The document discusses improving inventory management of spare parts to increase production and profits. It covers classifying parts by criticality and usage, managing demand through accurate forecasting and analyzing historical demand data, optimizing inventory parameters like minimum/maximum levels and safety stock based on lead times and service level goals, using inventory management systems to help with calculations and simulations, and establishing clear roles and policies around inventory management. The overall goal is to better meet service level targets while reducing inventory levels and stockouts through optimizing spare parts inventory management.

1. PROCUREMENT
Increase production and
profits with better
availability of spare parts
2013 PMAC National Conference
in Ottawa
June 14th, 2013
By Robert Lamarre, B.B.A., M.A.Sc.
President of IMAFS inc. & GCRL inc.
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2. 1. Parts classification
2. Managing service
3. Managing demand
4. Forecasting demand
5. Managing lead times
6. Optimizing inventory parameters
7. A good inventory optimization system
8. Clarifying roles and responsibilities
9. Policies, procedures and key performance indicators
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3.  True or false: all parts are created equal ?
 Classify the parts in relation to both their relative
importance on operations (criticality) and
frequency of usage
 Classify the parts taking into account inventory
strategies
 Pareto on hits and value
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4. 4
Identify product family and demand stream
Critical
or
not
Stock
or
non stock
New
Inactives
(no usage for X
months)
A B C D
Based on Hits or
usage value
Updated
 Annually
 Monthly
 Manual
Reparable
or
not
Obsolete
or
not
Classes
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5.  The reason we keep inventory
 Analyzing our performance is important
 Ability to supply the parts when needed
 Ability to reduce downtime on equipment’s
 Estimate parts availability
 Service goals to be determined for each product class,
each product family and each warehouse
 The system has to adjust Min-Max to service goals
 80 – 20 Rule -> Focus on important items
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Measures existing levels
Allows service goals on part’ criticality level
Allows service goals by class, by family, by warehouse
Safety stock set in line with service goals
Simulations
to measure impact of service goals variations
Dashboard to track service results
Tools to take corrective actions

7.  Historical Information
 More data = more accurate you can be
 Demand flows regular, project, planned maintenance
 Demand patterns: planned or emergencies
 Regular demand or intermittent demand
 Manage on demand data; not shipping
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Better data for accurate forecasts

9.  Forecasting: Prediction or science ?
 Human, machine or both ?
 Sales & Operations Planning (S&OP)
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Good solid
statistical
forecasts
Forecasting
methods that
account for
demand trends,
seasonality and
intermittence
Best fit by
item
Possibility
of manual
adjustments
Filters &
alerts
Can integrate maintenance planning data
Better forecasts = better service + less stock

11.  What is a lead time ?
 Lead times are often long and variable
 Reality versus promises
 Measure and manage the various elements of lead
times
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Bad lead time information result in stock outs or surplus stock
Can run simulations to analyse impact of changes
Tools to take corrective actions
Lead
time
Dynamic
calculation
By vendor and
transport mode
Cleansing of
extreme delays
Internal lead
time managed
by components
Possibility of
manual control
Compare real
lead time with
vendor promises

13.  What is a Min ?
 What is a Max ?
 Min-Max variations
 Safety stock provide the service level goals
 Demand variability and forecasts
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$
Ordering Stocking
costs costs
DATA BASE
ERP or
CMMS
Calculation
SS Lead time
Min Max
Forecasting
Lot sizes
Service
objectives
per class /
family/
warehouse
AdjustmentsSimulation

15.  Look for inventory management system specially designed for
spare parts. They should account for:
 Parts criticality
 Service goals per product class and product criticality
 Erratic demand forecasting
 Planned demand
 Lead time management
 Dynamic inventory parameters optimization
 Allow simulations
 Surplus stock identification, prevention and disposition
 A complete set of KPIs and exception reports
 Data mining
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Inventory analysis reports gives full picture of inventory
management results with pointers on necessary corrective
actions with drill down possibilities
Overall results that can be drilled down

17.  Clarifying roles and responsibilities
 Who is responsible for inventory ?
 What are the roles of Supply Chain Management ?
 What are the roles of Maintenance ?
 Change management is very important
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18.  Service goals
 Policies determine roles and responsibilities
 Key performance indicators
 Benchmark
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21. Inventory Management can be passionate and exciting
 Yes eliminating 25% or 40% of equipment downtime due
to lack of parts brings a smile to operations manager
 Eliminating 80% of stock-outs at the store has a major
impact on maintenance efficiency
 When you can reduce total inventory by more than 25%
while improving service, you are freeing up capital
money and space that are always badly needed
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Thank you
Questions?