a vendor going out of business, a carrier going on strike, or a sudden shortage of raw materials. Being too conservative in stocking levels can result in the inability to repair equipment in a timely manner or to keep the production line running.
In asset management, the criticality of a part determines whether it is a candidate for JIT. A criticality code in the EAM inventory record can be used to identify these items.

Lean manufacturing is a similar concept with a broader scope. Lean...

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