“Optimise your spares,” they say – and to your credit, you immediately consider those spare parts that are just lying in the stores and have not moved for the last five to ten years. It’s a good start, but what about the rest of your inventory? What will the approach be for the vast majority of spare parts that your company holds? Do you employ a financial or logistics company? Or do you ask Pragma to use sound engineering and asset management principles to optimise the spare parts held in your stores?
There is significant value in understanding the considerable impact that engineering and asset management principles can have on spare parts demand forecasting. In Model 1, we proposed stock levels to cater for the unpredictable demand (breakdowns), and not for the predictable demand (services, shutdowns, etc). This can and should be used to motivate getting your work management process in order and to mature the environment to predictive rather than breakdown maintenance. Model 2 considered the impact of the standardisation of equipment. The insights gained from these models demonstrated significant improvements in inventory optimisation. Refer to Appendix A for context on these two models.
Traditionally, the solution for spare parts optimisation has revolved around categorising parts and determining demand based on historical data or complex mathematical models. While this approach has its merits, it fails to fully grasp the underlying factors that drive spare parts demand.
Pragma’s interest in the subject of spare parts optimisation is threefold.
Firstly, the opportunity presents itself during project execution as part of maintenance readiness. The reliability engineering function needs to specify stock levels for new equipment, and in the absence of historical data, a different approach is needed.
Secondly, clients with poor-quality consumption data also need to be serviced in the spare parts optimisation field.
Thirdly, you need to improve your understanding of the impact that employing engineering and asset management principles could have on the optimisation of spare parts.
Demand forecasting can be approached by using one of three forecasting principles:
- Engineering expectations
- Planned maintenance
- Historical data
The value of planned maintenance in spare parts optimisation
Planned maintenance plays an important role in spare parts demand. It refers to the proactive and systematic maintenance, repair and replacement of equipment components before they fail.
Since it is proactive, you must question the reason for keeping these components as spare parts. Optimisation in this area means having stock levels that cater only for unpredicted demand, such as breakdowns, and excluding planned maintenance spare requirements from spare parts calculations. To this effect, Pragma has developed models and generated spare parts data for three different scenarios. The scenarios differentiated between high-cost (R100 000) and low-cost (R500), versus fast- and slow-moving spare parts, based on the following criteria:
- Firstly, they considered, as a baseline, a spare parts inventory policy that stocks items solely for breakdowns.
- Secondly, they considered a relatively immature organisation with 67% breakdowns and 33% planned maintenance.
- Thirdly, they considered a more mature organisation with 67% of spare parts demand coming from the planned environment.
The results looked promising:
For slow-moving spare parts, the savings were inconsistent. Previously, there may have been one spare part in stock, but now, none is needed. Alternatively, the requirement may have been reduced from two spare parts to one, or it may remain unchanged at two. Therefore, savings are very dependent on the cost of the specific spare in question.
Savings become more predictable when there is an increase in demand.
High-cost spare parts with medium to high demand can achieve savings of approximately 10% relative to the baseline when 33% of planned replacements are excluded from the stocking requirement. These savings can increase to as much as 19% when 67% of planned replacements are excluded.
Low-cost spare parts with medium to high demand can achieve savings in the range of 12 to 38%.
This approach requires a mature work management process that prioritises predictive and preventive maintenance over reactive breakdown maintenance. By aligning with these principles, organisations can maintain lean yet effective inventory levels, ensuring the availability of the necessary components without keeping excess stock.
The power of standardisation in spare parts management
Standardisation of equipment is another key aspect that engineering principles can have a significant impact on. In many industrial settings, companies use various types of equipment from different manufacturers, leading to a wide range of spare parts in inventory.
During operational readiness, decisions that are relevant to the standardisation of equipment need to be made. When considering replacement at the end of life, it is wise to consider the potential benefits that could be gained from the standardising of equipment. By adopting standardised components, you can streamline inventory management and reduce the number of spare parts needed. This leads to cost savings, since standardised parts are often more readily available in the market, resulting in faster procurement and reduced lead times during emergencies.
The model generated for this case compared having six machines (or production lines) with the same spare parts versus having three machines with one type of spare and three machines with another type of spare. Once again, the models differentiated between high-cost (R100 000) and low-cost (R500), versus fast- and slow-moving spare parts. In this case, a saving of between 27 and 39% was realisable.
Conclusion
Optimising spare parts inventory requires a comprehensive approach that goes beyond addressing obsolete and non-moving stock. Integrating engineering and asset management principles into the optimisation process can lead to substantial cost savings of up to 38%, increased operational efficiency, and enhanced performance. By catering for planned demand through a mature work management process and standardising equipment, companies can achieve significant cost benefits of up to 33% and ensure a more sustainable and successful approach to spare parts optimisation. Embrace the power of engineering and asset management to unleash the true value of your spare parts inventory.
