Efficient Plant December 2017 - 51

Answers to questions
facing today's reliability
& maintenance
professionals

Q

"Where do I get money to
pay for predictive/condition-based monitoring?"

A

You've made your pitch to management (Efficient Plant, Oct.
2017, p. 47) and followed up with PM
Optimization (Efficient Plant, Nov.
2017, p. 44). You now should be able to
free up people to implement predictive
maintenance (PdM)/condition-based
monitoring (CBM). However, you
still need funding for equipment and
training.
The quickest way to obtain needed
funds, outside of management simply
handing you a budget, is to improve
on your spare-parts-management
process. Every parts-reduction process
that I have been involved with has
resulted in at least a 10% to 40% reduction in MRO (maintenance, repair,
and operations) spare-parts inventory.
Negotiate with management to apply a
percentage of that spare-parts savings
to fund the initial stages of your PdM/
CBM process.
There are several ways to find these
funds. Assume you have $10 million in
MRO spare parts. A 10% reduction is
$1 million in savings. A 40% reduction
with $2.5 million in parts is also a
$1-million gain.
A few commonly used metrics in
MRO spare-parts management are
inventory turns and inactive, out-ofstock, and overstocked inventory. The
following definitions are consistent
with the SMRP (Society for Maintenance and Reliability Professionals,
Atlanta, smrp.org) Body of Knowl-

DECEMBER 2017

department | on the floor

edge. For this discussion, assume
annual stock purchased is $5 million,
inventory turn is 0.5, and stock outs
are at 10%:
 Inventory turns = stock purchased/
stock on hand ($) = $5 million/$10
million = 0.5
Achieving an inventory turn of
0.56 = $5 million/$9 million saves $1
million. Best practice is greater than
1.0 inventory turn.
 Over-stocked inventory best practice is less than 2%. An 8% overstock
on $10 million is worth $800,000 +
$200,000 (from 25% carrying cost) =
$1 million savings.
 Parts sharing, or "share the spare"
between plants can return 50% to
70% from my experiences. Sharing $3
million will save at least $1.5 million.
 Stocked MRO-inventory value per
RAV (%) = (Stocked MRO Value ($)/
Replacement Asset Value ($)) x 100 =
$10 million/$500 million = 2%.
Assuming the same replacement asset value, getting to a 1% value would
mean a $5 million savings.
There are plenty of other inventory metrics and strategies that can
be used, such as percentage of total
work orders kitted and percentage of
inventory accuracy. However, it's up to
you to select the factors that can make
a difference at your location and that
you can use to generate improvement.
For example, you need to look at such
things as:
 reducing order stock to the
correct level
 selling excess and old stock
 arranging with your suppliers to

Spare-Parts
Management
Generates
CBM Funds
Dr. Klaus M. Blache
Univ. of Tennessee Reliability
& Maintainability Center

Find the money you need to start a predictive-maintenance/condition-based monitoring
program by improving spare-parts management.

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51
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Table of Contents for the Digital Edition of Efficient Plant December 2017
