Spare parts inventory control for the maintenance of productive plants
M. Bevilacqua1, F.E. Ciarapica1 G. Giacchetta1
1
Dipartimento di Energetica, Universit Politecnica delle Marche, Ancona, Italy
Abstract - This paper analyses a set of compares different
methods to effectively manage spare parts inventory,
presenting a case study relating to an Italian pasta producer.
The work was divided into three phases:
- in the first phase FMECA analysis was performed in order
to classify all items on the basis of their criticality.
- in the second phase ABC method was used to evaluate
consumption rates of the spare parts.
- Finally different re-order point methods were compared.
Three demand modelling techniques and inventory policies
are evaluated using real data: 1) Normal distribution, 2)
Poisson distribution and 3) Gamma distribution.
Economic Order Quantity method was used to define the
purchase policy. The results showed that the normal
distribution is not generally advised for modelling the
demand of slow-moving items, for which a Poisson
distribution is better recommended.
Keywords Spares Management, FMECA, ABC,
Economic Order Quantity
I. INTRODUCTION
Spare part inventory management is often considered
as a special case of general inventory management with
some special characteristics, such as very low demand
volumes.
The principal objective of any inventory management
system is to achieve sufficient service level with
minimum inventory investment and administrative costs.
The difficulty in assessing good strategies for the
management of spare parts lies in their specific nature,
normally very slow-moving parts with highly stochastic
and erratic demands. For example, typical industrial data
sets comprise limited demand history with long streams of
zero demand values and a few large demands [1]. This
makes the estimation of the lead time demand (LTD)
distributions very difficult, which is essential to obtain the
control parameters of most inventory policies. In
inventory decision making, one needs to determine
inventory control parameters, such as re-order points and
safety stocks.
During the past decades inventory research has
produced a vast amount of theory for modelling different
inventory control situations. If safety stock is necessary,
the amount depends upon general management policies,
obsolescence, the base-depot-echelon structure, and upon
circumstances unique to each application. Some of the
most important topics discussed from authors concern:
978-1-4244-2630-0/08/$25.00 2008 IEEE
Multi-echelon problems: one of the recurrent
problems is that of where to place spare parts in a
multi-echelon system. See Cohen et al. [2],
Papadopoulos [3], Song and Zipkin [4].
Management issues, such as methods of organizing
and reducing spares. See Haneveld et al. [5] and
Gajpal et al. [6].
Age-based replacement. One of the simplest
maintenance policies is to replace items at the end of a
pre-determined interval. See Armstrong and Atkins [7],
Zohrul Al-Olayan [8].
Problems involving obsolescence. Since a spare parts
inventory has specialized uses, if the equipment it is to
be used for does not require it, the spare part sits in
inventory. There are no alternative uses for it, except
to sit in inventory as an insurance cost against
downtime. See Cobbaert and Van Oudheusden [9].
Repairable spare parts; Brammer and Malmborg [10].
II. CASE STUDY
This paper concerns a maintenance spare parts on an
important Italian pasta producer.
The main steps of the pasta production process consist
of: 1) wheat selection; 2) first transformation of cereals; 3)
winnowing of wheat; 4) conditioning; 5) milling; 6)
dosage; 7) mixing and braking; 8) modelling; 9)
dehydration; 10) cooling; 11) storage and packaging.
During 2006, the company did not perform any
preventive maintenance policy for the spare parts of the
productive plants. The maintenance management policy
used was only a corrective one with the most part of spare
items being purchased in presence of a failure and only,
commonly used items present in stock. Maintenance
Manager decisions on spare parts order policy was based
only on his own personal experience, causing several
problems such as:
- the risk of long plants stop in case of critical components
stockout.
- a supplier lead time high uncertainty .
- the inconvenience due to possible hurried repairs and
renewals, in order to avoid plant stop.
Figure 1 shows the flow chart of the procedure
developed by a panel of expert in order to change the
spare parts the management.
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TABLE I
START
Inventory
Descrizione dellamanagement
domanda durante CRITERIA FOR CRITICALITY ASSESSMENT
LTD definition
LTD, secondo forlaevery item: Poisson
distribuzione di
Distribution,
frequenzaNormal Distribution,
considerata, Gamma
per singolo
Classification ofdelle
Classificazione
criticality,
spareparti
utilizationtasso
base a criticit,
parts:
in
rate, lead
di
Distribution
elemento Consequences LEVEL 1 LEVEL 2 LEVEL 3
time
utilizzo, movimentazione caused by
Per
Fillogni
rateelemento si fissa
definition un fillitem
for every rate (95%)
obiettivo failure
(95%)
Demand
Analisi dellaanalysis
domanda
SAFETY Failure causes Failure causes No
Risks for peoplegreat effects on risks for people consequences
Evaluation
Si trova of the s value
il valore that
di s che
stabilito al defined
satisfy ilthe
soddisfa
punto precedente
fill fill
raterate and people and and
environment environment environment
Esclusioneofdegli
Exclusion
elementirequest
parts
senza alcuna
Applicazione del filtroindi
Filter application
domanda perorder
QUALITY Failure causes Failure causes No effects for
without during demand data in
richiesta nellarco di
the period analysed tolesclusione di dati
define misleading
Inventory
Politiche policy
di gestione: Effects of great effects on lower quality goods
(s, nQ)
tempo considerato per fuorvianti per lanalisi (s, nQ)
lanalisi information
(s, S)
failure on quality, the goods
(s, S) quality goods are not
up to customer
Ex post di
Criterio optimization criteria:
ottimizzazione all data
ex-post: tutti ihave
dati Results
Analisi deianalysis
risultatiand optimization
e ottimizzazione
specification
beendomanda
reali della used as simulation
usati come input
input per le
simulazioni CONTINUITY Machine works Machine works Intermittent
work continuity 24 hours per 12 hours per working
day day
Fig. 1. Flow-chart of the procedure adopted in this work PRODUCTION Failure causes Failure causes a There is a
Effects of total system parallel
In the first phase of the study all items have been failure on interruption of important machine
production production interruption or
classified taking into consideration: reduces the
1) the criticality level of the spare parts; production
2) the item supply lead time; FREQUENCY A lot of stops Occasional No frequent
3) the utilization rate of the items (failures/hear) due to failures stops (one time stops (less than
Number of (more than one every six one time per
failures per time every six months) hear)
A. Classification based on criticality level hear months)
COST () Very high High Not important
This used classification procedure allowed the costs value
caused from
company to define the priority in spare parts management, failure
taking more attention on critical items. FOOD Possibility of Not applicable No effects for
A technique similar to FMECA (Failure Mode Effect SAFETY goods pollution good
Criticality Analysis) method was used to carry out this Good
contamination
first classification. SCORE 7 3 1
The classification is made on expert judgment. The
panel of expert was composed of different stakeholders: The procedure here adopted uses the scores 1, 3 and 7
maintenance manager, manager of mechanical to define low, medium and high level of criticality. The
maintenance area; manager of electrical maintenance area. use of flow chart showed in figure 2, allowed the
The first step of classification concerned the analysis company to classify the maintenance items through three
of Electrical Diagram, PI&D and the definition of the classes:
Equipment Tree. A Class high criticality
According with the diagram schemes, all plants were B Class medium criticality
broken up into four levels: C Class low criticality
1 Level: plant or machine that was taken into Every spare parts characterized by high criticality
consideration for maintenance. must be physically present at the warehouse and
2 Level: specific process phases or machine controlled with different policies defining safety stock,
assemblage/functional group. inventory level and re-order point (table II).
3 Level: machine sub-assemblages involved in The items that belong to the medium class of
elementary activities necessary in functional group of criticality are managed in different way on the basis of
the second level. cost and lead time. Particularly these items will be
managed using just in time policy, when lead time is less
4 Level: main critical components (electrical, than 24 hours.
hydraulics, mechanicals, etc.) that are the failure and
propagation sources for the above levels.
The criticality of a part is related to the consequences
caused by the failure of a part on the process in case a
replacement is not readily available, and hence it could be
called as process criticality. The effects produced by a
failure and the priority levels have been highlighted in
table 1.

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7 SAFETY
The spare parts that belong to the C class are
SICUREZZA
composed of 50% of total items; they have low
3, 1 utilization rate and represent only the 10% of the total
7 FOOD
SICUREZZA utilization value.
SAFETY
ALIMENTARE
The utilization rate allowed the company to identify
3, 1
7
the inventory control policy: constant control for the A
QUALITY
QUALITA codes, periodic control for B and C codes.
3, 1
7, 3 C. Demand analysis
CONTINUITY
CONTINUITA

1 Statistical information on the consumption of spare

PRODUCTION
PRODUZIONE
3, 1
PRODUCTION
PRODUZIONE
1 parts was available for 7 years. The demand information
was recorded in monthly periods, so a total of 77 periods
7 7, 3 of demand information was available for the study.
3, 1 1
FREQUENCY
FREQUENZA FREQUENCY
FREQUENZA Three problems have emerged during demand analysis:
7 7,3
1) In the first step parts with negative or null demand have
FAILURE
COSTO 3, 1 FAILURE
COSTO 1 been excluded from the analysis.
COST
ASSOCIATO COST
ASSOCIATO 2) Erratic high demands partially caused by preventive
7 7, 3 maintenance have been observed, causing a better spare
parts stock control to be necessary. Equation (1) was thus
CLASS A
CLASSE A CLASS B
CLASSE B CLASS C
CLASSE C used to evaluate anomalous values:
Fig. 2.Flow chart necessary to classified all items into three criticality
classes xi > ( + k ) (1)

The xi value is considered anomalous if it is higher of

TABLE II
MANAGEMENT POLICIES
Management policies
Criticality Multi item Just in time Single item No Stock
class inventory policy inventory
A X
B X X The reason for using the ex-post approach is that many
C X
B. ABC classification
In order to reduce the number of item being analysed
an ABC classification has been carried out. Class A items
have been further classified.
A more refined analysis of the spare parts data
revealed important differences among class A items not
only in terms of criticality but also with respect to their
demand and price. Therefore, is has been decided to group
them in different classes to define the most suitable stock
control method for every class.
Some parts had only 0/1 demands while others
experienced either few large demands or no realization of
demands during 5 years. For other parts large negative
demands due to returns have been observed. Thus, a spare
parts classification was needed based on consumption
rates.
The classification scheme used in this work is the
ABC-classification according to the Pareto principle.
The A category components are the 20% of total
items; they have high utilization rate and represent
almost the 80% of the total utilization value.
The B class collects almost the 30% of all items;
these parts have medium utilization rate and represent
the 10% of the total utilization value.
average value plus a multiple of standard deviation.
In this work was chosen a k value equal to 16.
3) An ex-post approach to optimization the spare parts
inventory has been adopted. In the ex-post procedure the
same data set is used for both fitting and testing purposes.
industrial data sets are rather short for forecasting
purposes and there is a lot of non-stationarity because of
introduction or outphasing of parts. This procedure will
give the advantage of using the whole data set to get a
better picture of the real demand process.
D. Inventory management
Our aim is to compare various policies with real
demand data from the case to see which one is best under
what circumstances. We also evaluate the performance of
the system using Normal, Gamma and Poisson
distribution based models.
When we use the Poisson distribution to estimate the
Lead Time Demand (LTD), we use Q = 1. This model is
often referred to as (S - 1, S) model, with s = S 1. As
average demand is generally low in this case, the EOQ
calculation also yields a value of 1.
It is possible to analyse, for example, the case of item
#773. Table III shows the required value during the 77
months of the analysis. This part has a lead time equal to
15 days (0.5 months) and it belongs to the A class of
criticality and A class of utilization rate.
TABLE III
UTILIZATION OF ITEM #773

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ITEM #773 panel of expert decided to round up a total, obtaining a re-

PERIOD VALUE TOTAL UNIT REQUIRED order point value equal to s = 1.
2 3 56
7 10 LEAD TIME In the case of the Normal distribution we use an (s,nQ)
13 10 0,5 inventory policy for the system, with the re-order point s
24 10 HANDLING
evaluated using the LTD distribution according to the
modelling methods described above. Thus, when
25 5 FAST MOVING
overshooting of the re-order point s cannot be overcome
46 5 UTILIZATION RATE
by the lot size Q, an alternative lot size equal to nQ is
55 5 A ordered, such that the inventory position is brought above
59 3 CRITICALITY s, where n is an integer value.
68 5 A To this end, the average () and standard deviation ()
of the observed period demand is evaluated to estimate
In general, three types of costs are associated with the parameters LTD and LTD of a normal LTD
inventories: holding costs, ordering costs and stockout distribution, as follows:
costs. Holding costs represent the cost of capital tied up in
the spare parts inventory. An annual fixed rate of 40% LTD = L (5)

was used in the study. Ordering costs represent the cost LTD = L
associated with placing an order for a spare part, which
includes the costs of telephone calls, inspection and where L is the lead time of an item in full periods of
handling of the incoming items, paying the bill and time (days, months, etc.), and with and evaluated
registration of the parts. This cost is independent on the using the whole data set of demands, including zero and
number of parts included in the order. An ordering cost of negative values. To determine a re-order point s for a
25 euros was used in the study. Since our objective is to given fill rate , we use a similar procedure as the Excel
evaluate the optimal balance between service levels and goal seek routine, by first finding a z-value satisfying:
holding costs we do not incorporate in this study stockout
costs. The cost of item #773 is equal to 60.9 ; using the LTD UNLLI ( z )
EOQ formula it is possible to evaluate the order quantity 100 % (1 ) 100 (6)
Q
value Q:
where UNLLI(z) is the unit normal loss integral
2C o D 2 25 6,5 (2)
Q= = 4 associated with the unit normal variate z. Then s follows
Cm 0,4 60,9 from s = LTD + z LTD rounded up to the nearest integer.
Using the #773 item data we obtained the following
Once the LTD distribution is obtained, we can use it to results: with an average value = 0,363 and a standard
determine a re-order point to achieve a given fill rate as deviation = 1,575, a fill rate equal to 95% implies a re-
follows: from the CDF (Cumulative distribution function), order point s = 1,575, that it was approximated to s = 2.
F(x), of LTD obtain the list of possible re-order point
values s, by setting s = x, where x are the lead time In the case of Gamma Distribution the inventory
demand values, and their corresponding probabilities f(x). management policy used was (s,n Q) type. The Gamma
Now choose the smallest s satisfying: Function () used was:

ES ( s ) (3) x 1
100 % 1 x100 f ( x) = e x (7)
Q ( )

where Q is a pre-determined lot size and ES(s) is the Where

expected unit short for a given re-order point s, which is
( ) = e t t 1 dt (8)
evaluated as follows:
0

( x s) f ( x)
x| x > s
(4)
The shape () and scale parameters were evaluate
using moment method:
The term 1 - ES(s)/Q is the calculated fill rate for a
given s. Using this procedure the item #773 gives the 2
= (9)
following results: with s = 0, we have ES(s) = 0,292 and a

fill rate equal to 90.9%; with s = 1, we have ES(S) = =
2

0,038 and a fill rate equal to 98.53%; we obtained a value 2

s = 0,536 corresponding to a fill rate equal to 95%. The

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 Proceedings of the 2008 IEEE IEEM

Considering the item #773 it is possible to calculate: This paper addressed the question of managing spare
LTD = 0,363; LTD = 1,565; = 6,73; = 0,0539. Using a part logistics by discussing the basic principles affecting
fill rate of 95% the calculation of ES(s) is similar to the the strategic choices and related policies in this area.
Poisson Distribution. The s value obtained is 1,627, While some specific observations were made in terms of
approximated to s = 2. the illustrative case context, the main objective was to
emphasize the need of differentiating the policies between
different types of spare parts as well as revealing the links
III. RESULTS AND CONCLUSION between the part characteristics and logistics system
elements.
To evaluate the results obtained through the different
model used the inventory level and the inventory value
have been calculated. In table IV a comparison is shown REFERENCES
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2700

2600

2500
Inventory

DISTR.
NORMAL/POISSON
NORMALE/POISSON
DISTRIBUTION
2400
DISTR.
GAMMA/POISSON
GAMMA/POISSON
DISTRIBUTION
2300

2200

2100
88% 90% 92% 94% 96% 98% 100%
FILL RATE%

Fig. 3. Relation between fill rate and inventory level for two
management models

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