Spares Optimisation & Cost Reduction Techniques
(including 25 step reduction programme)

Duration - 3 days

Introduction

Most companies do a bad job of managing their inventory effectively. There are many reasons for this, but it usually starts with bad submission of vendors recommended spare parts data, poor cataloguing and selecting initial spares
From our experience this is not limited to any one industry. Irrespective of the industry, e.g. Oil and gas, mining, power, food & drink, electronics, semi-conductor plants, all do a bad job of managing spares leading to excess costs
This practical 3 day workshop covers aspects related to reducing inventory and costs of spare parts and is supported by case studies, software and practical exercises to aid understanding
This workshop focuses on reducing the inventory, which is an area often overlooked
There are very few courses conducted that deal with the practical issues of spares cataloguing, optimising spares and stock reduction

After this course, delegates will leave the workshop with tools and techniques that they can immediately apply in their own companies and start to reduce costs
An Excel Analysis worksheet containing all formulae will be provided to conduct an audit of current inventory parameters

Two analysis techniques will be covered; first using probability for normal operating and consumable spares and the second using simulation (modelling) techniques for high value spares with logistic issues
The course is of particular benefit to companies who:

  • Want to audit their spares data quality
  • Need to upgrade their CMMS system
  • Want to reduce inventory levels and costs

Many case studies will be shown including reduction of 50-70% in line items

CONTENTS

Course Introduction

Topic 1: Introduction to Spares Management

Delegates' issues
Common issues in inventory management with real examples
Where we incur excess costs
Benefits of improved inventory management
Terms and definitions used in the workshop

Topic 2: Recommended Spare Parts List (RSPL) from Vendors

RSPLs, their purpose and why they are submitted incorrectly, principles good spares cataloguing to ensure zero duplicates, and ease of searching
A critical review of a typical RSPL form and the associated procedures sent to vendors
Examples of good and bad RSPL
10 rules for effective use of RSPL
Proposed improved format for an electronic RSPL

Topic 3: Effective Cataloguing

Introduction and detailed examples of an 8 step cataloguing process, i.e

  • Defining naming formatting
  • Developing spare type guides to ensure consistent part naming
  • Developing rules for Mfg's Part/Nos, dimensions, abbreviations
  • Define strategies i.e. who to buy from OEMs, Vendors, specialist company
  • Develop a set of cataloguing best practice manuals
  • Create upload file and quality checks
  • Benefits of commercial cataloguing software

Many examples collected from our numerous studies will be shown

Topic 4: Inventory Cost Reduction Programme

Introduction to a 25 step inventory reduction programme, tactics including, but not limited to:

  • Audit CMMS spares data quality
  • Challenge the decision, whether to stock and who pays
  • Establish spare criticality and service levels
  • Apply the 80-20 rule to AIV, Item Cost, Stock Holding Cost
  • Identify duplicates line items
  • Reduce internal lead times to reduce stock holding costs
  • Standardisation
  • Different strategies, min-max, reorder point control, constant vendor delivery
  • Replace OEM
  • List issues and make a plan
Topic 5: Discussion on Spares Costs

Different costs used in the stock management process, e.g. buying, holding cost, item cost, issue cost, penalty cost, average stock level costs, annual issue value

Topic 6: Introduction to Reliability Theory

Normal & Poisson distribution
Weibull parameters for high value spares
Explanation of service levels
Importance of the P-F
How to estimate annual usage using MTBFs or reliability data sources

Topic 7: Challenge Vendors Recommended Quantities

How to calculate estimated annual demand rates based on spare reliability
Case studies where actual consumption has exceeded initial estimates

Topic 8: When to order? (Setting of Re-Order Points, Safety Levels)

Different approaches to set safety stock
Using the Poisson distribution to set re-order points based on lead time, annual usage and criticality and the typical issue quantity
Different replenishment strategies such as ROP control, Min-Max and Constant Vendor Delivery
Exercise - setting re-order levels using formula based on the Poisson cumulative probability tables

Topic 9: How many to order?

How to determine the economic order quantity using both a formula and a tabular approach
The effects of ordering too many or too few
Evaluating whether discounts are worth accepting for higher quantities
What to do if the EOQ is not practical

Topic 10: Auditing current inventory Parameters effectiveness

Introduction to 25 inventory formulae, use an Excel worksheet to seek opportunities to reduce stock levels and stock holding costs
Metrics include service levels; safety stock, ROP, Average stock levels, no of years of stock, Annual Issue Rates, and Value, Stock holding value all calculated at line item level
Demonstration of an MS Access based application to simplify the analysis

Topic 11: Database Solutions

Demonstration of an MS Access Based Application to simplify the analysis

Topic 12: Evaluate Policies for Insurance Spares

Introduction to monte-carlo simulation and penalty costs to evaluate policies for insurance spares

Topic 13: Alternative Strategies

Sometimes the ROP/EOQ strategy is not appropriate, discussion on other options

  • Min-Max policy
  • Constant Vendor Delivery
  • EOQ related to evaluation discounts for higher order quantities
Topic 14: Measuring Spare Management Effectiveness Using KPIs

Purchasing & Inventory KPIs
Performance management system

Course Review and Delegates Action Plan, i.e. what are they going to do differently as a result of this workshop

Who Should Attend
Maintenance Managers, Engineers
CMMS super users
Warehouse Managers & Supervisors
Project Engineers
Spares & Inventory Personnel
Purchasing & Logistics
Cost Controllers

Training Methodology

PowerPoint slide. Delegates will learn by active participation during the workshop and through the use of exercises, case studies
Laptop required

YOUR INSTRUCTOR

David Thompson has over 40 years in the field of Maintenance, Reliability & Spares Optimisation
As a consultant David has conducted 100’s of different types of audits, developed strategy and procedures and has been involved in CMMS builds and data revamps. He has worked in the oil and gas, petrochemical, mining and many manufacturing companies
He was the UK representative for Reliasoft, one of the world's leading providers of Reliability Analysis software and a certified instructor for the Taproot RCA/RCFA process
David has conducted numerous courses in reliability, including public as well as in-house courses for SABIC, Qatar Petroleum, Wood Group, Shell Nigeria, First Quantum Mining etc.
David has also presented at Reliability Symposiums in Brasil, Europe and Asia and is an external online instructor in Reliability for the Robert Gordon University
This spares course has been conducted very successfully in Asia, Africa and the Middle East