1.0 Why do we need effective Spare parts planning?

It is a challenge for asset intensive industries to maintain optimum level of spare parts in the inventory. Keeping lower levels of parts than required could mean non availability of parts in time to carry out planned and unplanned maintenance, thereby increasing equipment down time. Reduced availability of equipment can lead to lower production and impacts meeting customer delivery schedules. On the other hand, keeping higher inventory of spare parts means higher inventory carrying cost which will increase overall production cost. Also, industry often experiences the risk of excessive stock of parts in the inventory becoming obsolete over a period of time due to technology and engineering advancements. Either way, it is a challenge for maintenance planners and the MRO stock planners to keep the optimum level of stock on continuous basis.

2.0 Business criticality

Most manufacturing plants and maintenance departments face the challenge of lowering operating cost and improving service levels. Manufacturing systems have become more sophisticated due to demand for agility and flexibility over involving greater capital investments. This has added complexity in maintaining machinery in running condition with minimal impact to production and minimal impact to customer delivery schedules.

Demand unpredictability, part alternatives, high service levels, accurate forecast of part requirement also add to the complexity to the planning for spare parts.

3.0 Key business process requirements

Here are a number of business process requirements that drive spare parts planning:

  • Ability to plan for parts based on a variety of factors such as criticality, cost, consumption, combination of these factors
  • Integration of production and operation planning to optimize equipment availability
  • Optimize spare parts storage with respect to usable life as well as storage space constraints
  • Ability to dynamically update part availability due to material transfers
  • Handle shelf life expiry and maximize usable life
  • Ability to track service levels and parts consumption and to update planning dynamically
  • Ability to carry out cycle counting based on criticality, parts consumption, parts value, etc.
  • Use of performance metrics such as overall equipment efficiency (OEE), MTTR, MTTF, unplanned downtime, repair cost, etc.

4.0 SAP ERP functionality to support Spare parts management

SAP ERP supports these key requirements through Plant Maintenance module and integrated functions including inventory, warehouse, procurement, finance and costing. In addition, maintenance scheduling can impact production scheduling. Some of the key functions of SAP that support spare parts planning are described below:
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4.1 Material Master Setup

Spare parts can be broadly classified as:

  • Stock Items: Materials for which stock is usually maintained in the store room.
  • Non-Stock Items: Materials that are usually one time purchases and not maintained as stock in store room.

Requirement for maintenance spare parts are usually generated in the following ways:

  • Re-Order planning: Store room personnel maintains the minimum and maximum stock levels for most of the MRO items. Procurement process is triggered based on the Re-order level. System creates dependent requirements for all the parts that are subject to requirements planning.
  • Manual purchase requirements: Purchase requirements are manually created by users as and when the parts are required (during emergency breakdown for example).
  • Automatic purchase requisitions: System can automatically generate purchase requisitions for non-stock items, if they are used in the work orders.

The table below lists the combination of common MRP parameters used for re-order planning of MRO spares. The combination of MRP type and Lot size keys in conjunction with reorder point, fixed lot, max stock addresses most of the common planning needs for maintenance spare parts.

MRP Type Lot Size Reorder Point Fixed Lot Max Stock Effect
V1 HB X X

Replenishes to max stock level when below
re-order point; allows work order influence

V1 FX X X

Replenishes to a fixed quantity when below

re-order point; allows work order influence

VB HB X X

Replenishes to max stock level when below

re-order point; does not allow work order influence

VB FX X X

Replenishes to a fixed quantity when below re-order

point; does not allow work order influence

PD EX

Orders only per work order requirement. allows

work order influence

ND

No planning; will not order

4.2 Integration of PM with Procurement processes

  • Determination of requirements: Requirements are determined based on MRP planning or manual purchase requirements
  • Approval process: Once purchase requisitions are approved by authorized personnel, they are converted to purchase orders to carry out the procurement process
  • Source determination: Potential sources of supply based on past orders and existing long-term purchase agreements. This speeds up the process of creating the requests for quotation (RFQs)
  • Quotations: Functionality to compare a number of quotations, different pricing and terms, etc.
  • Purchase order processing: Information from requisition to quotation can be included in a purchase order. Different types of POs include scheduling agreements, contracts etc.
  • Goods receipt and inventory management: Goods receiving personnel can confirm the receipt of goods simply by entering the PO number. By specifying permissible tolerances, ‘over’ and ‘under’, deliveries of ordered goods can be limited.
  • Invoice verification: Invoices can be verified and accounts payable clerk is notified of quantity and price variances for clearing and payment.

4.3 Integration of PM with Warehouse processes

  • Managing stock: Stock for materials is updated real-time when goods movement transactions are carried out. Stock overview of the current stock situation of any given material can be obtained. For example, stocks that –
    • are located in the warehouse
    • have already been ordered, but have not yet been received
    • are located in the warehouse, but have already been reserved
    • have other statuses like quality inspection
  • Types of Physical Inventory
    • Periodic inventory
    • Continuous inventory
    • Cycle counting
    • Inventory sampling
  • Cycle counting process
    • Cycle counting is a method of physical inventory where inventory is counted at regular intervals within a fiscal year. Cycle counting allows you to count fast moving items more frequently than slow moving items.
    • Materials can be grouped together into various cycle counting categories (such as A,B,C,D).

4.4 Core Plant Maintenance processes

Order Management: Work orders in SAP support component planning. Stock items as well as non-stock items can be planned on work orders. Stock items create reservations instantly on saving work orders. Materials are issued to work orders from stock. if parts are not available in stock, system creates purchase requisitions. Purchase requisitions are created immediately on saving work orders for non-stock items. System offers functionality to create planned, unplanned and emergency work orders.

Refurbishment process: Refurbishment Order is a special type of work order that allows repairing of damaged parts in-house or through external vendors. Damaged part is refurbished and then put back in stock for consumption. This process is fully integrated into inventory, costing and MRP functions of SAP.

Serial number management: Spare parts can be tracked individually through serial number management functionality in SAP. Parts can be serialized at the time of material receipts, issue or during stock transfers. Serialization also helps in tracking warranty on parts. vendors can be made accountable for parts that fail prematurely through this functionality.

5.0 Key Metrics

Here are a few key performance indicators that provide analysis on effectiveness of spare parts management:

Equipment efficiency: Percentage of the number of maintenance labor hours spent on an equipment vs equipment operating time.

Maintenance effectiveness: Operating time / (operating time + downtime for maintenance ) as a percentage. Represents equipment availability from maintenance perspective.

Unplanned downtime %: Percentage of time equipment/facilities are not available for production due to maintenance requirements.

Maintenance cost %: Equipment/facility maintenance cost as a percentage of manufacturing controllable costs.

MTTR: Mean time to repair equipment and facilities for a defined unit of measure such as operating hours, number of batch runs, etc.

MTTF: Average interval of time between failures of equipment and facilities for a defined unit of measure such as operating hours, number of batch runs etc.

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5 Comments

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  1. Juan Felipe Bernal

    Good document. Most of the times, spare parts are on the last part of the list of priorities in a EAM Go-Live, but the pain is suffered few months later. Thanks.

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