Surviving the Spare Parts Crisis. Joel Levitt

Bill of Material information is cross-referenced by point-of-use.(1 point)4. Attribute scanning on key words of the description (both short and long) is available to help find the desired item.(1 point)

       # of points_______of 6

       Assessment of Analysis Techniques Used to Understand the Inventory

1. Usage records are employed to determine stocking levels, order points, and order quantities.	(1 point)
2. Unit dollar values are readily available and routinely used in planning and Work Order approval efforts.	(1 point)
3. Maintenance, Purchasing, Accounting, and the Supply Room work together to assure availability of necessary parts, elimination of obsolete parts, adjustment of stocking levels, minimal lost time by craftsmen, etc.	(1 point)
Maintenance is regularly consulted regarding stocking parameters generated by the system.	(1 point)
Human judgment can override the system on an item-by-item basis.	(1 point)
Maintenance influences the type and quantity of repair materials to be set up in stock.	(1 point)
A system exists that flags frequently ordered parts non-stock, which must be authorized for stocking.	(1 point)
Stocking levels (min/max), reorder points, and order quantities are set up and maintained:
• Automatically	(2 points)
• Manually	(1 point)
• Not set up	(0 points)
4. Inventory categories are defined and segregated when analyzing inventory value and turns.	(1 point)
5. SIC formula parameters for EOQ calculation (carrying cost, purchase order cost, delivery time, etc.) are current and periodically updated.	(1 point)
6. There is an established insurance / critical spares program containing review provisions. They are protected from discard due to low usage.	(1 point)
7. An approved Work Order indicating which cost center to charge is sufficient authorization to withdraw stock materials.	(1 point)

       # of points______________of 14

       The Part Itself

1. Support systems for purchasing are effective:
Quality performance measures have been established for materials.	(1 point)
Purchase Order tracking is functional.	(1 point)
A vendor rating system is in place and vendors are aware of their responsibility to provide materials of acceptable quality on time.	(1 point)
Procedures are in place that alert requisitioners regarding receipt of their materials.	(1 point)
Buyers are evaluated on the performance of vendors that they select.	(1 point)
There is an established interface/partnership with vendors to improve material quality, cost, availability, and standardization at minimal carrying expense.

2. Practices and procedures between Maintenance and Purchasing are clear and effective.	(1 point)
Maintenance is allowed to specify individual suppliers when necessary.	(1 point)
Maintenance is allowed to specify method of s hipment when necessary.	(1 point)
Purchasing reviews any change in original specs with Maintenance and/or Engineering. They do not make material or equipment substitutions without consulting technically knowledgeable resources.	(1 point)
Purchasing routinely (and when requested) follows up and expedites POs.	(1 point)
There is an effective system for tracking Purchase Requisitions from generation to receipt by originator.	(1 point)
The volume of Emergency Purchase Orders is “reasonable.”	(1 point)
Production is not permitted to purchase direct nor to maintain duplicate inventory of unit spares of special parts.	(1 point)
Maintenance is permitted to purchase direct locally when necessary.	(1 point)
When appropriate, Maintenance is permitted to contract work to local shops with purchasing cooperation.	(1 point)
3. Blanket and system contracts, and blanket and system orders, are effectively employed to minimize redundant paper work and administrative effort:

Blanket contracts (e.g., repetitive service)	(1 point)
System contracts (e.g., service contractors negotiated by PA)	(1 point)
Blanket orders (e.g., parts price agreement)	(1 point)
System orders (e.g., parts costs negotiated by PA)	(1 point)

      # of points_________of 20

      CHAPTER 6

      SPARE PARTS INVENTORY AND RISK MANAGEMENT

      What do your car insurance, backups of your computer files, and spare parts inventory have in common? They are each an example of risk management. According to author and researcher Douglas W. Hubbard, risk management is “the identification, assessment, and prioritization of risks followed by coordinated and economical application of resources to minimize, monitor, and control the probability and/or impact of events.”

      Just like your car insurance minimizes the financial consequence of a car crash, backing up your files minimizes the consequence of a computer crash and spare parts inventory minimizes the consequence of an equipment crash. They are all about risk management.

       RISK MANAGEMENT FUNCTIONS

      Four basic functions help manage risk:

      • risk identification

      • risk quantification

      • risk probability

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