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Spare parts procurement: Nature of problems

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Spare parts management presents certain unique challenges that one would not encounter when dealing with other materials.

Purchasing and Supply with Nyasha Chizu

The financial impact of spare parts mismanagement is reflected by the rate of obsolescence and redundancy.

Failure to plan optimum spare parts inventory would result in the company losing value because the spares in stock are no longer usable.

Obsolescence relates to loss of value as a result of changes in taste whereas redundancy refers to loss of value as a result of changes in technology.

The equipment of which spare parts are provisioned for can be affected by obsolescence and redundancy.

If the equipment is no longer useful due to the two circumstances, the spare parts held also become redundant. The inventory manager needs to provision for spares parts at three different stages of the equipment life cycle. There are parts that are purchased at the initial stage when the equipment is bought, some at the operational stage of the equipment and others during the phasing out stage of the equipment.

Provision of initial spares is the most challenging and in fact, the raw area of spare parts management. It must be noted that decisions at this stage govern the effectiveness of spare parts policy in future. Initial spares are sometimes referred to as “mandatory” or “recommended” spares.

Such types of spares are normally recommended by the manufacturer and the buyer has limited means to verify the information recommended. Most redundant spares are built up from the initial spare parts provisioning because of the following limitations:

Relevant consumption or usage data would not be available.
The will be no experience regarding the performance of the machine.
Manufacturers in most instances cannot prescribe the optimum mix of spares due to unknown conditions during the operation of the equipment by the client.
Manufacturers also tend to recommend non moving spares from their warehouse to eliminate their own dead inventory.
Manufacturers normally recommend life time procurement of spare parts due to faster changes in technology. There is usually a threat of non available of support for older versions of equipment when new versions are released.
In case of imported spares, fear of non availability in future and the risk of longer lead times, tempt the front loading of initial spares.

Operational spares are the repetitive replenishments of parts consumed during the course of business. Spares of this nature are controlled using similar techniques applied to other stock items. Historic data of consumption is used to determine the reorder level, minimum and the maximum stock levels. Such spares can be categorised in terms of consumption patterns, fast and slow moving spares can be identified with certainty.

Equipment is phased out due to various reasons that include but not limited to inefficiencies identified, consideration of the economic life of the equipment or changes of operational systems. This calls for provisioning of spares only enough to sustain the limited life of the equipment, as opposed to the procurement of spares during operational phase.

There are difficulties encountered in the co-ordination between activities of the spare parts manager and the maintenance manager during the initial and phasing out phase. The spare parts manager in most instances does not have information pertinent for planning spares such as maintenance schedules, stages of the equipment in its life cycle and organisational plan for switching over to new technology.

The performance measurements for spare parts systems are therefore limited.

Nyasha Chizu is a fellow of The Chartered Institute of Purchasing and Supply writing in his personal capacity. Feedback: chizunyasha@yahoo.com

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