All Member Open Forum

Original Message------

I am interested in understanding what % of purchase price organizations are budgeting for spares when purchasing new capital equipment.  Does your organization have a standard?  If so, is it based on any academic research?

 

Thank you.

 

Edward T. Carter PE

Regional Manufacturing Engineering Manager – VGNA

Galesburg, MI - Building locator C12-WL

(269) 342-3657 Desk

(248) 219-3110 Mobile

 

For our spares purchases, we do not budget specifically.  Choice to stock spares is based on a formula that looks at:

1. Cost (lower cost = higher ranking)
2. Lead time (longer lead = higher ranking)
3. Expected failure rate/usage rate (higher failure rate = higher ranking)
4. Business Criticality (higher criticality = higher ranking)

The formula is (1+2+3) x 4

Each category has ranking criteria 1-10 (though we only have 5-7 ranks for each).  I believe an overall score of 0-65 returns "Non-stock", 66-200 returns "Stock" and 201-300 returns "Critical Spare".

In general terms, I've heard the number 3% of ARV thrown around as a general budgetary guideline for spares, but that doesn't factor in that you may want 10% on a critical machine vs. 0% on a machine you can live without for a couple weeks.  I strongly suggest factoring criticality into the decision.

------------------------------
Austin Shoemaker
Reliability Engineer
AstraZeneca Pharmaceuticals
West Chester OH
------------------------------

Original Message:
Sent: 03-15-2019 07:54 AM
From: Edward Carter
Subject: Spares budget on Capital Purchases

I am interested in understanding what % of purchase price organizations are budgeting for spares when purchasing new capital equipment.  Does your organization have a standard?  If so, is it based on any academic research?

 

Thank you.

 

Edward T. Carter PE

Regional Manufacturing Engineering Manager – VGNA

Galesburg, MI - Building locator C12-WL

(269) 342-3657 Desk

(248) 219-3110 Mobile

 

​We evaluate our storeroom spare parts using a critical spares worksheet. The criteria we use are cost of downtime, delivery lead time, time to disruption, and supplier reliability. You can assign individual values under each category that would be typical or customary for your particular industry. Our scoring ranges from 0 to 174. The score in each category is summed to give a total score. We have three different tiers, "A", "B", "C", with the top one-third "A" considered "critical spares". For all critical spare parts, at a minimum, we create equipment BOMs and determine which task lists uses these spare parts on maintenance plans.  We would also evaluate if the critical spare part had ever been used in a corrective capacity. The treatment of "A" spare part will entail a specific sourcing plan with documented specifications, and preferred vendors identified with a service level purchase agreement to help insure parts availability. "B" spare parts can be considered commodity hardware and managed on throughput. "C" spare parts can be a candidate for JIT and not to be stocked at all. I know this process differs from the more traditional canned ABC analysis most CMMS have since the delineation between the A's, B's and C's is 20/30/50 - which drives your quarterly cycle counts.

------------------------------
Ed Espinosa CMRP
Asset Management & Reliability
Puget Sound Energy
Bellingham WA
------------------------------

Original Message:
Sent: 03-19-2019 08:58 AM
From: Austin Shoemaker
Subject: Spares budget on Capital Purchases

For our spares purchases, we do not budget specifically.  Choice to stock spares is based on a formula that looks at:

1. Cost (lower cost = higher ranking)
2. Lead time (longer lead = higher ranking)
3. Expected failure rate/usage rate (higher failure rate = higher ranking)
4. Business Criticality (higher criticality = higher ranking)

The formula is (1+2+3) x 4

Each category has ranking criteria 1-10 (though we only have 5-7 ranks for each).  I believe an overall score of 0-65 returns "Non-stock", 66-200 returns "Stock" and 201-300 returns "Critical Spare".

In general terms, I've heard the number 3% of ARV thrown around as a general budgetary guideline for spares, but that doesn't factor in that you may want 10% on a critical machine vs. 0% on a machine you can live without for a couple weeks.  I strongly suggest factoring criticality into the decision.

------------------------------
Austin Shoemaker
Reliability Engineer
AstraZeneca Pharmaceuticals
West Chester OH

Original Message:
Sent: 03-15-2019 07:54 AM
From: Edward Carter
Subject: Spares budget on Capital Purchases

I am interested in understanding what % of purchase price organizations are budgeting for spares when purchasing new capital equipment.  Does your organization have a standard?  If so, is it based on any academic research?

 

Thank you.

 

Edward T. Carter PE

Regional Manufacturing Engineering Manager – VGNA

Galesburg, MI - Building locator C12-WL

(269) 342-3657 Desk

(248) 219-3110 Mobile

 

Original Message------

​We evaluate our storeroom spare parts using a critical spares worksheet. The criteria we use are cost of downtime, delivery lead time, time to disruption, and supplier reliability. You can assign individual values under each category that would be typical or customary for your particular industry. Our scoring ranges from 0 to 174. The score in each category is summed to give a total score. We have three different tiers, "A", "B", "C", with the top one-third "A" considered "critical spares". For all critical spare parts, at a minimum, we create equipment BOMs and determine which task lists uses these spare parts on maintenance plans.  We would also evaluate if the critical spare part had ever been used in a corrective capacity. The treatment of "A" spare part will entail a specific sourcing plan with documented specifications, and preferred vendors identified with a service level purchase agreement to help insure parts availability. "B" spare parts can be considered commodity hardware and managed on throughput. "C" spare parts can be a candidate for JIT and not to be stocked at all. I know this process differs from the more traditional canned ABC analysis most CMMS have since the delineation between the A's, B's and C's is 20/30/50 - which drives your quarterly cycle counts.

------------------------------
Ed Espinosa CMRP
Asset Management & Reliability
Puget Sound Energy
Bellingham WA
------------------------------

The amount of spare parts you have to allocate in the budget is one driver for purchase decision. 

When you evaluate different proposals, you need to take into how much do you need to expend on spare parts. This information should come from the suppliers at the request for proposals stage.

I think is difficult to make the criticality analysis before knowing exactly what you're purchasing. The ponderation formula looks awesome for existing or already decided projects, will test it. 

Thanks!!

------------------------------
Manuel Belaochaga
Hipermercados Tottus
Lima
------------------------------

Original Message:
Sent: 03-22-2019 09:53 AM
From: Edward Carter
Subject: Spares budget on Capital Purchases

Thank you Edward.

 

Edward T. Carter PE

Regional Manufacturing Engineering Manager – VGNA

Galesburg, MI - Building locator C12-WL

(269) 342-3657 Desk

(248) 219-3110 Mobile

 

Original Message------

​We evaluate our storeroom spare parts using a critical spares worksheet. The criteria we use are cost of downtime, delivery lead time, time to disruption, and supplier reliability. You can assign individual values under each category that would be typical or customary for your particular industry. Our scoring ranges from 0 to 174. The score in each category is summed to give a total score. We have three different tiers, "A", "B", "C", with the top one-third "A" considered "critical spares". For all critical spare parts, at a minimum, we create equipment BOMs and determine which task lists uses these spare parts on maintenance plans.  We would also evaluate if the critical spare part had ever been used in a corrective capacity. The treatment of "A" spare part will entail a specific sourcing plan with documented specifications, and preferred vendors identified with a service level purchase agreement to help insure parts availability. "B" spare parts can be considered commodity hardware and managed on throughput. "C" spare parts can be a candidate for JIT and not to be stocked at all. I know this process differs from the more traditional canned ABC analysis most CMMS have since the delineation between the A's, B's and C's is 20/30/50 - which drives your quarterly cycle counts.

------------------------------
Ed Espinosa CMRP
Asset Management & Reliability
Puget Sound Energy
Bellingham WA
------------------------------