2 Repairable & Non Repairable Spares High cost critical spares are expensive and difficult to forecastIssues are:Levels of availability and reliability requiredCostFailure rate forecastsRepair timesLead timesValue PropositionSMS optimizes stock levels, reduces sparing costs and Increases reliability
3 Useful DefinitionsInterval 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 wantedNon-Repairable Spare: Element which cannot be repaired and reused.Repairable Spare: can be repaired – either in-house or externally
5 Benefits of SMS Balances spares requirements with cost and reliability Easy to use - Runs on Windows laptop/desktop – minimal training neededBased on proven algorithms -- Developed by University of TorontoSales and Support by OMDEC -- Comprehensive User manualExperienced in industry – numerous case studiesUses commonly available dataMultiple Availability and Reliability ParametersEasy and early detection of systemic errors, extreme valuesMinimization of spares allocation for given Reliability levelNot duplicated by standard office automation toolsProvide planning horizon for replacement of current stockPlacement of final orders for discontinued partsMaximum supportability interval for current stockOptimizes procurement planning
6 Repairable Spares failures time # items in service stock failed units repaired unitsRepairshop
7 Dofasco Steel Said…*Focus is on high value, capital spares – both repairable and non-repairableBrought decision logic to the finance (zero stock) versus Operations (infinite stock) debateIntroducedRequired availabilityRequired reliabilityUnavailability CostEquipment Management Procurement RequirementsAligned sparing/procurement decision with equipment reliability Business Process* IMEC Conference 2006
8 Business Challenge #1How many spares do I need to achieve x% ReliabilityIt’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?
9 Business Challenge #2What 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?
10 Business Challenge #3Will the current level of spares give me the required reliability during my planning periodI’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?
11 Business Challenge #4The 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?
12 Dofasco found….* SMS showed 1 Buy 2 $204,000 ItemNoAsset Manager’s Recom- mendationValue of Asset Manager’s Recommended BuySMS showed1Buy 2$204,000Reducing Buy by $102,000 decreases Reliability by only 0.7% to 99.25%2Buy 4$156,000Reducing Buy by $39,000 decreases Reliability by only 1.3% to 98.4%3$52,000Reducing Buy by $26,000 decreases Reliability by 10% to 87.4%* IMEC Conference 2006
13 SMS Case 2Mining company has 62 electric motors on their conveyor systemsMTB Replacements of motors is 3000 days (8 years)Planning horizon is 1825 days (5 years)Cost of spare motor is $15,000Value of unused spare is $10,000Cost of emergency spare is $75,000MTT Repair a motor is 80 daysCost of plant downtime for a single motor is $1000 per dayHolding cost of a spare is $4.11 per day (10% of value of part/annum)Question - How Many Spares to Stock?
14 SMS Case 2 Results: Repairable Parts Randomly failing motorsInterval reliability (never run out): 95% reliability = 7 sparesCost minimization: = 6 sparesInstant reliability (always one when wanted) : 95% reliability = 4 sparesPlant Availability at 99%: = 2 sparesPlant Availability at 95%: = 0 spares
15 Case Study 3 Planning Horizon Comparison – Electronic Components Given the current stock level, how long will it last?
16 Case Study 4 Spares in Stock Comparison Electronic Components With the current MTBF, how many units do we need?
17 Case Study 5 System Reliability Profile Manufacturing plant i.e. the probability that demand will be fulfilled under stated conditionsWith the current Stock levels and MTBF, what is our reliability?
18 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
19 Case Study 7 Steel Mill - Fume Fan Shaft Spares Provisioning Optimization ProjectPart = fume fan shaft used in a blast furnaceDecision: how many spares?ComplicationsPart has long lifespan (25-40) yearsLong lead time (22 weeks)If part fails, results are catastrophic (loss estimated $6 million per week)Inventories are trying to be minimizedSMS – Quantify the risk in not having enough spares
20 How many spares? – Fume fan shaft Note – no significant difference in reliability between 1 and 2 spares
21 Case Study 8 Haul Truck Components Case & Optimization criteriaOptimal Stock levelAssociated ValuesInterval Reliability(goal = 95%)15Reliability = 98.05%Stock cost $45,000Instantaneous Reliability10Reliability = 97.53%Stock cost $30,000Availability(goal = 99%)6Availability = %Stock cost - $18,000Cost minimization14Inst. Reliability = 99.94%Stock cost $42,000It 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.
22 Case Study 9 Shipboard Components Supportability for the system is determined by the shortest supportability for any of its critical parts
23 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 randoma. 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
24 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 yeara. 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
25 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: 2425
26 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: 5626
27 SMS Inputs Required Asset ID and Description Adjusted cost / Purchase Price $Repairable? Y/N# of Parts in UsePlanning Horizon - monthsConstant Rate of Replacement (MTBR) - monthsIf Non-Constant, the standard deviation for replacementsNumber of Spares in StockEmergency 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 monthCapital cost per month %
33 SMS SummaryMatches spares levels to needs – saves $$$, increases reliabilityImproved decision making, reduced cost of sparesIntegrates risk and cost calculationsForecasts timing of replacements for current sparesSets the Spares levels required to meet multiple replacement conditions and % reliability requirements:Given a stock size, shows the availability during the period being plannedAccommodates variable failure intervals, variable lead times, variable repair timesProvides cost calculations for repairable and non-repairable spares