Effect of "Unofficial" Maintenance Spare Parts Storerooms

For a standard factory operation, a maintenance system will usually include an equipment spare parts inventory with its own stores management system under the engineer in charge of the operations. The system is necessary to achieve the desired level of plant availability. The basic business reason is of course, “time”. For example, a breakdown can last a few minutes to several months depending on the availability of a necessary part or material.

Keeping inventories will absorb a significant portion of the budget. However, the downtime costs of not having a required spare part often far outweigh the purchase and holding cost and this can lead to holding more (as insurance parts) in inventory than is really required. As a result, accountants will often find this area an easy target for cost savings. The problem starts if the engineer acquiescent and just reduce inventory without a diligent and thorough review. Though there will be short term cost savings, this will later lead to more inconveniences with stock-outs and other hustles if the usage rate (due to poor maintenance practices?) and lead times (in the procurement process & for the supplier) are not addressed

With the erosion of their trust on the system, people will soon take matters into their own hands and keep stocks “outside the system”. The popular belief is that the time needed to repair will be reduced by storing the part(s) near their station or area while avoiding all the hassles of not finding the part in the stores when needed. Soon this becomes part of the operation’s culture and standard practices.

However, these “Unofficial” Storages will impact negatively on our inventory levels, operational expenditures and reliability program. In the end,

 1. Actual Inventory will Increase – this is obvious because the items’ inventory in the stores are each duplicated by the “unofficial” storage

2. Earlier reorder point - consider the formula used for optimum stock inventory level,

where :

  P = fixed cost per order

  q = weekly usage of the item in quantity

  52i = annual interest rate (or more specifically, the holding cost per item as a percentage of the item unit cost)

  c = unit cost of the item

  T = lead time to order, weeks

  σ = weekly mean absolute deviation

  K = service assurance level factor (see below)

 

Assurance Level, %	50	75	80	85	90	98	99	99.9
K value	0.0	0.7	0.8	1.0	1.3	2.1	2.3	3.3

 

  In the formula for Re-order point, the second term [K MSD sqrt (T)] is the “safety stock to prevent stock-outs while the first term (qT) is the usage of the item while it is being restocked

 The maximum, minimum and average inventory level and cost can then be derived.

 For simplicity, assume the usage of an item (say an air filter common to several AHU’s) is constantly one piece per week and lead time is about 4 weeks. If someone decides to withdraw two at a time and keep the extra piece for next replacement, the mean deviation will become one instead of zero. For an assurance level of say 98%, about 5 pieces of safety stocks will be needed and the re-order point will be 9 pieces. This higher re-order point will make the system more vulnerable to price fluctuations

      3. Higher expenditures – also obvious as the higher inventory will have to be paid for

      4. Skewed Usage Report – will show a poor control of the costs due to the higher variation

      5 Increased Obsolescence – the amount of stock “outside the system” will not be known

      6. Increased Downtime – if the person doing the maintenance work is not aware or has no access to the “unofficial stores”

      7. Maintenance Planning is affected – store withdrawals can no longer be relied as data of parts replacement and usage

It is unfortunate that on many situations, the maintenance engineer believes in initiating such practices in their workplaces