Spare Parts Inventory

Spare Parts Inventory Management

Spare parts management needs special treatment, somewhat different from the inventory management of regular items. This is because the purpose of keeping a stock of these I different – to serve as a replacement to the worn-out parts in the machinery.

The principle that A class items need to be stocked lower than B and C class items, will provide important guidelines to spare parts inventory control.

The inventory models we have discussed can also be applied to spare parts control. Just as the behavior of the consumption of spares is different from the consumption of the regular items in inventory, so also the supply of spares is different from the regular items. This being so, some modifications are necessary to the conventional inventory and safety stock models.

Spares parts can be classified for stocking policy analysis.

• Maintenance or breakdown spares: There are the spares which are required in large quantities at more or less frequent periodic intervals as and when the breakdowns occur. These resemble, somewhat, the regular inventory items in their consumption patterns. To some extent, the analysis for stocking policies of the spares could be similar to that of the regular items in inventory
• Insurance spares: The purpose of these spares is to provide an insurance against the relatively remotely possible breakdown or failure of an equipment / component. The probability that such a component / equipment will survive the life-time of the machinery or plant is quite high. The reliability of such spares has been observed to be as high as 95 to 99% over the life span of the machinery. These spares are sparingly needed. But they are needed all the same because they may hold up production resulting in considerable losses for want of them. Many of these spares are, also high value items. These spares are, by and large, procured along with the capital equipments. At the time of the purchase of the capital equipment itself a decision regarding the purchase of the insurance spare is also made. Generally, the decision with regard to insurance spares may be to buy either no spare or to buy a spare.
• Capital spares: These are also high-reliability spares, but not as high as the insurance spares. The reliability is not as low as that of the maintenance spares as well. Moreover, these spares have relatively higher purchase cost than the breakdown spares. The decision regarding these spares is usually made at the time of purchase of the capital equipment itself. But the decision may be to buy anywhere from 0 to say 6 or 7 spares.
• Ratable spares: These are the reusable spare parts, which after their breakdown can be reconditioned and re-used. Typical examples are the step any in the car, jet-engine in aircraft, tyre tubes in cycles, electrical motors, etc. Since these have more than one life, the cycle of their various lives needs to be taken into consideration in the analysis of their inventory policy. After Spare Parts Inventory Management, we now turn our attention to:-
• Maintenance or Breakdown Spares: The rate of consumption or usage of spares can be derived from historical data regarding failure of the different components in the machinery. Failure statistics is important basic information for this analysis. If the failure times show a negative exponential distribution, the failure rates are distributed by means of Poisson distribution. If the failure times show a normal distribution due to aging or wear, then the failure rates will also show a normal distribution. From the failure statistics one can know the mean consumption rate of these spares and also find the level of consumption expected with a corresponding probability of its occurrence. Based on service level, the inventory level can be easily arrived at. The service level is given by the formula: Service level = Ku/ (Ku+K0) where, Ku= Opportunity cost of under-stock of one unit K0= Opportunity cost of overstock of one unit
• Capital Spares: As mentioned earlier, the decision here is to buy spares ranging anywhere from 0 to say 7 spares. These spares are bought along with the capital equipment. The reliabilities of such spares are much higher than those of the maintenance spares. Let us have the following notation:

C         =          Cost of spare parts

Cs        =          Cost of shortage per unit,

S          =          Salvage value of the spare parts when they are salvaged,

Pi         =          Probability that the demand for the capital spare parts is ‘i’ in number

N         =          Optimal number of spares required, and

TC       =          Total cost for stocking N items.

The demand may be either more than the optimal number N, or less than or equal to optimal number N. These are the two situations that are considered which have their own associated costs. The policy of buying N spare parts should be such that the total costs (i.e. summation for both the aforesaid situations) are Minimum