Up Time Magazine- August/September 2008

ally exclusive, these two categories have clearly not covered the slow moving items, so there may be items that do not fit either category. To be Completely Exhaustive your categories must cover all possibilities. Some types of categories that you might consider include: Spare Parts – Parts that, if unavailable, would not prevent the plant from operating and/or where usage could be planned. This might include sub categories such as fast moving parts that turn over regularly, slow moving parts that turn over occasionally, routine maintenance parts that are only used for specific regular maintenance events (and therefore can be planned), and project spares that are placed in inventory in preparation for specific one off events (and so can also be planned). Critical Spares – These could be defined as components that if unavailable would prevent the plant from operating and for which there is no viable alternative2. These spares may also be subdivided as fast, slow or routine. Consumables – Likely to be very high usage, but relatively low cost items that may be directly expensed to a cost center as a means of minimizing the administration associated with the level of usage. Bulk Commodities – Items that are essentially consumable but where their supply, storage and usage requirements set them apart from other consumables (such as fuel and oil). Capital/Insurance Spares – Capital/Insurance spares are usually very high value items that are particular to a specific asset and, because of this, can be defined in the accounting system as Property, Plant and Equipment rather than inventory. The term Capital Spares is also often used to cover spares supplied as part of an initial capital purchase rather than those purchased subsequent to the capital purchase. In either case, they usually are not counted as part of the inventory, but they do need definition in order to clarify whether they should be counted. These categories are considered MECE because they are initially divided on the basis of unique attributes, and it is, therefore, unlikely that any one item could be included in more than one category. Also these categories cover all potential inventory types. Figure 1 shows a simple decision process to help identify into which of these categories an item may fit. Now that the categories are defined, you need to think about the other aspects that make up the policy. www.uptimemagazine.com Provide Guidance on the Quantity to Carry and How to Calculate It This is the area that gets the most focus in inventory reviews and there are a number of different techniques that can be used. For example, you may choose to use software to calculate your requirements and therefore base your policy on the output of that software. This approach has both pros and cons. On the one hand the software is convenient. However, if your data is inaccurate or incomplete, or you do not fully understand the assumptions in the algorithm used, and the constraints that it imposes, then you are likely to over invest, create a poor inventory mix and sub optimize your outcomes. Alternatively, you may choose to use a process based approach (such as Inventory Process Optimization) as this overcomes the data issues, assumptions and constraints by tackling them head on and providing guidance based on optimizing your management processes. Whichever approach you choose, your Spares Stocking Policy must clearly state the process or rules to be used. Here are some further ‘rules of thumb’ to look out for and comments that might help in determining the quantity to carry and how to calculate it. • The less critical the part and the shorter the lead time, the fewer items that need to be held. • Conversely, the more critical the item and the longer the lead time the more items that need to be held. • You should always strive to hold the minimum quantity required, don’t manage to the maximum. • The more predictable the usage, the better the delivery can be timed to suit usage. • Data does not always reflect what you think it does. • Demand for parts is often driven by the behavior of the team rather than the failure characteristics of the equipment. • Similarly, supply lead times are often driven by the procurement, receiving and storage procedures. • Sometimes ‘calculation averaging’ leaves you short of the ‘one time’ usage requirements. • You do not necessarily have to fill all the storage space (for example, with bulk Spares Category Decision Tree Supplied as part of capital purchase? Yes No Meets definition of Capital/Ins Spare? Capital/Ins Spare Yes Yes No Supplied in bulk? Bulk Commodity No High usage item of minimal cost? Yes Consumable No Supplied as part of Non availability capital purchase? stops plant? Yes Critical No Must be a Spare Part Yes Meets definitionaof Purchased for Capital/Ins Spare? specific project? Project Item No Meets definition of Used in routine Capital/Ins Spare? maintenance event? Yes Routine No Meetsusage item? High definition of Capital/Ins Spare? Yes High Turnover Slow Moving No Meets definition of Capital/Ins Spare? Figure 1 - Spares Category Decision Tree commodities). • Simple protocols and criteria make both the initial decision and the subsequent review of that decision easier. • There is no one size fits all calculation that can be applied, everyone’s circumstance and process is different and so requirements are different. Provide Guidance on the Timing of Purchases For some categories, it is sufficient to set your quantities via a maximum and minimum holding. However, for the categories that relate to parts where there is a degree of predictability in usage, it is important to provide guidance on the timing of purchases. For routine maintenance or project spares the planned timing will be known in advance and so your policy should include setting the criteria for ordering and delivery. For example, you may say that all shutdown spares should only be ordered for delivery in the month preceding the shutdown. This criterion can be applied whether the part has a 6 month lead time or a 1 week lead time. The important principle here is that the cost of inventory includes the time value of money for the time that you hold it, the shorter the holding time the lower the overall holding cost. 51 http://www.uptimemagazine.com

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Up Time Magazine- August/September 2008 Contents Upfront Upclose Information Technology Lubrication Infrared Maintenance Management Motor Testing Precision Maintenance Reliability Ultrasound Vibration Upgrade

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