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Spare Part Inventory Management

The document discusses spare parts inventory management in transportation systems. It aims to provide the highest level of customer service while minimizing costs. This is challenging due to conflicting financial and operational goals. The document recommends segmenting the spare parts portfolio, evaluating criticality, championing preventive maintenance, and using metrics to enhance inventory management performance over time. Special methods are also suggested for intermittent demand items and emergencies.

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254 views

Spare Part Inventory Management

The document discusses spare parts inventory management in transportation systems. It aims to provide the highest level of customer service while minimizing costs. This is challenging due to conflicting financial and operational goals. The document recommends segmenting the spare parts portfolio, evaluating criticality, championing preventive maintenance, and using metrics to enhance inventory management performance over time. Special methods are also suggested for intermittent demand items and emergencies.

Uploaded by

chemist_tma
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Spare parts Inventory

Management in
transportation systems
Provide the highest level of service to customers
at the lowest total cost

Jean-Louis Moreau
Procurement Consultant – Interim Executive

JL Moreau - Proprietary/Confidential information 2019-08-30 1


Goals of inventory management
in transportation systems
• Provide the highest possible level of service to end
customers at the lowest total cost.
• Prevent delays and cancellations.
• Maintain a high state of readiness, with assets free of
maintenance issues.
• Ensure part availability to the maintenance function,
optimize preventive maintenance and reduce the impact
of stoppages.
• Conflicting financial and operational goals
→ Inventory fill rate (EOQ)
→ Minimum Equipment List
→ Efficient use of maintenance personnel
JL Moreau - Proprietary/Confidential information 2019-08-30 2
Goals hierarchy in transportation
systems inventory management
Cancellation

Delay

Service level

Efficient use of maintenance


personnel

Financial goals

JL Moreau - Proprietary/Confidential information 2019-08-30 3


Efficient spare parts management

Inventory
volume

Maintenance Maintenance
volume volume
Inventory
volume

Initial state Target state

JL Moreau - Proprietary/Confidential information 2019-08-30 4


Rules for efficient SPM
• Champion preventive maintenance.
• Eliminate process flaws along the Supply Chain.
• Segment the spare parts portfolio.
• Evaluate spare parts criticality.
• Forecasting is key to spare parts management.
• Use special methods for intermittent demand items and
emergencies.
• Consider the whole life cycle of the equipment.
• Implement an appropriate information system for spare
parts and maintenance inventory management.

JL Moreau - Proprietary/Confidential information 2019-08-30 5


Enhance preventive maintenance

Maintenance

Planned Unplanned

Deferred
Standard Predictive Corrective
corrective

Inventory
Planned Procurement
Management

JL Moreau - Proprietary/Confidential information 2019-08-30 6


Segment SP portfolio: Inventory
classification and characteristics
• Rotable: Part that can be economically restored repeatedly
to a fully serviceable condition.
• Repairable: Same as rotable with the difference of a higher
scrap rate.
• Expendable: Single use with 100% scrap rate.
• Recoverable: A repairable with a high scrap rate or an
expandable that can be repaired sometimes with a process.
• Consumable: used in time with 100% scrap rate.

JL Moreau - Proprietary/Confidential information 2019-08-30 7


Inventory classification
and characteristics
Classification Characteristics

Scrap Rate Financial Life-cycle

Rotable Negligible Asset, held Indefinite


on books
until surplus
Between 0% Persists until
Repairable or scrap
and 100% scrap

100% One- Consumed at


Expandable
time use time of use
Expensed at
time of use
100% several Consumed
Consumable
time use over time

JL Moreau - Proprietary/Confidential information 2019-08-30 8


Evaluate spare parts criticality
• Cost • Possibility of
• % of invested capital anticipation
• Characteristics of
failure
• Part lifespan

Cost of
Probability of
holding
failure
inventory

Lead time Impacts of


and other spare parts
parameters unavailability
• Delivery time • Effects of failure on
• Reparability Operations
• Possibility of • Cost of unavailability
maintenance
planning
JL Moreau - Proprietary/Confidential information 2019-08-30 9
Spare parts forecasting
Quantitative Common
methods sense

JL Moreau - Proprietary/Confidential information 2019-08-30 10


Spare parts forecasting
Unexplained/Ra
Minimize
ndom

Make
Uncertainty Common sense
of future
efficient
consumption

Quantitative
Maximize
methods

JL Moreau - Proprietary/Confidential information 2019-08-30 11


Special methods for intermittent
demand items and emergencies
• Continuously assess where intermittent demand items
could be found and possibly secure relationships with
vendors.
• Make provision for emergency buying with special
approval process/Threshold.
• Enforce regularization after the fact to ensure data
accuracy and appropriate control levels.
• Specific set of pre-approved emergency vendors.
• Implement VMI whenever possible.
• Consider the use of P-cards within strict limits.
JL Moreau - Proprietary/Confidential information 2019-08-30 12
Consider the whole life cycle
of the equipment
New vs. aging
fleet

JL Moreau - Proprietary/Confidential information 2019-08-30 13


Inventory performance metrics
• Inventory Performance Metrics are important to gauge the
performance of IMS.
• A properly designed set of metrics will allow diagnosis of
inventory issues and identification of possible areas of
improvement.
• Like any system, IMS will benefit from a robust continuous
improvement process.
• Metrics will serve to place an objective measurement on
planning performance and part delivery processes.
• Beyond ERP’s specific spare parts and maintenance
inventory management systems are helpful.

JL Moreau - Proprietary/Confidential information 2019-08-30 14


Inventory performance metrics
• Service Levels: Delays and cancellations attributed to parts
availability. Stoppage events and Elapsed time to recovery.
• Fill Rate = Number of Filled Requests for Parts/Total Parts
Requests.
• Backorders
• Inventory turnover
• Inventory turns per year for each component
• Repair Turn Around Time or TAT of each component
• Scrap Rates of each component
• Replenishment Lead Times
• No Fault Found Rates
JL Moreau - Proprietary/Confidential information 2019-08-30 15
Thank you
Questions?
Next steps

https://www.jlmconsultant.com

JL Moreau - Proprietary/Confidential information 2019-08-30 16

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