Question

I have been given a final year project to develop a model for ‘Spare part inventory control and management’ for multinational company. the model should include the best suitable classification method and a simple mathematical approach for forecasts. Suggest me the best approach to accomplish this. I am expecting,

1. Explanation in developing the model step by step.
2. Suitable classification method for spare parts.
3. A simple mathematical approach for forecasting spare parts (preferably with an example).
4. Other key factors to be concerned in developing the model.
5. Good referencing documents or sites for more accurate information.

Help me to develop the model with a limited time frame due to heavy workload. Thanks

Answer 1

The main objective is to provide

the right parts
the right quantity
the right place for that part
the right level of quality
Least total cost to the company
step 1 : Identify all the spare parts as may be some parts are purchased for a one-time use or which have future use and should be in inventory.

step 2 : classify all the spare parts as per there criticality. This will help us to define an effective safety stock.

step 3 : Bill of materials (BOM) should be accurate as it will help to schedule the preventive maintenance that is requires on a given part. Also, In making order and placing work order simpler.

step 4 : Use the work order, which will reduce the maintenance department's wait time at the parts warehouse . All the parts that have been used have to be linked to a work order. Also helps to keep the inventory accurate.

step 5 : Access to the inventory warehouse should be tracked and limited, for accurate results. As, everyone to have access it quickly make parts disordered & mismatching of the numbers.

step 6 : Optimize the warehouse by centralizing them, which makes it easier to control and maintain it's accuracy.

step 7 :Use of inventory control system like barcode scanning will improve the efficiency of the warehouse and inventory accuracy.

step 8 : Cycle counting for inventory control with inventory ABC classification:

A = 10% of line items, gives 65% of turnover

B = 20% of line items, gives 25% of turnover

C = 70% of line items, gives 10% of turnover

Part A is relatively small in % of spare parts inventory is consumed most often, it will also need to be replenished most frequently.

step 9 : Establish a minimum and maximum inventory level for each part and calculating the Economic order Quantity for the spares parts to be ordered for minimum cost.

Forecasting the spare parts:

1. NON-SEASONAL ITEMS and SPARE PARTS WITH WEAK AND IRREGULAR DEMAND

The sales for the item in the next quarter will be the same as the actual sales for the last quarter.(Q1)

Forecast for the item over the next quarter = Q1

2. ITEMS WITH AN IRREGULAR DEMAND HISTORY

Sales for the item in the next quarter will be half of actual sales over the last 6 months.

Q1 = Actual Sales over the most recent 3 months

Q2 = Actual Sales over the 3 months before that

F = (Q1 + Q2)/2

3. ITEMS WITH MODEST SEASONALITY

Sales for the item in the next quarter will follow the percentage increase or decrease with respect to last year.

Q1 = Actual Sales of the next 3 months for last year

Q2 = Actual Sales over the most recent 3 months

Q3 = Actual Sales of the corresponding quarter last year

F = (Q4*Q1)/Q5

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