Inventory Planning Blog

Inventory Life Cycle for Parts

Posted on Tue, Jul 09,2019@12:04 PM

Previously, we discussed the different industries, uses and planning of parts. Today, the OEM replacement of parts is happening at an ever-increasing rate as technology allows for improvements in performance and longevity.
The graphic below shows the important milestones in a part’s life cycle. These have an impact on inventory planning for each item. This section examines how those milestones impact parts planning.

Inventory Planning Life Cycle for Parts

New Parts


New parts usually show up when a new demand is recorded by the transaction processing system. With no history of usage, there is no data to create an automatic forecast. Someone must decide how to project a usage forecast for at least a few months. After a few months of experience, usage history should guide an automatic forecast.


Part Active and in Use through its Maturity


The period that the part is active and stocked can be very long, perhaps 10 to 50 years or in some extreme cases only a few months. Usually there is a ramp up in usage as more equipment using the part enters the field. Then, as the equipment ages and more modern parts supersede this one, usage of the part may decline. Usage trends change over time, sometimes rather rapidly, so it is important that part ordering strategies recognize these changes. Some parts are not discontinued and are carried for many years.

Phase Out


parts can become obsoleteThere are two ways a part can become obsolete. There may be an engineering change to the equipment that uses the part, so that another part supersedes this one on a given date. The other possibility is that all the equipment using this part either goes out of service or goes off vendor support as of a given date. Obsolete inventory represents wasted investment. By tracking when there is an excess of parts or when parts are likely to become obsolete, steps can be taken to avoid over-ordering to sell parts while they still have some worth.

 

Last-time Buy


While well into the active period, the part supplier may notify the service organization that the part is being discontinued. The supplier then indicates the last date that the part can be ordered. This stimulates an analysis to decide how to handle the problem. Is there an alternate supplier? Can parts be cannibalized from other equipment going out of service? Is repair of failed parts a sufficient source? If all else fails, the service organization has to order a large number of last-time-buy parts to satisfy anticipated needs for the rest of the period the part will be needed.

Tracking repairs complicates planning

Tracking repairs complicates planningExpensive parts may be much cheaper to repair than to throw away and buy new. However, repair adds complications that are important to recognize and deal with:


• Repaired parts may have a separate item code to distinguish from the corresponding new part, this is especially true in Aviation.
• Need to track how many failed parts are in inventory that could be sent to a repair center.
• Meet demands with repairs first, only ordering more expensive new parts when no repairable failed parts are available.
• If demand is low and we have many failed units in stock, wait to repair them until they will be needed.
• Some failed parts will be too broken to fix, so we need to consider a yield rate with our repair orders. For example, if we have a 90% yield rate, then we will have to send 10 parts out for repair, on average, to get back 9 good ones.

These repair concerns are difficult to handle manually, so it is important for a parts planning software product to handle them properly.

 

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Tags: SPARE PARTS INVENTORY PLANNING