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**Spares Management Software**

Ben Stevens - OMDEC

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**Repairable & Non Repairable Spares**

High cost critical spares are expensive and difficult to forecast Issues are: Levels of availability and reliability required Cost Failure rate forecasts Repair times Lead times Value Proposition SMS optimizes stock levels, reduces sparing costs and Increases reliability

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Useful Definitions Interval Reliability: Probability of not running out of stock at any moment over a specified period of time (even if no immediate demand) Instant Reliability: Never run out of stock when one is wanted Non-Repairable Spare: Element which cannot be repaired and reused. Repairable Spare: can be repaired – either in-house or externally

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**Optimization criteria**

SMS Overview Optimization criteria Optimal Spares Requirement Interval Stock Reliability Non-Repairable Spares Repairable Spares Instant. Stock Reliability Cost Minimization Availability Stock Remaining Life Supportability

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**Benefits of SMS Balances spares requirements with cost and reliability**

Easy to use - Runs on Windows laptop/desktop – minimal training needed Based on proven algorithms -- Developed by University of Toronto Sales and Support by OMDEC -- Comprehensive User manual Experienced in industry – numerous case studies Uses commonly available data Multiple Availability and Reliability Parameters Easy and early detection of systemic errors, extreme values Minimization of spares allocation for given Reliability level Not duplicated by standard office automation tools Provide planning horizon for replacement of current stock Placement of final orders for discontinued parts Maximum supportability interval for current stock Optimizes procurement planning

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**Repairable Spares failures time # items in service stock failed units**

repaired units Repair shop

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Dofasco Steel Said…* Focus is on high value, capital spares – both repairable and non-repairable Brought decision logic to the finance (zero stock) versus Operations (infinite stock) debate Introduced Required availability Required reliability Unavailability Cost Equipment Management Procurement Requirements Aligned sparing/procurement decision with equipment reliability Business Process * IMEC Conference 2006

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Business Challenge #1 How many spares do I need to achieve x% Reliability It’s budget time – How many should I plan for? Demand for output is up – I need higher reliability so what is my spares buy? Re-Order time is here, lead time is 18 months; do I have enough spares to maintain my reliability for that time frame? If I have too many in stock, can I sell some without compromising reliability? How many?

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Business Challenge #2 What is the right spares level to minimize cost…. If I reduce spares levels to the minimum cost level, what is the effect on reliability? Supply lines have changed, my outage costs have gone up; what is the impact on reliability? How much does my reliability increase if I add another unit of spares? How much do I need to spend on additional stock to achieve the level of reliability I need?

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Business Challenge #3 Will the current level of spares give me the required reliability during my planning period I’m setting my five year capital plan; do I need to add more spares? What level of reliability will I have at the end of my planning period based on the current lavel of spares? The end of period reliability level is too low; how many spares do I need to add to achieve the right level? What is the cost? If my current stock exceeds the number required for my needed level of reliability, how many can I sell?

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Business Challenge #4 The manufacturer has advised I have a 24 month lead time on my capital spares item. Will my current level of spares give me the required reliability during this lead time? What level of reliability will I expect in the period before the new stock arrives? What is the cost if I run short? What should my order quantity be?

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**Dofasco found….* SMS showed 1 Buy 2 $204,000**

Item No Asset Manager’s Recom- mendation Value of Asset Manager’s Recommended Buy SMS showed 1 Buy 2 $204,000 Reducing Buy by $102,000 decreases Reliability by only 0.7% to 99.25% 2 Buy 4 $156,000 Reducing Buy by $39,000 decreases Reliability by only 1.3% to 98.4% 3 $52,000 Reducing Buy by $26,000 decreases Reliability by 10% to 87.4% * IMEC Conference 2006

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SMS Case 2 Mining company has 62 electric motors on their conveyor systems MTB Replacements of motors is 3000 days (8 years) Planning horizon is 1825 days (5 years) Cost of spare motor is $15,000 Value of unused spare is $10,000 Cost of emergency spare is $75,000 MTT Repair a motor is 80 days Cost of plant downtime for a single motor is $1000 per day Holding cost of a spare is $4.11 per day (10% of value of part/annum) Question - How Many Spares to Stock?

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**SMS Case 2 Results: Repairable Parts**

Randomly failing motors Interval reliability (never run out): 95% reliability = 7 spares Cost minimization: = 6 spares Instant reliability (always one when wanted) : 95% reliability = 4 spares Plant Availability at 99%: = 2 spares Plant Availability at 95%: = 0 spares

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**Case Study 3 Planning Horizon Comparison – Electronic Components**

Given the current stock level, how long will it last?

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**Case Study 4 Spares in Stock Comparison Electronic Components**

With the current MTBF, how many units do we need?

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**Case Study 5 System Reliability Profile Manufacturing plant**

i.e. the probability that demand will be fulfilled under stated conditions With the current Stock levels and MTBF, what is our reliability?

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**Case Study 6 Manufacturing Plant Question: How many spares - What reliability level**

-both calculate stock reliability at any moment in time -H1 uses replacement time of yr (negligible) -> very similar to instantaneous reliability case -recall: add up all failure probabilities up to a certain point -> means that reliability more than its actual value -but adding a minor replacement time decreases reliability -the two minor changes cancel each other out and the results between the two models are extremely similar -more spares -> reliabilities increase & results become more similar because the failure probabilities at higher levels are even less probable with more spares so cut-off at level six is more adequate

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**Case Study 7 Steel Mill - Fume Fan Shaft**

Spares Provisioning Optimization Project Part = fume fan shaft used in a blast furnace Decision: how many spares? Complications Part has long lifespan (25-40) years Long lead time (22 weeks) If part fails, results are catastrophic (loss estimated $6 million per week) Inventories are trying to be minimized SMS – Quantify the risk in not having enough spares

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**How many spares? – Fume fan shaft**

Note – no significant difference in reliability between 1 and 2 spares

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**Case Study 8 Haul Truck Components**

Case & Optimization criteria Optimal Stock level Associated Values Interval Reliability (goal = 95%) 15 Reliability = 98.05% Stock cost $45,000 Instantaneous Reliability 10 Reliability = 97.53% Stock cost $30,000 Availability (goal = 99%) 6 Availability = % Stock cost - $18,000 Cost minimization 14 Inst. Reliability = 99.94% Stock cost $42,000 It is interesting to see that the result varies depending on the criteria selected. In this case, as the shortage costs are known (quantifiable) it seems appropriate to go with this answer, of 14 spares. Note that the associated reliability for the stock (instantaneous – or fill rate) is very high. This is due to the fact that, as downtime costs are large compared to stockholding costs, it is better to have more spares than to accept the small risk of having a shortage. In other applications, shortage costs are very difficult to quantify, so usually in that case we will be interested in achieving certain reliability.

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**Case Study 9 Shipboard Components**

Supportability for the system is determined by the shortest supportability for any of its critical parts

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**SMS – Typical Problems Solved #1**

A manufacturing plant uses a total of 50 optical sensors to identify different part geometries. The sensors cannot be repaired easily so they must be replaced when they fail. On average, a sensor lasts 2 years, assuming the parts fail completely at random a. How many sensors are expected to fail over 4 months? b. How many spares will the company need to keep in stock if they require at least a 95% reliability over 6 months? c. IF the spares are reduced by 1 unit below the level in “b” what is the level of reliability over six months? SMS Answers: 8, 19, 92.4% 23

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**SMS – Typical Problems Solved #2**

A factory uses 50 presses to manufacture shoes. The presses are repairable, and fail on average every 5 years. A press takes about a week to repair. The downtime cost is $15,000 an hour, and the holding cost is $3,000 per year a. How many spares are required to achieve a reliability of 95% over 30 weeks? b. If two presses are in stock, what is the probability that a shortage in spare parts will occur over 25 weeks? c. How many spare presses are required for a 95% instant reliability? d. How many spare presses kept in stock would result in the minimum cost? e. What is the minimum cost? f. If the company is only interested in at least a 98% availability, how many spares should be kept in stock? SMS Answers: (a. 3) (b. 7.71%) (c. 1) (d. 4) (e. $33.56 /day) (f. 0) 24

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**SMS – Typical Problems Solved #3**

A clothing company uses 50 presses to put labels and graphics on t-shirts. A component of the presses was poorly designed, and it causes the presses to wear out and need to be replaced about every three years. The company requires 95% reliability over a year. How many presses should they keep in stock? SMS Answer: 24 25

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**SMS – Typical Problems Solved #4**

A company uses the same size bearings on type machines A and type machines B. There are 5 type A machines and 2 type B machines in use at all times. Type A machines utilize 10 bearings each, while type B machines use 25 bearings each. If the company uses quarter year planning horizons and requires as close to a 95% reliability as possible, how many bearings should be kept in stock? Bearings need to be replaced on average every 6 months and 9 months for type A and B machines, respectively. SMS Answer: 56 26

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**SMS Inputs Required Asset ID and Description**

Adjusted cost / Purchase Price $ Repairable? Y/N # of Parts in Use Planning Horizon - months Constant Rate of Replacement (MTBR) - months If Non-Constant, the standard deviation for replacements Number of Spares in Stock Emergency cost of Spare Part $ Downtime cost of Spare Part $ Expected Annual Loss of Value of Spare Part in Stock - % Holding Cost of Spare Part - $ per month Capital cost per month %

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Current GUI Screen Shot #1

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**Proposed GUI Screen Shot #2**

i.e. the probability that demand will be fulfilled under stated conditions Screen Shot #2

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Output Report #1

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Output Graph #1

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Output Report #2

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SMS Summary Matches spares levels to needs – saves $$$, increases reliability Improved decision making, reduced cost of spares Integrates risk and cost calculations Forecasts timing of replacements for current spares Sets the Spares levels required to meet multiple replacement conditions and % reliability requirements: Given a stock size, shows the availability during the period being planned Accommodates variable failure intervals, variable lead times, variable repair times Provides cost calculations for repairable and non-repairable spares

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**OMDEC SMS Questions – Next Steps ben@omdec.com**

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