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CHAPTER 6
SPARE PARTS INVENTORY AND RISK MANAGEMENT
What do your car insurance, backups of your computer files, and spare parts inventory have in common? They are each an example of risk management. According to author and researcher Douglas W. Hubbard, risk management is “the identification, assessment, and prioritization of risks followed by coordinated and economical application of resources to minimize, monitor, and control the probability and/or impact of events.”
Just like your car insurance minimizes the financial consequence of a car crash, backing up your files minimizes the consequence of a computer crash and spare parts inventory minimizes the consequence of an equipment crash. They are all about risk management.
RISK MANAGEMENT FUNCTIONS
Four basic functions help manage risk:
• risk identification
• risk quantification
• risk probability
• risk response
The first three — identification, quantification and probability — are sometimes grouped together under Risk Analysis or Risk Assessment. With these four functions completed, the last step is to exercise:
• risk vigilance
Risk vigilance is simply the recognition of the risk conditions, the ongoing response to the risk conditions on the ground, and implementation of the appropriate risk responses. Vigilance requires you to identify an appropriate trigger and this trigger defines the parameters for your vigilance. We say appropriate risk responses because different risks require different approaches. For example, you might have a smoke detector to monitor for the risk of fire and machine guards to manage the risk of injury.
Here is an example of this approach:
• Risk identification: Failure of the bearings on a turbine is a risk.
• Risk quantification: In the event of a failure, will anyone get hurt and how hurt? How much money will the event cost in downtime per hour or per day? What is the cost if the repair takes a few weeks or months instead of a few hours or days?
• Risk probability: What is the chance this risk will happen? Has it happened before? Does the manufacturer warn us about the risk? Do we have statistics about MTBF (Mean Time Between Failures) for the bearings in question?
• Risk response: Can we eliminate, mitigate, or anticipate the failure? What PM will extend life? What parts will be needed if the breakdown does occur? How costly is the kit? Can the risk be transferred to someone else (by using supply contracts or buying insurance)? Does the waiting time for the part introduce any unanticipated risk?
• Risk vigilance: How do we organize our team and maintenance strategy so that an event becomes apparent quickly enough that we have time to respond? In addition to vigilance, this aspect includes responding to changes in the character of the risks over the life span of the plant.
RISK MANAGEMENT OPTIONS
In all cases of risk, you have four options for managing that risk. As you evaluate each risk, you need to adopt a management strategy based on the option you choose. The risk management options are presented here in the order in which they should be considered.
You can mix and match options to get the loss level you want. For example, the probability of losing small tools when you let outsiders into the plant is fairly high, but the loss consequence is generally more of a nuisance than a catastrophe. Typical strategies include placing a guard and an entry gate (partial mitigation), but that is pretty much it, you don’t scan or search the workers. You just accept the loss of some items. If the loss level gets too high, you can add weight to the mitigation strategy perhaps by locking up more tools or adding surveillance cameras. Your response could escalate until the losses are reduced to an acceptable level.
1. Avoid the risk. One way to avoid risk is to re-design the work. In many circumstances, this might involve reengineering, choosing long-lived assets, or even replacing the asset. The best way to avoid the risk of an iatrogenic failure (failure caused by the mechanic or electrician) is to design the system to not break down! Of course, that is tough, but improvements in reliability that are based on equipment design are made every day. If you can’t eliminate the risk, the next step is to mitigate it.
Most plants have an Environmental Health and Safety (EHS) department that reviews requests from contractors to bring specialized chemicals on-site. If a chemical is exceptionally risky, EHS can reject the request and literally eliminate the risk posed by that chemical completely. However, that chemical might be the best of the bunch; the others may add other problems.
2. Mitigate the risk. Mitigation involves reducing the probability of the risk happening (using existing technology
