Lengthy Spares Lead Times
We asked one of our consultants, Dave Thompson, if we could use the benefit of his experience to produce a series of blogs where we actually look at the main issues faced by Spares Managers and how these issues can be addressed.
Of course, Dave happily agreed. Here we have the third of these blogs which tackles the issue of the long lead times.
Spares Issues Part 3 | Long Lead Times
Lead times for spares are getting longer…
Lead times seem to be getting longer and longer and this is a major concern for all industrial sectors. The long lead times are not always the fault of the vendor but include what is known as internal lead time.
Two early reviews
Review 1
During a site maintenance audit, the maintenance team complained about poor spares availability. Our spares expert, David Thompson went to discuss this with the inventory manager at the head office, his response was that there was no issue. When investigated further, the lead time set up in Maximo for all line items was 90 days. At this company, it took longer than 90 days to issue the PO to the vendor. So, when the vendor’s lead time was added plus the shipping time, customs clearance, goods inspection and time to put on the shelf, the total lead time was very high.
Review 2
A similar example is related to some turbine filters. We found that the total lead time was 244 days, and the internal lead time represented 65% of the total time, i.e., more than the vendor’s lead time. The re-order point had been set at 750, however, the average usage in the lead time was 1,200 filters. Because of the high usage per year - on average 1,850, the replenishment strategy should have been what we call constant vendor delivery (a just in time approach).
Most inventory management systems (typically forming part of the CMMS or EAM), allow the population of only the vendor’s lead time and this is rarely updated.
This is alright for the purchasing function, but inventory analysts need to know the total lead time, to be able to calculate safety stock and re-order points. If we assume a critical spare, with a re-order point control and annual demand of 12 per year and a lead time of 45 days, then the re-order point must be set at 4. If the total lead time is double at 90 days, the re-order point must be 7, an increase of almost 75%.
The Main Issues
The actual total lead time is not formally recorded or used to calculate Re-order Points and Safety Stocks
Long lead times are not formally highlighted and subjected to process mapping to seek constraints
There is little dialogue between purchasing and inventory personnel
Purchasing, inventory and maintenance personnel have had no training in inventory control, and therefore, do not have the knowledge to set or evaluate their existing inventory levels
Result of these main issues
These issues result in:
Inability to optimise stock levels
Over or understocking of parts which lead to emergency purchases or excess stocking
Identifying and fixing these issues
Apart from a systematic line-item by line-item review, we propose the following options:
Identify long lead times and start by analysing those with high stock holding costs
Conduct a process mapping exercise to identify issues/events that cause higher lead times
Carry out what-ifs analysis
Develop and implement corrective actions
If you require support with your spares management processes, get in touch with us to instigate a free, no obligation conversation with one of our spares experts.
You might also be interested in reading…
Optimising Spare Parts and Inventory Management
In our white paper - Optimising Spare Parts and Inventory Management, we discuss some of the areas that can be addressed to help reduce stock levels and ensure that you only stock the right parts leading to reduced stock-holding savings in expenditure and reduced downtime of equipment.
The areas we cover in this white paper are:
Duplication of spare parts
Standardisation of spare parts
Rationalisation of spare parts
Bad practices
Strategies and priorities
We have included a number of case studies and also the offer to review of your parts data - free of charge!
Download our white paper now to start optimising your spare parts and inventory management systems.