Spare Parts Inventory Reduction

Introduction

Many companies do a bad job of managing their inventory effectively. There are many reasons for this, but it usually starts with poor initial spares data from vendors, poor cataloguing and not challenging the recommended quantities using reliability and operational parameters.

Ramsoft (UK) Ltd have developed over several years, a data analysis process and training to support companies optimise spares and reduce inventory.

Our experience tells us that all companies have issues with their spare parts management whatever the industry and. course delegates have come from oil and gas, power, mining, steel making, food & drink, semi-conductor, manufacturing, etc.

These issues are compounded if a company has recently undergone a CMMS upgrade.

Ramsoft (UK) Ltd have developed a 21 tactical plan for reducing inventory value. To start your improvement programme we offer an Initial Audit and a Full Health and Optimisation Audit

The Initial Health Audit

The purpose of this Spares Optimisation Health Audit, is to review the quality of the CMMS cataloguing and the effectiveness of the inventory control parameters. The aim is to support your inventory reduction programme.

We will analyse your inventory items. A full technical evaluation can only be conducted if you have defined the following key parameters:

  • Desired Service Level expressed as a %
  • Holding Costs expressed as a fraction
  • Replenishment or Buying Cost expressed as a cost per line item

Few companies have the above data, therefore the scope of this initial audit will be (by line item):

  1. Review the quality of the short descriptions for standardised format
  2. Review both Manufacturer's Part Numbers for consistencies
  3. Determine the ABC class this should be used by purchasing to negotiate discounts for A items and used by Reliability of Maintenance to conduct RCA/RCFA analysis to improve reliability in order to reduce consumption of these A items
  4. Determine the XYZ class this is used to prioritise and challenge existing inventory levels to lower average stock levels
  5. Determine the HML class, this is used by purchasing to negotiate discounts
  6. Determine the part's demand class, this combined with criticality supports further reductions in safety stock
  7. Evaluate the 'time since last issue', reports will support obsolescence programme and to challenge policies for slow movers
  8. Determine current or actual % Service Levels, this will highlight excess or under stocking issues
  9. Determine No of Years of Stock; based on current quantity on hand, an indicator of excess stocking
  10. Identify where key optimisation data is missing
  11. Propose changes to ROPs and the potential savings (significant changes)

The report will include recommendations to support inventory reduction including graphs, data analysis results

We can provide more information, if required, including typical audit costs.

Your Audit Responsibilities

Provide a download in MS Excel from your CMMS/EAM system. This is best done in two phases as follows:

Phase 1 Short Description field, vendor P/N and Mfg's P/N. This data is easy to provide and we can then start the analysis immediately

Phase 2 (asap) requires a little work from your side and should include:

  • Average issues per year (if you can provide the last 4 -5 year's issues, this would be ideal)
  • CMMS Max, ROP, Min (if only Min-Max is provided we require a definition what is Min as the Min for many companies is the ROP
  • Unit Price or Latest Price
  • True Lead Time the time from deciding stock replenishment is required until it is on the shelf ready for issue, i.e. it's both the company's and the vendor's lead time
  • Date of the last Issue of the part
  • Quantity on hand
  • Date of the data download
Full Analysis

Where desired service levels have been assigned and Buying and Holding Costs are known, a complete analysis of spares data would include the above, for the complete inventory plus:

  • Evaluate excess buying or holding costs
  • Identify opportunities for alternative replenishment strategies (Default is ROP plus EOQ), but in certain situations this policy is not appropriate and other strategies need to be considered
  • Calculate current, optimised and proposed changes to inventory parameters and the relevant financial $ value reductions or increases by line item
  • Calculation of the average stock level and average stock level value
  • Calculation of the number of years of stock based on average stock levels
Training

Ramsoft (UK) Ltd also offer training in Stock Optimisation and Inventory Reduction Techniques that includes a 21-step improvement programme, plus Excel worksheets that include all formulae. However, a database solution is far more effective. This course has been conducted 20 times in Asia with 12-30 delegates, proving that spares management is of great concern to companies. See Training section for more information