Keep a lid on costs: Managing backlog, spare parts inventory

Keeping a lid on maintenance costs is paramount to efficient management of the things a plant can control: backlog of work orders, keeping a sharp eye on the number and storage of spare parts, and gate-keeping of the storeroom to control access.

Sustainable storerooms and spare parts programs require the right management and governance to be successful, said James Kovacevic, principal instructor at Eruditio LLC, a corporate training firm based in Mount Pleasant, SC. “Without this, the storeroom inventory continues to grow and leads to an abundance of obsolete or unneeded spares.”

Kovacevic presented a session on storeroom gatekeeping at MainTrain, convened by the Plant Engineering and Maintenance Association of Canada. He suggested the main way to govern spares is a policy that ensures all requests for new spare parts are evaluated, prioritized and ultimately accepted or rejected for stocking in the storeroom.

The key to good storeroom maintenance is understanding the financial impact of poor materials management and to develop a process for evaluating spare parts based on stocking levels and criticality.

He believes this yields significant improvements for the maintenance department and the business.

CMMS/EAM expert Ben Stevens, the principal of DataTrak Systems Inc. in Godfrey, Ont., weighs in on another issue that offers an opportunity to curb maintenance costs: backlog management. He sees it as a very effective way of ensuring work done keeps up with work required. He defines backlog as consisting of: work started and on schedule, but not yet completed; work started, but not yet completed, and behind schedule; work planned and scheduled to be started, but not yet started; and work waiting to be started, but not yet planned and scheduled.

He suggests five best practices for effective backlog management: review work weekly; review based on priority; examine reasons for delay; include changes in priority for those that require more time to respond; and initiate action for the top priority work orders that are delayed.

Stevens also writes about spare parts control, which play a key role in the best practices to be applied to the maintenance function. The lack of spare parts availability interrupts the smooth provision of planned maintenance and is one of the major reasons for time and cost overruns, unanticipated failures and lower than expected operational performance.

Spare parts control

Apply best practices to two categories of spare parts: common-use low-cost spares, and the slow-moving high-cost parts. The first are best managed using the spare parts module of the plant’s CMMS or EAM systems. In this case, best practices are as follows:

Each spare part stocked should have key data recorded in the CMMS or EAM: part number, standard description, preferred vendor, cost, delivery terms and where used.

Establish minimum and maximum inventory levels by using CMMS/EAM, along with the economic order quantity.

Record receipts, issues and returns in the CMMS/EAM to maintain current inventory levels.

When issues reduce the levels below the indicated minimum, initiate automatic purchase requisitions.

For high-priority work orders, reserve and quarantine the relevant spare parts in the CMMS/EAM to ensure they’re not inadvertently used for other jobs.

On release of the work order to the supervisor for execution, issue a pick list to stores so parts can be assembled and delivered to the job site.

Stevens says a different approach is required for slow-moving, high-cost critical parts. In this case the lead times are extensive and the high cost of spares militates against stocking them.

Here are the best practices:

• Establish the level of reliability needed from the equipment and spare part.

• Factor in the frequency of failure.

• Factor in the lead times, replacement cost and cost of failure.

• Calculate the spare level needed to meet the required level of reliability.

Stevens also has some suggestions for maintenance cost control best practices.

The CMMS/EAM work order process is capable of accumulating costs against each work order and roll up the total cost to the equipment, system, and plant or site level. With small adjustments, CMMS/EAM also tracks the cost of failure at the same levels. These capabilities are important because they track exactly where maintenance costs were incurred. They also identify “bad actor” equipment.

To achieve this, he proposes the following best practices:

• Include manpower and contractor rates in the CMMS set-up.

• Add materials, consumables and spares.

• Put in the work order hours spent, and include materials, consumables and spares consumed.

• Change special tools to the work orders requiring them.

When preparing monthly cost reports, show the type of expenditure (labour, materials) for each type of maintenance activity (corrective, preventive maintenance, emergency, special projects) for each major piece of equipment and system, plant or site.

Monthly reports show variances from the budget and are used to set the next year’s budget. The costs of failure must include: repairs, lost operability, penalties and lost public image.

These best practices are key to sustainable material management and will go a long way toward curbing a plant’s maintenance costs.

Steve Gahbauer is an engineer, a Toronto-based business writer and a regular contributing editor. E-mail gahbauer55@gmail.com.

This article appeared in the January-February 2020 print edition of PLANT Magazine.