spare parts management, not just supply chain or generic inventory management. The reasons for this are explored in Part 1.
The other key considerations in this phase are understanding the financial implications, developing the policies and processes that provide the framework for action and decision making, and establishing a robust parts identification system. In addition, an understanding of best practices will help ensure that you are working from established principles and practices that deliver the best outcomes. These are all covered in Part 1.
Part 2: Create and Stock
The two most important decisions in spare parts inventory management are whether or not to stock an item and how many to stock. It is these decisions that determine if you have the stock that you need and how much money you spend on your inventory. It is in this phase of the life cycle that a company has the greatest influence on its spare parts inventory, and getting these questions “right” for your circumstance makes everything else that follows that much easier (but not necessarily easy!).
What is most curious about these two decisions, however, is how few companies have properly developed guidelines on the process and tools to use to make these decisions. These should be elements of the policies established as part of your spare parts management system. The problem is that, too often, when there is a policy, the guidelines are vague or nonspecific. For example, they may suggest the collection of appropriate data such as usage and lead time, which is a good start, but then provide no guidance on what to do with this information—that is, how to actually make the stock-holding decision. The intent is right, but the guidance on execution lets it down. Here in Part 2 there is definitive guidance on how to set both the reorder point and the reorder quantity, using a technique that can be applied on a daily basis with little or no software.
Before getting to that, however, it is important to understand the range of issues that will most often derail the “stock–don’t stock” and “how-many” decision process. These include issues such as standardization, capital equipment and the first-time buy, so-called free spares that come with capital purchases, and spare parts criticality. These are all covered in Part 2.
Part 3: The Operations Phase
Following the create and stock phase, the longest part of the spare parts life cycle is the operations phase. While the decision to create an item and stock it in the inventory may be made in minutes, the item can then be part of the inventory for years or even decades. During this time, for most spare parts, the item (and the storeroom team) can be involved in a huge range of activities:
• Future requirements may need to be forecast.
• There will be regular (or maybe irregular) inventory optimization projects.
• Repairable spares require management.
• The storeroom needs to be set up and managed appropriately.
• Periodically, the descriptive information may need to be updated and restandardized.
• Stock takes will occur at least annually.
• The storeroom may adopt bar coding technology.
• There will be a need to coordinate activities and planning with both maintenance and procurement.
Part 3 is the largest section of this book and explains the key aspects of managing all of the above.
Part 4: Obsolescence and Disposal
No matter how an item was first created or how long it is part of an inventory, it is almost inevitable that at some point it will become obsolete and therefore require removal and disposal. Part 4 addresses this final phase of the life cycle by discussing end-of-life management, the last-time buy, the management of obsolescence, and the options for spare parts disposal.
Thirty years ago in that factory in the western suburbs of Melbourne, we had no road map to help us work through all this; we worked it out as we went along. It was here that I discovered that the routine approach for inventory management that we used for our raw materials and finished goods was of little use for our spare parts. We adopted the parts identification system used at the Sydney plant (we had largely the same plant and equipment). We established a storeroom function to control and physically care for the parts. When equipment was updated or replaced, we made sure that we maintained useful stock, and made the most of our limited space, by removing items that were no longer required.
The result of this, and all the work we did in maintenance, was that we not only reduced downtime by 80% (yes, really) but also achieved record financial results and transformed the plant to be the profit leader of the group. We produced one-third of the product and two-thirds of the profit. Of course, we did much, much more than organize and control our spare parts, but the success that we achieved would not have been possible without a reliable supply of quality spare parts.
Phillip Slater
Phillip Slater is a spare parts inventory management and optimization specialist with more than 30 years of industry experience. Phillip’s work has helped companies save hundreds of millions of dollars in spare parts inventory and procurement spend, while, importantly, maintaining their operational capacity and support.
Phillip started his career as a maintenance engineer, so he fully understands the need for having access to the right parts, at the right time.
As a consultant, he has provided strategic and operational advice to some of the world’s largest corporations and has helped companies in more than 35 countries solve their operational and spare parts inventory management problems.
Phillip is the founder of SparePartsKnowHow.com, an online training resource dedicated to spare parts inventory management and optimization.
For more information, please visit
www.PhillipSlater.com and www.SparePartsKnowHow.com.
To put the content of this book into action please visit www.Sparesology.com.
SPARESOLOGY®
The discipline of optimizing the physical,
financial, process, and human resource
management of spare parts.
Sparesology® is more than just ‘inventory optimization.’ Sparesology® requires an understanding of the complete ecosystem within which the spare parts are managed and seeks to ensure that all factors influencing spare parts management outcomes work in concert to achieve an organization’s goals.
