In this Two Minute Tutorial Phillip Slater discusses the only two reasons why you (or anyone) holds spare parts inventory.
The first reason is when you can’t access supply within your planning horizon.
For example, if you have a need for a spare part that is critical to your operations and the predominant failure mode is unpredictable, catastrophic failure, then your planning horizon is effectively zero and so you will most likely hold a spare part. But if you can reliably access a part at (say) one hour’s notice and the part fails progressively through wear, then you don’t really need to hold the spare part in your inventory.
The second reason is when you can’t buy the exact quantity that you need.
If you only need one of an item each time it is required but the vendor only sells them in sets of two, then you will hold the extra item as inventory. But if the vendor supplies the exact quantity that you need then you will use what you need when you purchase the item and then not hold any inventory.
These two examples are real and faced by many of us everyday – they describe exactly why we hold a spare tire for our cars (unpredictable, catastrophic failure) and why we don’t hold spare brake pads (wear out and available at short notice in exact quantities).
With spare parts inventory management there is a tendency to over complicate the issues that we face. However, if you use these two simple reasons to help guide your spare parts inventory decisions then you will make better decisions and hold less inventory. One way for you to apply this know-how is to incorporate these two reasons into your company’s spare parts management stocking policy. That way you will turn your spare parts decision making from the ad hoc and emotional to logical and audit-able.
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Posted by: Phillip Slater