Strategies for Managing Spare Parts More Effectively

Andrew Bissot
Tags: inventory management

Minimizing the costs of spare parts is a major struggle for most manufacturers. It requires having the right spares in inventory or creating platforms for anyone on the shop floor to find a spare part instantly. Organizations tend to lose track of the importance of managing their spares until it is too late. Then, when it is too late, production is impacted.

From a cash perspective, these conditions end up increasing the spares inventory value both on and off the books. The effect of mismanaging spare parts cultivates organizations that hoard spares, creating small pockets of undocumented spares around the facility that often are saved privately in the event of an emergency.

Typically, the responsibility of spare parts management falls outside the organizational control of operations and may be delegated to certain individuals. This delineation of roles and responsibilities of managing spares versus the utilization of spares tends to create conflict when a spare part is unavailable. Without a process or systematic way to manage spare parts, a spiral of blame, inflated costs and increased equipment downtime can occur. This is problematic for everyone, but it doesn’t have to be.

Defining Orphaned Spares

Private reserves of spare parts, or any spare that is not electronically visible in a computerized maintenance management system (CMMS), can be categorized as orphaned spares. These items were purchased with intent and recognized as being required for effective operations. To allocate the spare, personnel had to spend time and resources for it to be purchased, received and stored. Beyond just the holding costs, the orphaned spare has created additional management costs within the allocation process as well as the cost of managing the spares inventory. These costs of allocating and managing the orphaned spares are compounded with each purchase order.

Generally, the objective with spare parts is for them to be ready when required for anyone in the facility. However, orphaned spare parts often are not electronically linked within a CMMS or attached to the applicable bill of materials (BOM). In a perfect world, each spare would have a BOM (family) attached to a functional hierarchy (home) within a CMMS. Realizing how spare parts fit into a family and home encompasses an optimization strategy to save the orphaned spares. When all the orphaned spares have been saved, anyone could look in the CMMS to find the correct home, see its family and then locate the spare. Maintainers could then shift most of their time to getting equipment back up and operating, as opposed to walking up and down the aisles looking for the right spare part.

Saving Orphaned Spares

To find homes for all your orphaned spare parts, you first must identify what is an orphaned spare. Within this process, an orphaned spare is any spare part not electronically attached to a BOM that is not connected to a functional hierarchy location. Both are required, not just one.

Embrace the idea that every orphaned spare needs a family and a home. Using the term “orphaned spare” can lead to a complete switch in how personnel view spares. This metaphor tends to create a sense of ownership and causes people to realize spare parts should be accessible to everyone and not just for one’s personal use.

Once a list of orphan spares has been identified, it’s time to begin saving each one. Start by establishing two rules:

  1. No part goes out of the warehouse unless it is issued a CMMS work order, and the BOM of the work order’s functional location must have the spare part’s identification number attached electronically.
  2. No part has a purchase order created unless the spare part’s unique identification number is electronically attached to a BOM on a functional location.

The intent here is to save the orphaned spare in the moment when it is known where or how the part is to be used. This is when you have the most information about your spares. Leverage this and take advantage of the opportunity.

There will be conflicts when implementing this process, so expect some pushback. For the first few months, there may be tension because the moment’s emergency appears to supersede the future’s value. Note that this will be short lived. You may hear comments such as, “Just give me the part,” “I don’t have time to find the functional location,” or “The functional hierarchy is wrong.” This attitude should be muted by leadership with a message of embracing the process and why.

After a few months, this process will become incorporated as examples of successfully finding spare parts begin to repeat. Maintainers will build trust in the availability of spares found within the CMMS by searching for material from the applicable functional hierarchy’s BOM. Orphaned spares will continue to be saved, and the tension will be subdued because spare parts are being found faster.

Practice the Process to Gain Momentum

Training personnel to locate the spare part is also critical. Teaching them how the CMMS works and explaining how the functional hierarchy is laid out will be critical for success. Without proper training, orphaned spares may be saved incorrectly in the most readily available BOM just to satisfy the two process steps. Minor audits of orphaned spares can prevent this.

Consider creating a table that has the functional hierarchy in columns, with each row a piece of equipment and its BOM identified (see Table 1). Next, for each piece of equipment, build another table including the spare part’s description for its BOM (see Table 2). Finally, write an algorithm that references the two tables. Include a sentence such as, “The (part description) on the (functional location) (equipment name) has failed. Find the warehouse location of the spare.” For example, “The rotary optical encoder on boiler feed pump #1 motor, AC, 100 HP has failed. Find the warehouse location of the spare.” These types of “homework-like” assignments will train your team to see the importance of having accurate data going into the CMMS to ensure accurate data comes out.

Table 1. An example of a functional hierarchy with BOMs

Table 2. Examples of BOMs

Experience has shown that an inventory of 10,000 uniquely identified spare parts can transition from 100 percent orphans to less than 5 percent orphans in just two years. By focusing on one work order or one purchase order at a time, you can begin to save your orphaned spares. Evaluate your progress on a monthly basis by assessing trends in the orphaned spares count and their inventory. Targets should be set in a cumulative view to reach 100 percent within a set time frame.

When an organization achieves 5 percent orphans, one final activity often is required. This is where the warehouse pulls all the remaining orphaned spares so maintainers can see and evaluate them. During this activity, you likely will realize you have orphaned spares that are no longer needed. In many cases, these can be sold back to vendors.

After transforming your spare parts management, the inventory that was once scattered and unmanaged should now be readily available to be queried by anyone. You should also see reduced inventory-carrying costs, increased productivity and improved partnerships between maintainers and the spares management team. In the end, your organization will establish the trust to build a solid foundation for continuously improving the management of its spare parts.