Spare Parts Provisioning

Spare Parts Provisioning
Andrew K S Jardine
CBM Laboratory
Department of Mechanical & Industrial Engineering
University of Toronto
Canada
jardine@mie.utoronto.ca
August 2006
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Economic Order Quantities
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Andrew Jardine, CBM Lab 2
“Spare Parts Provisioning”
The stores controller wants to determine which order
quantity will minimize the total cost.
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This total cost can be plotted and used
to solve the problem.
A much more rapid solution, however, is
to construct a mathematical model of
the decision situation. The following
parameters can be defined:
•D total annual demand

•Q order quantity
•Co ordering cost / order
•Ch stockholding cost per item / year
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• Solution:
2 DCo
∴Q = *
Ch
Q =order quantity
Co =ordering costs
Ch =holding cost/item/year
D =annual demand
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Example
Let D = 1,000 items
Co = $ 5.00
Ch = $ 0.25
2 x1000 x 5
∴Q = *
0 .25
= 200 items
Thus, each time the stock level reaches zero, the stores
controller should order 200 items to minimize the total cost
per year of ordering and holding stock www.ipamc.org
Extensions
• Non-zero lead time
• Quantity discounts
• Back orders allowed
• Uncertainty in demand
• Useful reference to inventory control:
Nahmias, S., (1997), Production and
Operations Analysis, Chicago,
Irwin/McGraw-Hill www.ipamc.org
Spare Parts Provisioning:
Preventive Replacement Spares
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If preventive maintenance is being conducted
on a regular basis according to either the
constant interval or age-based replacement
models then a spare part is required for each
preventive replacement, but in addition, spare
parts are required for any failure
replacements. The goal of this section is to
present a model that can be used to forecast
the expected number of spares required over
a specified period of time, such as a year, for
a given preventive replacement policy.
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Construction of Model
tp is the preventive replacement time (either
interval or age).
f(t) is the probability density function of the
item’s failure times.
T is the planning horizon, typically one year.
N (T, tp) is the expected number of spare parts
required over the planning horizon, T, when
preventive replacement occurs at time tp.
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The Constant Interval Model
N (T, tp) = Number of preventive replacements
in interval (0,T)
+ number of failure replacements in interval
(0,T)
= T / tp + H (tp ) (T / tp )
where H (tp) is the expected number of failure
replacements during an interval of length tp
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The Age-Based Preventive Replacement Model
N (T, tp) = Number of preventive replacements in
interval (0,T)
+ number of failure replacements in interval (0,T).
In this case the approach to take is to calculate the
expected time to replacement (either preventive or
failure) and divide this time into the planning horizon,
T. This gives:
T
N (T , t p ) =
t p × R(t p ) + M (t p ) × [1 − R(t p )]
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An Application: Cylinder Head Replacement –
Constant Interval Policy
A cylinder head for an engine costs $1,946 and the

policy employed is to replace the 8 cylinder heads in
an engine as a group at age 9,000 hours, plus failure
replacement as necessary during the 9,000-hour
cycle. In the plant there were 86 similar engines in
service. Thus, over a 12 month period there is total
component utilization of 8 × 86 × 8,760 = 6,026,880
hours worth of work.
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Estimating the failure distribution of a cylinder
head, and taking the cost consequence of a
failure replacement as ten times that of a
preventive replacement, it was estimated that
with the constant interval replacement policy ,
the expected number of spare cylinder heads
required per year to service the entire fleet
was 799 (576 due to preventive replacement
and 273 due to failure replacement).
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The constant interval and age-based
models will be illustrated using the
OREST software
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OREST Software
Educational version from CRC Press,
publisher of Maintenance, Replacement &
Reliability: Theory and Applications, by A K S
Jardine & A H Tsang, 2006
www.crcpress.com/e_products/downloads.asp?cat_no=DK9669
Or
www.banak-inc.com
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OREST Educational Version
Limitations
Cost ratio fixed at:
Cf = $1000,
Cp = $ 100.
At most 6 observations can be analyzed

(mixture of preventive replacements and
suspensions).
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1 Records from two heavy-duty dumper trucks show that fan belt failures occurred
at the odometer readings (kilometers, from new) listed in the following table:
Truck 1 Truck 2
51,220 45,380
68060 103,510
At present, the odometer readings are 115,680 km for truck 1 and 132,720 km for
truck 2.
(a) Prepare reliability data in a form suitable for analysis by OREST.

(b) Determine the following Weibull parameters:
Shape Parameter β
Scale Parameter η
Mean Life
(c) What type of failure pattern is indicated (EARLY LIFE, RANDOM, WEAROUT?)
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(d) The Preventive Replacement Cost is $100 and the Failure
Replacement Cost is $1,000. Determine the optimal preventive
replacement age, the cost under this policy, and the savings under this
policy when compared with a policy of replacement-only-on failure.
(e) Preventive replacement can only be carried out at odometer readings
which are multiples of 5,000 km. Select an appropriate preventive
replacement age. What is the cost ($/km) for this policy? How does this
compare with the cost for the optimal policy?
(f) If the company has a fleet of 30 similar dump trucks, each of which
averages 50,000 kilometers per year, estimate the number of
replacement fan belts that will be needed per year, under an
appropriate replacement policy.
(g) If 30 dump trucks average 50,000 kilometers per year, estimate the
number of in-service fan belt failures that will occur, given that the
policy is to replace fan belts on a preventive basis at 20,000 kilometers.
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2. The cloth filter on a sugar centrifuge is currently
replaced on a preventive basis if a suitable opportunity
occurs and the cloth has been in use for at least 20
hours. The cloth is also replaced on failure.
The centrifuge cloth failure data provided in the
following Table are available for 10-hour time intervals
of cloth life.
Age in Hours Failure Replacement Preventive Replacement
0 – 9.99 14 0
10 – 19.99 5 0
20 – 29.99 2 4
30 – 39.99 1 8
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(a) Use OREST to analyze the failures and estimate the
following parameters:
Shape Parameter β
Scale Parameter η
Mean Life
(b) Is the current policy correct? What policy do you
recommend?
(c) The company has three centrifuges each of which
runs an average of 400 hours per month. Estimate
the number of replacement cloths required per month
under the existing and under the recommended
replacement policies.
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Spare Parts Provisioning:
Insurance Spares
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Real world research
Managing Risk: A CBM Optimization Tool
Securing Canada's Energy Future
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Research Team
Research Students Research Staff
Diederik Lugtigheid (Repairable Systems) Dr. Dragan Banjevic, Project Director
Darko Louit (Spare Parts Optimization) Wei Hua (Walter) Ni, Programmer/Analyst
Jean-Paul Haddad (Research Topic TBA) Dr. Daming Lin, Research Associate
Andrey Pak (Maintenance & Repair Dr. Ali Zuaskiani, Post doctoral Fellow
Contracts) Neil Montgomery, Research Associate
Susan Gropp, Research Assistant
Principal Investigator Collaborating Researchers

Prof. Andrew K.S. Jardine Dr. Xiaoyue Jiang, Assistant Professor
Louisiana State University
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Spares Optimization
Software
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Spares Management Software
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Spares Management Software (SMS)
Optimization criteria
Interval Stock
Non-Repairable Reliability
Spares
Instant. Stock
Optimal
Reliability
Spares
Cost
Repairable Minimization Requirement
Spares
Availability
Stock
Supportability Remaining
Life
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Non-Repairable Spares
failures
stock
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With non-repairable components, when a
component fails or has been preventively
removed, it is immediately replaced by one
from the stock (the replacement time is
assumed to be negligible), and the replaced
component is not repaired (i.e. it is discarded,
see Figure 2.34). It is assumed that the
demand for spares follows a Poisson process,
which, for emergency parts demand, has
found wide application. Several references
describe models based on this principle
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# items in
service
Repairable Spares
Failures
time
stock
failed units
repaired units
Repair
shop
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Criteria for Decision Making
1.Instant reliability
2.Interval reliability
3.Cost minimization
4.(Process) Availability
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Definitions
1. Instantaneous reliability. This is the probability that a
spare is available at any given moment in time. In
some literature this is known as availability of stock,
fill rate or point availability in the long run.
2. Interval reliability. This is the probability of not
running out of stock at any moment over a specified
period of time, such as one year.
3. Cost minimization. This takes into account costs
associated with purchasing and stocking spares, and
the cost of running out of a spare part.
4. Availability. This is the percentage of non-downtime
(“uptime”) of a system/unit where the downtime is
due to shortage of spare parts. www.ipamc.org
Scenario
• Plant has 62 electric motors on their conveyor systems (Mining company)
• MTBReplacements of motors is 3000 days (8 years)
• Planning horizon is 1825 days (5 years)
• Cost of spare motor is 15,000 $
• Value of unused spare is 10,000 $
• Cost of emergency spare is 75,000 $
• MTTRepair a motor is 80 days
• Cost of plant downtime for a single motor is 1000 $ per day
• Holding cost of a spare is 4.11 $ per day (10% of value of part/annum)
QUESTION: HOW MANY SPARE PARTS TO STOCK?

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Results: Repairable Parts
Randomly failing motors
• Interval reliability: 95% reliability requires 7 spares

• Instant reliability: 95% reliability requires 4 spares
• Cost minimization: requires 6 spares. Associated plant
availability is 100.00%
• Availability of 95%: requires 0 spares. Associated
electric motor availability is 97.4% [Note: If availability
of 99% was required (rather than the specified 95%)
then spares required would be 2]
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Reference Case
Population 100 transformers
Failure Rate 0.005

failures/transformer/yr
Repair Time 1 yr
Replacement Time 0.001yr
Interval 1 yr
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Repairable Instantaneous Reliability
Vary Spares
1
0.99
0.98
0.97
Reliability
0.96
0.95
0.94
0.93
0.92
0.91
0.9
1 2 3 4 5
Spares www.ipamc.org
Fume fan shaft – steel mill
• Spares provisioning optimization project
• Part: fume fan shaft used in a Blast Furnace

• Decision: should there be 0 or 1 spares?
• Complication:
• Part has long lifespan (25-40 years).
• Long lead time (22 weeks).
• If part fails, results are catastrophic (loss of almost $6 million per
week).
• Inventories are trying to be minimized.
SMS was used to quantify the risk involved in not having a spare
Decision support
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How many spares – Fume fan
MTBF Vsshaft?
Reliability with 22 week LT
100.5
100
99.5
R eliability
99 0 spares
1 spare
98.5 2 spares
98
97.5
97
0 5 10 15 20 25 30 35 40 45
Mean time between failures www.ipamc.org
Problem: Dry Gas Seal- used in
a compressor
• Repairable component
• 10 in use in petrochemical plant (2 in each compressor)
• MTBReplacements: 60 months
• MTTRepair: 10 months
• Cost new: $200,000
• Planning horizon: 5 years
Use SMS to determine how many spares to stock.

www.ipamc.org
Spares Management Software (SMS)
Educational version from CRC Press,
publisher of Maintenance, Replacement &
Reliability: Theory and Applications, by A K S
Jardine & A H Tsang, 2006
www.crcpress.com/e_products/downloads.asp?cat_no=DK9669
www.ipamc.org
SMS Educational Version
Limitations
Non-Repairable Spares
50 parts in use (fixed)

Day time unit (fixed)
Interval reliability (reliability required of 95% fixed,
cannot select spares in stock)
Cost calculation (cannot select spares in stock,
$15,000 regular cost of spare part fixed, $ 75,000
emergency cost of spare part fixed, 0.0288617289%
cost of capital per day fixed, $1,4913.6518075166
future value of unused spare fixed)
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SMS Educational Version
Limitations (cont.)
Repairable Spares
50 parts in use (fixed)

Day time unit (fixed)
Interval reliability (reliability required of 95% fixed,
cannot select spares in stock)
Cost calculation (cannot select spares in stock,$ 8.22
holding cost of one spare part per day fixed) Instant
reliability (reliability required of 95% fixed, cannot
select spares in stock)
Availability calculation (availability required of 98%
fixed, cannot select spares in stock)
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SMS Problems
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 random. (Assume 356 days a year)
How many sensors are expected to fail over 4 months (rounded
to nearest integer value)?
How many spares will the company need to keep in stock if they
require at least a 95% reliability over 6 months?
How many spares will the company need to keep in stock if they
require a value as close to 95% reliability as possible over 6
months?
Answers: 8,19,18
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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 year (assume 52 weeks are in a year, the factory
operates 24 hours a day, 7 days a week).
How many spares are required to achieve a reliability of 95% over 30
weeks?
If two presses are in stock, what is the probability that a shortage in
spare parts will occur over 25 weeks?
How many spare presses are required for a 95% instant reliability?
How many spare presses kept in stock would result in the minimum
cost?
What is the minimum cost?
If the company is only interested in at least a 98% availability, how many
spares should be kept in stock?
Answers: 3, 7.71%,1 ,4 ,$33.56 per day,0 www.ipamc.org

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
employee who chose these presses was
promptly fired). The company requires 95%
reliability over a year. How many presses
should they keep in stock?
Answer: 24
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4. A company uses the same size ball 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 ball bearings each, while
type B machines use 25 ball bearings each. If the
company uses quarter year planning horizons and
requires as close to a 95% reliability as possible, how
many ball bearings should be kept in stock? Ball
bearings need to be replaced on average every 6
months and 9 months for type A and B machines,
respectively. Assume 365 days in a year.
Answer: 56
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SMS references
Louit, D, Banjevic, D and Jardine, A.K.S.,
(2005), Optimization of spare parts
inventories composed of repairable or non-
repairable parts. Proceedings, ICOMS,
Australia, 2005.
Wong, J.Y.F., Chung, D.W.C., Ngai, B.M.T.,
Banjevic, D. and Jardine, A.K.S. (1997)
Evaluation of Spares Requirements Using
Statistical and Probability Analysis
Techniques, Transactions of Mechanical
Engineering, IEAust. Vol.22(3 & 4), 77-84
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Spare Parts Provisioning

•D total annual demand

A cylinder head for an engine costs $1,946 and the

At most 6 observations can be analyzed

(a) Prepare reliability data in a form suitable for analysis by OREST.

Securing Canada's Energy Future

Principal Investigator Collaborating Researchers

QUESTION: HOW MANY SPARE PARTS TO STOCK?

• Interval reliability: 95% reliability requires 7 spares

Failure Rate 0.005

Replacement Time 0.001yr

• Part: fume fan shaft used in a Blast Furnace

Use SMS to determine how many spares to stock.

50 parts in use (fixed)

50 parts in use (fixed)

Answers: 3, 7.71%,1 ,4 ,$33.56 per day,0 www.ipamc.org

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