Optimization of spare parts inventory – a cost-cutting tool

Paper mills often face a situation after years or decades of operation where the number of spare parts on hand gets enormous. Minor machinery upgrades or rebuilds have been carried out over the years and some new spare parts have been bought each time to ensure continuous operation. Spare parts for the equipment taken out at upgrades are usually not scraped or removed from inventory. This naturally results in very high inventory values that include plenty of obsolete items, or items that have been around for years but nobody actually knows where they belong. Help is now available for streamlining inventories and cutting related costs!

Everyone who has visited the spare parts storage facility of a paper mill can understand that inventory optimization can be a huge job. This is probably the reason why it is usually not done. Inventories can include brand new, used and reconditioned items. Some spare parts have been in storage for ten years, some even longer. The warehouse is full of spares, but half of them are never used. Nobody knows where even one-fifth of them belong. The situation naturally varies a lot depending on each mill’s practices and the quality of data in its ERP system.

However, paper mills can find a solution to this problem by working in close cooperation with Valmet*. This article describes a model for optimizing the contents of spare parts inventory.

Spare parts recommendations up to date

The optimization process begins with data collection. For a paper mill this means preparing a detailed listing of the items stocked. The rule of thumb is that the less information is available, the more work there is to be done. Valmet will simultaneously start to update its spare parts recommendations to reflect the mill’s current machinery. It is very important for Valmet to get accurate information on all upgrades and rebuilds carried out, what equipment was removed, and the composition of the mill’s current machinery. This update will produce very valuable information, namely a spare parts recommendation for the current machinery in use.

What to stock and where?

The next step in the optimization process is Spare Parts Criticality Analysis. All recommended spare parts are reviewed from a process point of view (production loss, safety, environmental aspects, delivery time and failure frequency). This analysis is performed to identify spare parts that need to be available at the mill site and parts for which some alternative warehousing methods can be evaluated.

Inventory audit identifies warehouse contents

Once the current contents of the spare parts inventory are known, as well as what they should be, the following step is an inventory audit. This is a desk audit that provides an overall understanding of the inventory contents. However, a physical inventory audit still needs to be conducted later to get a clear picture of the condition of the spare parts.

ePartsBook for documenting and searching spare parts data

It is not enough to just have up-to-date spare parts recommendations. Finding and using spare parts is predicated on knowing which spare parts belong to which equipment. Here we come back to the quality of data in the mill’s ERP system. Valmet's ePartsBook is an excellent tool for documenting and searching spare parts data. ePartsBook is a new product that provides mill hierarchy information, spare parts recommendations and assembly drawings, all in a visual mode and linked together. It has comprehensive search features and the ability to integrate with the SAP system. SAP integration facilitates ePartsBook spare parts searches, retrieval of pricing and delivery time information, and bringing spare part items into SAP without separately creating a new SAP item.

Less capital tied up in spare parts

At this point we have updated spare parts recommendations, we know the contents of mill’s spare parts inventory, and we have ePartsBook for documenting spares and easier searches. Now it is time for action. A physical audit is conducted to see the real condition of spare parts. At the same time all obsolete items are removed from storage. These are scraped, sold, or possibly used elsewhere. Based on criticality analysis findings we can better understand which spare parts are not overly critical for production. A new stocking policy can be considered for these types of spares.

If the delivery time is acceptable, why have parts in inventory when you can purchase them only as needed? Maybe other mills in your company also need the same spare parts? Would it be enough to have one shared spare for any given purpose? All of these actions are aimed at reducing the amount of capital committed to spare parts inventory. We also offer consignment inventory or vendor managed inventory options to ensure the reliable availability of premium quality process consumables.

( *Metso (Paper) until Dec. 31, 2013)