Many companies fail not because of more consumption but due to maintenance of huge spare inventory which remains underutilized ! The presentation looks in to reasons as well as remedial actions...

1. Many companies Fail, not
because of more consumption but
due to maintenance of huge
spare inventory which remains
unutilized.
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2. Company fail often due to “trap”:
The trap has two dimensions which
supplement each other
The success due to less failure
incidences leads to insecurity
for possible failure
Such insecure customers work
as warehouse to vendors for ‘
high profit’& less frequently
used spare
At the cost of
customer
Customer makes
payment for
procured items
It is a trap and needs systematic approach to come out of this
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3. Spare part Management plays an
important Role in achieving desired plant
availability at optimum cost
FACT :-1
Industry
• Capital intensive
• Mass Production
Orientation
• Sophisticated
Technology
Down time for such plant & machinery is prohibitive & expensive
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4. FACT :-2
Non availability of spare
as and when required
Cost of Spare part
50 % of total Down Time
50 % of total
Maintenance cost
Contributes to
More then
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5. FACT :-3
Most of the Spares are supplied by
Original Equipment Manufactures
Technology obsoletes faster than Life
of Equipment's
New models are introduced & new
designs are incorporated
Old Models phased out
Hence spares for Old Models are not
available
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6. FACT :-4
Number and variety of spare parts are too
large
Hence close control becomes very difficult
For medium scale engineering industry
For large scale process industry
15,000 variety of
spares
100,000 variety
of spares
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7. • Reducing forced deterioration
• Controlling natural
deterioration
• Modification / improvements
&addition of new features
JH, KK , IFC & QM
PM
Office TPM
• Establishment of spare parts batch
• Reconditioning of spares
• Spare part inspection
• Replacement policies for spare parts
• Stocking policy for r0table spares & sub assemblies
• Stocking policies & Insurance spares
• Developing inventory control system
• Formulation of selective control policies for various
categories
• Inventory analysis
• Forecasting spare parts requirements
TPM
Computer
application
for spare part
management
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8. Clarity for “spare
inventory” to be
maintained
How to reduce
dependence on
original suppliers
PART A PART B
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9. PART A
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10. 1. Systematic approach:
Lets be clear “what we actually
want “
a. It needs to be “cross “ functional understanding (For maintenance
“what we want” shall be different, then need of stores, purchase,
accounts and inspection department
b. Once “what we want” is clear. Write down procedure , how to satisfy
all requirements.
2. Inventory Analysis:
Basic for inventory analysis is clarity for different characteristics for spares
Let us “chalk down” the characteristics requirement.
The characteristic broadly includes:
1. Annual consumption value
2. Criticality
3. Lead line
4. Unit count
5. Frequency of use 10

11. 3. Codification: Identification of spare
It is common to use 9 to 16 digit codes for spare parts.
Example for 10 digit code is as under;
1 Digit 2-3-4 Digit 5-6-7 Digit 8-9-10 Digit
Imported or
indigenous
Machine type,
make &
Model
Type of spare
part
Size or serial
number
With condition of all spare parts
a. It is easy to minimize the duplication of spare parts.
b. Easy accounting & computerization.
c. Easier communication between concerned parties
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12. • A spare part catalogue is must for successful &
meaningful implementation & usage of codification.
• A spare part catalogue should have following
information:
a. Spare part codification plan.
b. Spare part code
c. Spare part description
d. Drawing number
e. Manufacturer code & part number
f. Stock location number
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13. • Spare part catalogue should be made available to all concerning
department for example Stores., Purchase and maintenance
• Very Important: But most neglected part
Suggestion: catalogue should be included in ISO –related controlled
documents.
This shall help
• Updating (only revised document shall be available.)
• Obsoleting (Old document & & removing from point of usage)
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14. • It is essential to analyze the spare parts inventory based on various
characteristics such as the frequency of issues, the annual consumption
value, criticality, the lead time & the unit price.
• This is essential as it would not be possible to exercise the same type of
control for all items & may not really be effective.
Commonly used inventory analysis are :
1. FSN analysis
2. ABC analysis
3. VED analysis
4. SDE analysis
5. HML analysis
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15. Classification based on frequency of issues/ use:
F:- Fast moving
S: -Slow moving= items that are issued less than once a month
N: -Non Moving= items that are not issued/ used for more than 2 years.
This classification helps spare parts management in
• establishing most suitable stores layout by locating all the fast moving
items near the dispensing window to reduce the handling efforts.
• Also, attention of the management is focused on the Non-Moving items
to enable decision as to whether they are required in the future or they
can be salvaged.
Even if a few of them are disposed off & the locked up capital is made
available, it will make available additional working capital to the
organization. Action for disposal should be taken based on the value of each
item of spare.
Experience shows that many industries
which are more than 15 years old have
more than 50% of the stock as non-moving
spares.
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16. Classification based on the lead time:
This classification is carried out based on the lead time required to
procure the spare part.
The classification is as follows:
Scarce (S):= items which are imported & those items which require
more than 6 months’ lead time.
Difficult (D):= items which require more than a fortnight but less
than 6 months’ lead time.
Easily available (E):= items which are easily available i.e. less than a
fortnights’ lead time.
This classification helps in reducing the lead time required at least in
case of vital items. Ultimately, this will reduce stock-out costs in case of
stock-outs. A comprehensive analysis may ultimately bring down lead
time for more & more number of items. This will also result in
streamlining the purchase & receiving systems & procedures.
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17. 17
Classification based on criticality:
Spare
Criticality
Non
Availability
V
(vital)
E
(Essential)
D
(Desirable)
Heavy Production loss
High cost in emergency
purchase
Example: Kiln: Bearing
Moderate Loss
Example: Bearing for
Auxiliary Pumps
Loss not significant
Example: Gasket for
piping connections

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Classification based on consumption:
Method for classifying spares is on the
basis of annual consumption value. As it
is true for any inventory situation,
Pareto’s principle can be applied to
classify maintenance spare based on
consumption value.
Pareto principle: the
significant items in a given
group normally constitute a
small portion of the total
items in a group & the
majority of the items in the
total will, in aggregate, be of
minor significance.
In a specific spares control system, it is quite possible that in a single year,
many spares would not have been consumed at all. In such cases, it is
better to perform ABC analysis on longer consumption period data, say 3
years. Then only spares will not be left out in this classification.
Policy for ‘A’ items
• Minimum control
• Bulk orders
• More items from same supplier

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Classification based on unit price:
High Cost
H
(high cost)
M
(Medium
cost)
L
(Low cost)
Unit cost is very High
Example: Say Rs. 10,000/- & Above
Unit cost is Medium
Example: Say Rs. 1000/- & Above
Unit cost is Low
Example: Say Rs. 100/- & Above
This analysis helps in exercising control at the shop floor level i.e.
• Clarity
• Proper Authorization
• Issue against replacement
• Exploring ways to enhancing left (Reconditioning & repair)

20. 20
Capital Spares:
• These are vital spares for
critical equipment. The stock-
out cost for such spares is
very high & the unit cost is
also very high. The number of
items consumed during the
life time of the equipment
may be 1 or 2 or 3. Hence, the
decision has to be made as to
the number of items to be
stored.
Consumable spares:
• These are regularly used
items such as fasteners, seals,
bearings, etc. these are to be
stored by the materials
department.
Insurance Spares:
•An insurance item is a spare part
that will be used to replace a failed
identical part in operating
equipment whose penalty cost for
downtime is very high.
•Hence, by definition, it is an
insurance against such failures for
which the down time costs are very
high.
• They do not become obsolete until the
parent equipment is retired from service
no matter if they do not move for many
years
Overhaul spares:
•Spare parts which must be replaced
every time the equipment is
dissembled & re-assembled.

21. PART B
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22. 22
STEP-1
Based on ABC Analysis & SDE Analysis- identify:
a) 10% -20 % of spares which contribute 90 % -80 % to
inventory cost.
b) Scares and difficult (imported / supplied by
manufacturers only
Important : confirm if any copyright / patent an terms of
patent / copyright is associated with any identified spare.
STEP-2
Availability of Drawing:
I. Verify if “drawing’s” (original) are available
II. If drawings are not available get same procured (from
manufacturers).
III. Incase drawings are available confirms if same are as
per spare requirement only.

23. 23
STEP-3
List down facilities / operations OR Equipment's Required
( Including inspection and measuring / monitoring
equipment's required)
STEP-4
Assess the skill of “operators in own work shops to fabricate
same and based on skill arranged provide necessary
training.”
STEP-5
I. Incase facilities / equipment's required not available ‘in-
house’ (as per step-3) identify vendors

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STEP-6
Assess the skill of vendors (part experience) and equipment
available (refer step-4)
STEP-7
Place trial order – Monitor - check,& then only proceed for
work order
(for total process financial viability need to be checked

25. To ensure smooth functioning it is essential to develop a suitable
inventory control by which optimization of spare part cost is achieved in
a systematic way. As regards the fast moving & slow moving items are
concerned, the following procedure can be followed taking into
consideration various cost elements.
While managing the spare=parts inventory, basically there are four cost
elements to be considered:
Cost of the spare part
Cost of ordering
Cost of storage
Cost of stock-out
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26. 1. Rent for the stores
2. Depreciation on storage & handling
facilities
3. Handling charges
4. Salaries of stores staff& clerks
5. Taxes
6. Insurance
7. Cost of stationery etc.
1. Rent for purchase department
2. Depreciation for office facilities
3. Salaries
4. Postage & telephone expenses
5. Stationery expenses
6. Travel expenses
7. Incoming inspection
8. Entertainment & misc. expenses
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27. For ideal conditions there should be no stocks at all. Every item should
arrive just before it is required in right quantity. This however is not
practical for two reasons.
While the ordering quantity is varied. It advised to analyze that at a
particular ordering quantity, the total cost will be the lowest & that
ordering quantity is called Economic Ordering Quantity (E. O. Q.).
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