TT Talk - Spare part inventory management

Board Press Release (25)

The management of assets and infrastructure inevitably requires the use of replacement parts to keep facilities and equipment operational and fulfil contractual obligations. Managing your spare part inventory for the range of assets and infrastructure required to operate ports, terminals and logistics facilities can be a high cost, complex and dynamic challenge that rarely gets the attention it deserves.

When working well, efficient spares inventory management will save the organisation in terms of cost and time, ensuring that spare parts are available when required, reduce wastage from obsolete parts and inefficient use of capital by overstocking low turnover non-critical spares.

When this part of the asset management system fails, it can result in costly downtime of assets which presents a major headache for operations. This is often foreseeable and preventable in many cases through considerate management.

Risk

Given the service-life of plant, equipment and infrastructure and the ability to in many cases extend the service-life of these assets through increased maintenance and/or refurbishment, parts will wear or fail and need replacing. The service-life of the individual components is difficult to predict with a high degree of accuracy, which requires the need to understand the impact of an asset/component failure on operations.

Long-lead times

Long-lead items can prove a challenge for asset managers faced with the decision of i) whether or not to stock a spare part and ii) how many of them to have on stock (minimum stock value). This challenge often changes due to fluctuations in the availability of spares and therefore lead-times, resulting in the potential for unexpected long outages of plant and equipment.

Missing parts

Missing parts in the inventory is all too common and frustrating, a result of a poorly managed inventory. Whether the part has been previously used and not booked out, hence the 'system' reporting that the part is available, or the 'system' has failed to reorder the part ready for use following utilising the available spare. The result is the same; delays in getting the asset put back into service, while waiting for parts and potential operational delays.

Obsolescence

Obsolescence, where components are no longer supported by the original equipment manufacturer (OEM), can make the sourcing of parts and expertise difficult to keep assets in service. Over the long service-life of assets, obsolescence of some of the components should be expected and will require proactive management to identify and manage risk of unsupported or discontinued parts.

High-cost items

Inevitably because of the specialist nature of assets and infrastructure used within the industry, some spare parts required to ensure resilience and short downtime periods to get the assets back into service following a breakdown require a significant capital outlay. The questions to consider when deciding on a spare part becoming a stock item is; i) how likely is this item to fail in service? ii) what is the likely impact on my operation? and iii) can my operation absorb the likely disruption of a failure of this component with the estimated lead in time?

Risk mitigation

Being unprepared for foreseeable component failure can and does lead to long unplanned outages of assets with obvious potential impact on operations. This potential risk has some simple measures that can be implemented to reduce the impact of inevitable in-service breakdowns.

When we consider the issue of in-service breakdown of assets or infrastructure, we need to look at operational impacts. The impact can be broken down into two main factors; i) effect on operational performance and ii) duration to get back to full operational capacity. Spare part inventory management alone will not reduce the number of breakdowns experienced, but it can significantly influence the time it takes to recover from a breakdown and lessen the operational impact.

Criticality assessment

Undertaking a criticality assessment firstly on the operational assets and then on the individual components of the critical assets can provide some useful insight for developing your spare parts inventory management strategy. This is not a static or one-time process but requires regular review to take account of i) changes within the operations; ii) condition and age of the assets; iii) availability of the spares. This granular assessment will help identify business risk due to component failure, the critical spares and help with the decision on which spares to hold within your inventory.

Supply chain management

Maintenance departments tasked with keeping assets and infrastructure operational will undoubtably build relationships with their supply chain who are suppling the spare parts. These relationships can provide the data required to update and amend their assessment of the part availability and potential changes in the estimated lead-in times, or early warning of obsolescence from removal of OEM support. Supply chain management is an important and integrated part of good asset management and spare part inventory management.

Inventory control & ERP systems

The quantity and variety of the type of spare parts required to manage large operational facilities is vast, which makes their management and control a challenge. There are several software systems that can help. The use of a fully integrated enterprise resource planning [ERP] system or even a standalone inventory management system can provide the oversight required to manage this task efficiently. The implementation of the system and the setting up of the bespoke parameters for each part requires careful and often onerous data input to get this right.

Having invested the time and resource into understanding the criticality of the assets, their components and the supporting supply chain, the inventory management system provides the important control of the availability of these spare parts when you require them to support your operation.

Summary

In the sphere of asset management and maintenance, the control of the spare parts inventory rarely gets the attention that it deserves. However, most asset managers know that it is an essential part of keeping their operations running efficiently. This is a challenging balancing act with dynamic variables which require time and resource to manage. Failures within the process are often only identified when it is too late, leading to long asset outages. Understanding and planning for the inevitable in-service failure of asset components and strategic stock of critical spares can reduce the impact on the operation.

Neil Dalus

TT Club

Date01/10/2024