Populating the no mans land of spare parts management

February 22, 2016

Author: Gordian Managing consultant Stijn Wouters

Almost all production and service industries have high demands for asset uptime. To minimise the downtime of an asset, maintenance must be performed and this means having the right spare parts in stock. However, especially for capital intensive assets, regular and proper maintenance can be costly. Think of the stock holding costs associated with the working capital of spare parts, the operational costs of transport and stores, and the transactional costs at the purchase department.

The no man’s land

Spare parts management is a key ingredient of asset management but is not always considered as such. From our experience, spare parts management is a ‘problem’ felt by many but owned by a few, or sometimes owned by no one. Operations only cares about asset availability, while Finance only cares about stock holding costs. Purchasing wants to reduce its spend and the store manager has a difficult time handling all the incoming and outgoing spare parts every day.

The integral solution of balancing spare parts availability (and therefore asset availability) with working capital and supply chain costs can greatly improve companies’ spare parts management.

Spare parts classification

Since not all organisations and their challenges are identical, finding this balance is not an ‘off the shelf’ process. Different spare parts management strategies have different focuses on different sub assortments of parts.

This model classifies every single spare part based on its demand frequency and unit price. Cheap fast moving spare parts are typically managed by exception and setting high stock availability levels. By not intervening much in this segment, spare parts planners can save time which can be spent on the more difficult parts in the spare parts portfolio – critical and expensive slow movers.

The approach for these critical, expensive slow moving parts falls more under risk management. All stakeholders (procurement, material management, engineering and production) are involved and make joint stocking decisions. Advanced inventory models and statistics are not applicable anymore. Spare parts pooling might be an ideal solution as well for economies of scale.

Case study: NedTrain

This differentiated approach was practically implemented at NedTrain, the maintenance organisation of the Dutch railways. They lacked spare parts control, but together with Gordian, they realised a stock reduction of as much as 50% and achieved an improved stock availability. To ensure this significant result was not lost, NedTrain firstly decided to appoint a supply chain planner and secondly, to receive structural support from Gordian’s Planning Services.

With this ongoing service, the results of the stock reduction project will be properly safeguarded. The stock value has since been reduced even further while availability remains at a consistently high level. NedTrain, partly due to the Planning Services programme, is now flexible and agile enough to respond to the dynamics of the organisation and is back in total control.

South African partners

With Pragma, Gordian is entering the South African market. Because of the no man’s land, some education may need to be done first. However, the number of opportunities shows that South Africa is ready for spare parts optimisation. Numerous quick scans have been conducted, as well as business process assessments, complete workshops, and even training courses on spare parts management.

Perhaps you are becoming increasingly aware of spare parts management issues and challenges. Our differentiated and practical approach can yield substantial improvements for you in this area.

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