How do you correctly size a spare parts stock?


The stock of spare parts is always a conflictive issue within organizations, since its need or demand will depend a lot on the business perspective.

For instance, for a financial department, a stock of spare parts can be considered as an asset within the balance sheet of the company which does not provide any value for the company. In addition, it is extraordinarily complex to control it since its location is distributed. In addition, many of the stocks end up being wasted due to lack of control or because they have never been used. Thus, they will end up disappearing or being recycled. Therefore, for a financial department, stocks immobilise money, do not add value and are complex to be controlled.

On the other hand, for a maintenance department, a generous stock of spare parts is of crucial importance. It is considered as one of the most important lifesavers. In high-availability applications, let us take as an example a city train or subway. Addressing an equipment failure, it is recommended to have a good stock of spare parts in each place where the equipment could fail and also a good strategy of maintainability. This will provide to us being assured and knowing that a rapid reaction will restore the line service. Accordingly, for a maintenance department, the stock is always low -no matter how much there is- and hence investment in the stock will be always low. This is exactly the opposite point of view of a financial department.

At the same time, it is clear for everybody that a lack of spare parts cannot precipitate a downed system. As an example, for 100 Euros of a spare part, you do not stop an installation or an asset that costs 1 000 M Euros. Anyway, it is quite common to miss this 100 Euro spare part on the day it is needed, but never before.

In the face of this divergence of opinions and points of view, RAMS Engineering provides, as a first approximation, strategies for a target calculation of the spare parts stock. Once this calculation would have been made, based on the reliability of the equipment, then the need, application and use of the system being under analysis shall be contextualised. We review below a good list of questions that we need to answer in order to oversize or reduce our spare parts stock: "+" means qualitatively that our spare parts stock should have more scope and therefore be increased;"-" means that the conditions for optimising the stock are in place.

  1. Are we faced with a high-availability application? YES+; NO-
  2. Are our degraded ways good enough to allow for operation being worthy of the asset? YES-; NO+
  3. What is the geographical extent of our system? "Are we" distributed or centralised? Distributed+; Centralised-
  4. Is it slow to repair equipment that we do not have in stock? YES+; NO-
  5. Do we have equipment in their period of obsolescence in life-cycle? YES+; NO-
  6. Do we have a Return On Experience (ROX) system in place allowing us to refine failure circumstances and availability rates? YES-; NO+
  7. Do we have a qualified maintenance team at our disposal, in terms of personnel? YES-; NO+
  8. Are we working in a hostile ecosystem, either by geography, weather conditions, etc.? YES+; NO-
  9. Do we have high-availability strategies in place, such as system redundancy, which allows us to maintain the operation of the asset? YES-; NO+
  10. Do I have a computer tool to control and manage spare parts, their location and quantity? YES-; NO+
  11. How fast am I in acquiring new spare parts material? I have to launch a tender because I am a public administration -and I cannot make a direct purchase-? YES+; NO-
  12. How fast is my supplier in supplying new spare parts? Fast-; Slow+
  13. Do I use specific products from my supplier that are tailor-made for me, for instance, NOT a generic product used in many other corporations like mine? YES+; NO-
  14. Does my supplier have a stock policy to service his/her customers? YES-; NO+
  15. Does my supplier have an after-sales service to meet my needs if I have serious problems and need help? YES-; NO+

No doubt these are complex questions to be answered. We need to take it into account and apply it in the calculation of our spare parts stock.

As a general rule, we can affirm this when investments are scarce, operating costs increase, since more breakdowns tend to appear, a high subsequent cost in maintenance and considerable availability and safety problems throughout the life cycle of the asset.

Therefore, at Leedeo we recommend asking us these questions the day we want to design our spare parts stock, but not only. Answering these questions much earlier, during the asset acquisition process, will allow us to put the right information on the table for a serious, professional, and forward-looking acquisition decision.

A RAMS approach for an initial calculation of spare parts stocks.

The most used and simplest RAMS model is the one known as Capital Stock or Life Cycle model. The essential and required parameters for correct calculation of spare parts stock are the following ones:

  • The reliability of our team. You must know the failure rate (λ) of our components (for each LRU, Line Replaceable Unit). Having high reliability is a guarantee of success, since the higher the reliability, the smaller the stock of spare parts required.
  • We must also know the hours of operation per day of our asset. The longer we are in operation, the greater our stock of spare parts should be.
  • You must know the total number of years (life cycle) you want to have the equipment with spare parts and in service.
  • Finally, the last parameter we must also know is the total amount of components (qi) that our asset has. Obviously, the greater is the number of components, the greater will be our stock.

To perform capital stock calculation, we only need to multiply each of the above parameters. The formula is as simple as the following:

Once this first theoretical approximation value would have been calculated, it is essential to contrast these values -obtained by previous calculations- with the experience acquired over the years and oversizing or reducing, using the 15 questions set out above.

It is important to comment that, on many occasions and due to the use of components with high reliability values, the application of the previous formula could leave an equipment without spare parts. However, a minimum stock value of between 1 and 2 is always recommended, depending on the environment and application conditions.

Conversely, if we want to know the spare parts stock of an Line Replaceable Unit (LRU) component, but we do not know its reliability, then we should estimate, for example, a spare parts stock of 10% of the total quantity (qi) of that component.

At Leedeo Engineering, we are specialists in the development of RAMS Railway projects, applying CENELEC standards EN 50126, EN 50129, EN 50128, EU Implementation Regulation 402/2013 with the application of the Common Safety Methods CSM-RA, supporting any level required to RAM and Safety tasks, in the development and certification of safety products and applications.

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