SpareParts Safety Stock
Theimportance of keeping track of spare part quantities and theavailable stock to fill up several orders cannot be overemphasized.Safety stock refers to that level of inventory that is maintained athand so as to prevent the supplier from running short in packaging orraw material due to the uncertainty that is related to the forces ofdemand and supply (Godoy, Pascual & Knights, 2013). It isessential to have a plan of filling all orders at all times and notbe caught in a position where you create stock outs, a situationwhere you run out of certain supplies which are not a good thing forthe business. The upside of keeping a large quantity of spare partsupplies on hand is that it makes you better prepared in situationswhere sales become much higher than originally planned for. It alsogives the supplier an upper hand when they can’t get additionalnumbers completed due to low stock level.
Factorsthat help to determine the quantity of safety stock for spare partsinclude the possibility of having a spare part on hand when required,the amount of items used in the system and the reliability of theitem in question among other things (Costantino, Di Gravio &Tronci, 2013). When the reliability of an item is determined, ithelps to figure out the actual quantity of spare parts needed if theitem breaks down or goes for maintenance. For instance, keeping thespare parts that you could not need very often because the item doesnot break often could be economical because inventory could build upin the warehouse and that room could be used to store parts that sellregularly.
Anitem that needs constant repair could be valuable to a spare partsdealer because they will constantly be in business supplyingreplacement parts. On the other hand, it could also be important todetermine whether it is economical to keep pumping money into an itemregarding spare parts or is it better to acquire a new piecealtogether. The safety of an item could also be another importantaspect to consider. Ideally, it could not be safe to keep anunreliable item that is under constant repair (Godoy, Pascual &Knights, 2013).
Itcould also be important to factor in the number of items utilized ina system. Generally, when there is a risk or safety factor involved,a large quantity of spare are off than required (Costantino, DiGravio & Tronci, 2013). This will, in turn, result in theprocurement and maintenance of the necessary inventory. The safetyfactor or protection level is a cautious way around the peril ofrunning out of stock. In general, maintenance plays a predominantrole in determining the level of spare part safety stock required.
Finally,the aspect of capital policy cannot be ignored as it is also a majordeterminant of the size of the security stock for spare parts(Costantino, Di Gravio & Tronci, 2013). Periodic inventory policychecks the spare parts periodically, such as twice a month and anorder is made to replenish the inventory shortfalls. However, if theinventory system for checking the spare parts is the continuingstrategy, whereby components are monitored continuously, thenreplenishment orders are made with freedom from time.
Costantino,F., Di Gravio, G., & Tronci, M. (2013). Multi-echelon,multi-indenture spare parts inventory control subject to systemavailability and budget constraints. ReliabilityEngineering & System Safety,119,95-101. http://dx.doi.org/10.1016/j.ress.2013.05.006
Godoy,AD., Pascual, R., & Knights, P. (2013). Critical spare partsordering decisions using conditional reliability and stochastic leadtime. ReliabilityEngineering & System Safety,119,199-206. http://dx.doi.org/10.1016/j.ress.2013.05.026