Global Inventory Management

Stock Levels Optimization – Target Stock Model (TSM)

2017
Target Stock Model

Overview
The Need for Inventory

Inventory purpose is to manage risk: Inventory exists because of the lead time between the requirement from the
plant, and the delivery of the spare part from the supplier.

Spare part is sent

to the plant

Maintenance: a spare Purchasing

Plant part is requested GPS process Supplier

Result: the spare part can not be available immediately!

Spare part is sent

to replenish the
Spare part is sent stock
to the plant
Handling
costs
Ordering costs
Storage costs
Maintenance: a spare Purchasing
Plant part is requested Warehouse GPS process Supplier

Result: the spare part can be available immediately

No. 2
TARGET STOCK MODEL

TSM Concept
Maintenance parameters definition
>> Criticality

Criticality

Definition:
Criticality evaluates the importance of the items by defining the consequences of a breakdown.
Criticality can be classified by 3 categories: critical, semi critical, and non critical
Questions to ask yourself:
A spare part is broken and you do not replace it…
what are the consequences?

• Any production losses

• Bad quality of finished goods / raw material
• Environmental issues, overtaking regulations limit (toxic material release…) 99%
Critical • Safety issues, risking to harm someone Availability

• There is a stand-by equipment

Semi
Critical
• The unit still runs on a hardship basis 90%
• There is a cannibalization solution Availability

Non Critical
• No impact : a failure doesn’t impact production or safety 80%
Availability

No. 4
Maintenance parameters definition >>Set Size

Set size is the number of spares you need in order to maintain an equipment.

• In most of cases, when one spare part breaks, you replace only
this spare part. In this case, set size is one.

• For few cases, when one spare part is defective, a whole set of
spare part is replaced.

• Examples:

• Two identical bearings can be found in one shaft. When one

bearing breaks, the two bearings have to be replaced. Set
size is 2.

• In this same example, if the shaft breaks, only one shaft is

replaced. Set size is 1.

No. 5
Maintenance parameters definition >>Installed quantity

Quantity Installed: The total number of spare parts being used in the plant not in stock in
the warehouse

• Set size should defined in line with an item’s UOM

• For consumables, the installed quantity is not applicable. It should

be set at 1

No. 6
Maintenance parameters definition >>Shelf Life

Shelf life is that length of time that a perishable item is given before it is considered
unsuitable for consumption.
• It is mostly used for food…But is also applicable for spare parts!
• Examples? Rubber gaskets or seals, batteries, oil, adhesive…

• Examples:

• You are storing a battery inside a warehouse. After 5 years,

the battery can not be used for the production anymore as it
is too old…

• Shelf life for this battery is 5 years, or 5 * 365 = 1,825 days

No. 7
Maintenance parameters definition >>MTBF

MTBF is the average Time between two failures of the spare part in one specific
equipment
• Average Time between two failures of the spare part in one specific
equipment

• ≠ The Time between two demands of the spare part from

maintenance end-users

Failure Failure

Time
MTBF
• MTBF should be expressed in months

• Note: for consumables (all items not installed in equipments), the

MTBF will be the number of months between 2 consumptions of
one unit of measure of the item in question

• Example: Item = Sodium, UOM=Bag

• MTBF the number of months necessary for the consumption of one

full bag ≠ number of times we use some grams of sodium

No. 8
TSM
Maintenance Parameters Inputs – 6 parameters

Business Inputs System System Outputs

Before After
1 Demand
Target Excess
Stock Model Max
Max
2 Supply
ROP

3 Maintenance Parameters

Overview:
• Spare parts are used in case of breakdown. Therefore, Maintenance characteristics of the
materials are needed. There are 6 maintenance parameters:

How important is the spare for How many years can the part be
Criticality MTBF
the plant? used before breaking down?
How many spares do you need Quantity How many spares are being used
Set size
for a maintenance operation? installed in the plant?
For how long can the material Can you predict the failure of the
Shelf life Predictability
be stored before being expired? pare part?

Improvements:
• Improved TSM to flag suspicious maintenance parameters (Set Size = 4 but store issuance
shows issuance of qty 1 for every demand).

No. 9