Efficient Plant April 2020 - 6

column | implementations

How Many
Spares Are
Enough?
Dr. Klaus M. Blache
Univ. of Tennessee Reliability and
Maintainability Center (RMC)

Excess MRO Inventory by Quartile
Top Quartile

1

Second Quartile

1.57

Third Quartile

2.24

Fourth Quartile

2.52

Source: Dr. Klaus Blache study, 2019
This comparison shows that
fourth-quartile (reactive maintenance)
operations carry 2.52 times more MRO
inventory than top-quartile companies.

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O

PERATIONS PEOPLE
always want an ample supply
of MRO (maintenance,
repair, operations) spare parts on hand
to make sure that production is never
at risk. This is especially true if your
maintenance system is highly reactive.
If the needed part is readily accessible,
it may cause additional downtime, high
expenses tied to expedited shipping,
and possibly result in scavenging parts
from other (less critical or unused)
equipment.
Keeping too much MRO inventory
leads to higher purchase and carrying
costs. Inventory carrying cost (typically
about 25%) is the cost incurred for holding inventory. It includes storage-related
expenses such as taxes, obsolescence,
insurance, warehouse/storage space,
damage, and relocation. If you have
unused parts sitting in storage for four
years, you could have purchased new
parts at no additional cost.
Several KPIs (key performance
indicators) can be used to monitor the
efficiency and effectiveness of your
spare-parts process. The standard metric
for how well you are doing, as defined
by the SMRP (Society of Maintenance
& Reliability Professionals, Atlanta,
smrp.org) Body of Knowledge, is the
value of MRO spare parts stocked onsite
to support maintenance, divided by the
RAV (replacement asset value) of the
assets being maintained at the plant,
expressed as a percentage. Same result,
shorter nomenclature: MRO value as a
percentage of RAV.

PERCENTAGE GOAL
Calculate a total of your MRO inventory plus in-stock supply. This should
include all inventory-share-the

spares common stores, undocumented
bone-yard parts, and vendor-managed
and consignment parts. Divide this
all-inclusive MRO parts value by your
RAV. RAV should include all the costs
necessary to replace the current production capability. Then, multiply by
100 to calculate the percentage value.
Using current replacement costs will
factor in inflation.
The SMRP Body of Knowledge states
that, for a top-quartile operation, the
range should be 0.3% to 1.5%, varying by
industry. My data indicates best practice
(top quartile) to be 0.3% to 0.7%, with
most top-quartile companies in the 0.5%
to 0.7% range.
An Aberdeen Group (Boston, Aberdeen.com) study (Maintenance, Repair,
Operations (MRO) in Asset Intensive
Industries, Feb. 2013, Nuris Ismail and
Reid Paquin) found that the top 20% had
only 1.3% unscheduled downtime due
to lack of spare parts, while the bottom
30% had 6.3% downtime due to lack of
spare parts.
An interesting trend that's stood the
test of time for more than 30 years is that
best-practice facilities have shrinking
investment in MRO inventory. Although
the numbers have changed slightly over
time, bottom-quartile companies typically have more than 50% of their total
maintenance costs tied up in parts. The
top-quartile value is less than 20%. EP

Based in Knoxville, Klaus M. Blache
is director of the Reliability &
Maintainability Center at the Univ. of
Tennessee, and a research professor
in the College of Engineering.
Contact him at kblache@utk.edu.

APRIL 2020

3/27/20 10:18 AM
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Efficient Plant April 2020

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