Spare Parts Procurement
7 tips for buying high-value recoverable spare parts
You might be surprised to find that:
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Spare parts could account for 10% of the cost a typical engineering procurement order
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Your company could already have invested 2-5% of its net value on MRO inventory
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You might have invested millions on spares that will never be used.
Here are the top 7 tips to help you make sure you don’t end up with too many (or too few) spares in your procurement programs.
1. Make someone responsible
Make one person responsible and accountable for maximizing the ROI (Return-On-Investment) for spare parts over the life of the equipment.
2. Procure spares based on stock-out-risk.
Don't just allow someone to guess. Demand a properly justified risk forecast. There are many ways to forecast stock-out-risk. The most popular is to use a compound logarithmic Poisson process. You can produce your own model or alternatively use one of the many computer packages on the market. Prices range between $1500 and $70,000. Spares Calculator is an example of a good low cost package.
3. Establish business rules
Agree procurement business rules for spare parts. Agree forecasting procedures and stock-out-risk goals. For example, you might agree a Poisson forecasting process with a stock-out-risk goal of less than 1% in 90 days.
4. Establish a penalty system
Establishing a spare parts procurement penalty system. Impose a buy-back clause incase you buy too many spares. Impose clauses mandating free additional spare parts, improved repair times and equipment modifications if the equipment fails to meet the agreed reliability.
5. Ask suppliers to produce spares forecasts
Review supplier spares forecasts. Check the logistic figures for accuracy. Suppliers often use more pessimistic data in their logistic calculations than that quoted in marketing literature. It is likely that the performance in service will be closer to former.
6. Review in-service data
Compare the new equipment to equipment already in service. Choose candidates by using the principle of similarity. First analyze the same equipment in the same environment. Second analyze similar equipment in the same environment. Third analyze similar equipment in a similar environment. Etc.
7. Use spares pools and crisis re supply models
Make use of crisis re supply models and spares pools to eliminate slow moving safety spares? These are spares with a mean time between demand of a few years or more. Crisis re supply models offer two levels of service. In normal service repairs might take 15 days. In a crisis they might take 8 hours. An additional fee is usually charged for each crisis demand. Spares pooling is based on sharing slow moving spares with other operators. This can be managed by the supplier or via a web service. Both of these techniques can be used to dramatically reduce investments in slow moving spare parts.
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If you buy, sell or manage spare parts inventory then Spares Calculator is an essential purchase! But don’t just take our word for it. Find out for yourself. Download the free Spares Calculator trial today.