How Many Spares Are Enough?

Operations 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.

This comparison shows that fourth-quartile (reactive maintenance) operations carry 2.52 times more MRO inventory than top-quartile companies.

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.