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Raul Martins

Due to a poor spare parts policy, cost reduction and problems with the Procurement/Purchase area, your plant lacks important spare parts when required. What would you do to tackle this issue?

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Hi all,

One of our most popular topics here at R2 Reliability Online Community was “What is your single biggest issue when it comes to Maintenance Planning & Scheduling?”!

We have received many great replies so far, so we decided to go a little further on this topic.

Basically, we collected data from that topic in order to discover which one is the most common issue according to the opinions that we have received. Here are the results of the data collection:

image.png.5e6bd1dc6db8b48a41e143f6f6951f0f.png

As we can see on the graphic above, although many different issues were raised, the most common was “Lack of spare parts available”.

This category includes not having the right materials available when required due to poor spare parts policy, cost reduction, as well as problems with the Procurement/Purchase area.

Now we want the community to help our members to solve this problem!

So, the question is:

Due to a poor spare parts policy, cost reduction and problems with the Procurement/Purchase area, your plant lacks important spare parts when required.

What would you do to tackle this issue?

 

Don't forget of telling us how and why you think think this strategy solve this situation!

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  • Automatic Spare parts minimum stock ( depending on historical data/ or on planning)  management system, which has  calibrated levels of minimum stock spare parts  and could also issue automatic orders to the puchase department. The Offset of the orders can be adjusted dependiong on the criticallity of the spare part.
  • Spare part contracts with Pricelist and fixed delivedry time for specific spare parts .  If you have a good contract  you can drive the above automatic  orders directly to the contract
  • Meeting with Procurement within the year for tracking the spare Parts Contract. 

For us the Spare management system will eliminate the delays in ordering and by input date will always now the minimum safe stock, without someone to be always checking

The contract ( you can haev a lot of contract wth deffierent suppliers , eliminating the low sapre part availability of a specific contractor)  mus always be avilable so you can without many steps order the needed part. Depenfid on the cost and your strategy you can have guaranteed delivery time for critical parts 

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What a topic! Lack of parts is a refrain (complaint) I hear over and over from customers all over the world. Sometimes there really are very poor spares management practices, sometimes stores has discarded needed materiel, sometimes policy does get in the way, but more often than not there are problems with planning and scheduling being flawed and far too short sighted.

Planners expect the parts to be there, and the stores person needs to be told what spares need to be there. Even with diligence on both "sides", parts unavailability becomes a problem. Of course maintainers taking the issue into their hands will often stash parts in shops, etc. so that they know they have their critical spares. That serves to distort the information available to the stores-keepers so they are then left making decisions about buying on the basis of flawed, incomplete and inaccurate  information. 

The problem is not so easily solved either because maintainer behavior will need to change, planning forecasts need to be far better than they usually are, and stores needs to get smarter about how it determines quantities to hold, buy and about what is NOT needed in stores any longer.

Consider that parts are a form of insurance against downtime. Insurers don't use simplistic calculations to determine what coverage to offer - there's a whole array of statisticians (actuaries) looking at risks and where to and not to put their money. Most companies don't give anywhere near enough thought to spares, how much to invest in it, which spares to carry to get the most uptime, etc. 

You need to know what creates demand - failures and preventive work do most of that. Preventive maintenance should be planned and scheduled with a very easy to forecast demand for spares. Predictive and detective maintenance do not usually consume spares, but they do uncover failures that must be fixed (which usually do consume spares). That demand is also fairly easy to forecast if you use failure statistics to forecast what failures you will find. The only "surprises" should arise from those failures you allow to occur, likely randomly and (if you've done your RCM work) only on assets where some downtime is tolerable. 

Fast moving items (fasteners, fittings, electric devices, some bearings, etc.) can be managed with the simpler stores calculations for min / max / EOQ / ROP. Even if you don't forecast these, you can gather usage information based on actual usage. For the slower moving items the data won't build up for a long time so that approach breaks down. Lead times are often longer and those will drive up the need for spares, even with low demand. You need to forecast demand. It is based on failure rates and task frequencies. Clearly, the more of your work is proactive, the more easily you can forecast demand for most items.

If you want to lower your risk of stockouts, then the math gets more complex. Very few companies use the sort of spares calculation tools that are needed and few stores people seem to have the mathematical knowledge to use them. Depending on the simple algorithms built into your CMMS/EAM is just not good enough. The software tools I've seen are not part of any CMMS/EAM - they are stand alone tools that perform the analysis. The results need to be transferred to your stores management software and then the analysis itself needs to be kept up to date. Someone needs to stay on top of the situation and that someone, needs to understand what she / he is doing, not just plugging numbers into formulas.  

There's quite a bit of science behind getting it right. Airlines and military organizations manage this reasonably well. They put investment into making sure asset availability is a top priority - like buying insurance. Unfortunately where failures are less critical and only cost us downtime, lost production and the concessional regulatory violation, or accident, we don't typically give this nearly the attention it deserves. 

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14 hours ago, UptimeJim said:

Lack of parts is a refrain (complaint) I hear over and over from customers all over the world. Sometimes there really are very poor spares management practices, sometimes stores has discarded needed materiel, sometimes policy does get in the way, but more often than not there are problems with planning and scheduling being flawed and far too short sighted.

I totally agree @UptimeJim 

I normally recommend people to first fix the basic maintenance processes like planning & scheduling, a robust PM program and attaching parts to your PMs etc.  Only then should you start tackling spare parts management. In a way, we first need to get our own house (i.e. maintenance) in order before we start telling otehrs how to do their part. In the interim a simple weekly meeting between procurement and the maintenance planner can solve a lot of problems.

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There is a quote that @Erik Hupje mentioned in another topic from Steven Covey's 7 Habits of Highly Productive People that says: If you want someone to be better, be better first yourself. I have not read this book yet, but I totally agree with Steven Covey.

When it comes to Maintenance Management, this quote fits 100%. It is quite common to see Maintenance areas trying to have every single spare part stocked, without considering risk or even if having so many parts available on stock would be benefitial or not from an economic perspective for the business.

Having a solid planning & scheduling, as well as a consistent defect elimination process established is key to solve not only the stockout issue, but also many other problems, such as overtime or low OEE.

However, it takes some time to implement such processess properly and see the results coming.

Although I am of the view that every business should focus on the medium/long term results, sometimes the current situation of a company might not give you enough time to think about it if the short term risk is too high. 

If I had to make this decision, I would firstly do something similar to what @NikosPant said. This is because when you lack important materials and you do not have a good forecast about when you are going to need it, having some of your critical parts available and a good sparte parts contract might bring results in the short term. In other words, you could increase some of your KPI's (e.g.: availability) by doing so.

Once that has been done and the maintenance area see some of its results getting better, I would focus on implementing the processes mentioned above.

Long story short, I would have a contingency plan that would focus on having critical spare parts available and a good spare parts contract and another medium term plan that would focus on improving the maintenance processes of the company.

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Hi,

I think the key is when you know your proper spare forecast in the beginning of the year for required PM tasks then provide the procurement team on the demanding time for their confirmation to deliver.

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Hi All,

 

The current challenges are:

1. Poor Spare Parts Policy

2. Cost Reduction Program

3. Lack of spare part availability

4. Problem with Procurement/Purchasing area

 

In term of spare part management:

First is about spare part policy.  Different type of business generates different type of methodology implementation. In my company, we use integrated software to monitor all maintenance activities including spare parts management. As example, to order the spare part it requires information such as part number, quantity (minimum 2-8% from total parts in the machine), Original parts manufacturer, etc. This policy can be customized depends on management decisions

Second is about cost reduction program. Sure the inventory value if we measure will be a huge amount. Categorizing spare parts based on how long it has been in store is the main thing to do, then cluster it into different group such as: Non moving (>1 year age), Slow moving (6-12 months), fast moving (0-6 months). Then make decisions for the parts non-moving, it will reduce the inventory value.

Third is about spare part availability. I believe all machine have the user manual book, and inside that book there is a chapter explain about maintenance. Normally this chapter will tell information about the maintenance frequency & what parts should be replaced within period of time. Make sure all spare parts from user manual book recommendation available in the inventory. As time goes by, there will be trend of usage showing which parts commonly break or wear (see second). Using substitution spare parts (same spec but different brands) should be an option to explore;

Fourth is about procurement/purchase. Worst case, the parts that breaks is not the parts in the store, i used to call this a special parts. We need support from procurement about this. For this case, making an agreement with the supplier is a good approach, and the risk the spare part price may be higher than normal but compared to the loss time in production it could be worth to try. Or making contract with "general supplier (3rd parties)". Lets say the OEM is 2nd parties and we are not buying the special parts from them. Once the machine is breakdown, we can ask the 3rd parties to directly buy from the 2nd parties right away without waiting requisition or orders (please note we already made a very special agreement with the 3rd parties)

 

Many thanks

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Hi @UptimeJim and @Erik Hupje,

I am curious about what are you positions regarding having a contingency plan as I mentioned on my last post (reviewing critical spare parts and having a spare parts contract available for emergencies) for short term results and a second plan which would aim at reviewing maintenance processes for the medium term.

Do you think this would be a good approach to this situation or focusing your endeavours only on the maintenance process would be more beneficial for the business, although it might take you longer to see the results?

Regards,

Raul Martins

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Hi @Wirza,

I like this approach of analysing the challenges separately.

Regarding the second item, do you have any specific method to review the non-moving items?

Regards,

Raul Martins

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Hi @Raul Martins,

One option that possible to explore is by using (could be excel) to check how long the part have been stored in the inventory, if it has been there for more 1 year then you can categorize as non-moving parts. As example a servomotor was purchased & arrived at the store back in 1 November 2018, but until now there is no sign that this part will be use in the machine. For now, the age is more than 1 year, either you use this part just to ensure the part is moving, or maybe you can other options. The longer parts age in the inventory the risk of damage is also increased considering the humidity & temperature will generate effects.

Specifically categorizing the spare parts type can give a big picture of our inventory. Too many parts available but low turn over is also a risk in financial perspective.

How do you think?

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Raul - I believe that having contracts for parts supply is a good idea, regardless of when executed. For fast moving parts that should be easy to set up as the supplier will have a more or less guaranteed income. For slower moving items it could be challenging - how does the supplier get compensated for effectively storing items on behalf of the company that may or may not use them? For items that may never be used, the problem becomes even more complex. Those latter items are "insurance spares" in every sense of the words. 

As for tacking the maintenance planning - it also must be done and sooner rather than later if the company is to benefit fully. However, recognize that planning alone isn't enough. Planners and stores-persons are in most cases not equipped to handle risk based determination of spares requirements. They will need some help, perhaps a tool that performs such calculations, to achieve that. 

I disagree with Wirza's third point about using the technical manual as a starting point for initial sparing. Manufacturer's manuals are often flawed in their maintenance recommendations. Getting into that is a whole different topic. The manufacturer knows what the asset can do, but not what it will be asked to do. The best place to start is with a work forecast based on RCM results, not manufacturer's forecasts. 

Where asset availability is being constrained by parts unavailability, regardless the cause, and the unavailability is causing substantial loss of revenues, then I would suggest that attempts to reduce stores are only going to make the matter worse. The cost of holding spares, until such time as plant reliability can be improved and spares requirements forecast more accurately, is very likely less (even much less considering that most of it is already a sunk cost), than the cost of lost revenues.

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23 hours ago, Raul Martins said:

Hi @UptimeJim and @Erik Hupje,

I am curious about what are you positions regarding having a contingency plan as I mentioned on my last post (reviewing critical spare parts and having a spare parts contract available for emergencies) for short term results and a second plan which would aim at reviewing maintenance processes for the medium term.

Do you think this would be a good approach to this situation or focusing your endeavours only on the maintenance process would be more beneficial for the business, although it might take you longer to see the results?

Regards,

Raul Martins

Sounds to me that what you're describing there @Raul Martins is a spares strategy (?) where you conduct a risk based analysis of whether you need to stock something or not.

I am not sure a contract will help too much, as @UptimeJim mentioned, vendors will be quite happy to stock spares for you that are fast moving and therefore you could quite easily purchase yourself without a contract. Getting someone to hold long lead items on your behalf is costly and typically not worth the hassle / cost unless you use an aggregator / stockist and take more of a commodity approach i.e. not insist on like for like but are willing to accept functionally the same - that can work well for e.g. valves.

For critical spares you probably won't have much choice than to hold them in stock yourself. If you're in industry where production losses are high value then the prudent option would probably be to start off with a relatively high inventory and progressively reduce inventory over time - just be careful that you don't get rid of non-moving inventory that are in fact critical to your operation!

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Hi @Wirza,

I am sorry. My question was not too clear.

In terms of reviewing the non-moving items, once you have the list of such items, how do you decide whether you will keep those stocked or not? Do you use any statistics or specific methodology for that ?

Regards,

Raul Martins

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Regarding having a contingency plan, I mean setting automatic sparte parts minimum stock and strategic spare contracts. The idea at this point is not to reduce invetory, I would be focusing on reducing "lack of important spare parts when required".

In other words, I would be increasing inventory for those cases that, as @UptimeJimmentioned, the cost of having the spare stocked is way less than the likelihood of revenue lossess. For contracts, I have seen some cases which you have contracts with specific equipment/spare parts suppliers, e.g. a critical pump impeller that is a slow-moving item, you could have a contract with its manufacturer as, although you only need one of this equipment operating in your plant, this manufacturer has dozens of identical equipments operating for his customers. Once you know that, you might set a contract with two different options: a) normal order, which it has a fixed lead time (30 days); b) an emergency order, which you may pay a little bit more for the spare, however, you would have it within 2 or 3 days.

As this would not take long to be fully operational, I would initially focus on that and, secondly I would focus endeavours on improving maintenance processess.

This would allow the team to get short term results, as well as save energy to focus on what really matters (e.g. improving Planning and Scheduling and Defect Elimination) for the medium/long term while the vicious cycle has not been broken.

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Hi,

I agree about culture issue but this will remain as lagging root cause not leading for most of failures and deficiencies in operation. So, I will exclude this as issue for maintenance planning and would focus on leading issues directly 

Best Regards,

Fahd    

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