A risk-based approach to manage non-repairable spare parts inventory
Purpose ‐ The purpose of this paper is to propose a risk-based approach for spare parts demand forecast and spare parts inventory management for effective allocation of limited resources. Design/methodology/approach ‐ To meet the availability target and to reduce downtime, process facilities usually maintain inventory of spare parts. The maintaining of non-optimized spare parts inventory claims more idle investment. Even if it is optimized, lack of attention towards the critical equipment spares could threaten the availability of the plant. This paper deals with the various facets of spare parts inventory management, mainly risk-based spare parts criticality ranking, forecasting, and effective risk reduction through strategic procurement policy to ensure spare parts availability. A risk-based approach is presented that helps managing spare parts requirement effectively considering the criticality of the components. It also helps ensuring the adequacy of spare parts inventory on the basis of equipment criticality and dormant failure without compromising the overall availability of the plant. Findings ‐ The paper proposes a risk-based approach that used conjugate distribution technique with the capability to incorporate historical failure rate as well as expert judgment to estimate the future spare demand through posterior demand distribution. The approach continuously updates the prior distribution with most recent observation to give posterior demand distribution. Hence the approach is unique in its kind. Practical implications ‐ Appropriate spare parts unavailability could have great impact on process operation and result in costly downtime of the plant. Following proposed approach the availability target can be achieved in process industry having limited maintenance resources, by forecasting spare parts demand precisely and maintaining inventory in good condition. Originality/value ‐ Adopting the approach proposed in the paper, risk level can be minimized and plant availability can be maximized within the financial constraint. The resources are allocated to the most critical components and thereby increased availability, and reduce risk.
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