Decision-making framework for inventory management of spare parts in capital-intensive industries

Du Toit, Deirdre (2014-12)

Thesis (MEng)--Stellenbosch University, 2014.

Thesis

ENGLISH ABSTRACT: Effective management of spare parts inventory is essential to companies because it influences inventory costs and asset utilization. The vast and diverse portfolio of spare parts, intermittent demand patterns and contradicting objectives between departments are examples of some of the factors that complicate Spare Parts Management (SPM). Managers of spare parts are faced with trade-off decisions between risk and cost on a daily basis. These decisions include, amongst many, determining appropriate stock levels and order frequencies. Despite the importance of SPM, decisions are however often made intuitively in practice with little factual support, and the decision-making process is commonly constrained within departmental silos. Even though there is a large body of academic knowledge on this topic, practical applications of spare parts inventory solutions lag behind theoretical studies. The majority of studies in literature focus on single components of SPM, such as demand forecasting and parts classification, whereas fewer studies consider the decision-making process itself. This study proposes a decision-making framework for spare parts inventory management. The framework is based on a wide-ranging literature review that focuses on capturing the essence of Spare Parts Management (SPM), but also acknowledges the interconnectedness of the problem. Therefore, core inventory management principles, as well as closely related topics such as Supply Chain Management (SCM) and Physical Asset Management (PAM), are studied in the context of spare parts. The broad scope of the literature study leads to a holistic approach to the problem and prevents sub-optimization. The proposed framework condenses principles from various fields of study (SCM, PAM, Classification and Inventory Management) into a stepwise methodology presented as a decision-making framework. The objective of the framework is to provide managers with a structured process, based on factual information, to enable better decision-making in the field. Furthermore, the framework aims to capture the fundamentals of SPM in a simplistic manner to ease the adoption of the framework in practice. A case study is conducted in the South African mining industry to validate the framework. The case study demonstrates that the framework is practical, provides structured guidance, and assists managers to make trade-off decisions in managing spare parts inventory.

AFRIKAANSE OPSOMMING: Effektiewe voorraadbestuur van onderdele is belangrik vir maatskappye omdat dit voorraadkoste en die benutting van bates beïnvloed. Die bestuur van onderdele is ’n komplekse probleem. Ondermeer is die portefeulje van onderdele items breed en divers, die vraagpatrone sporadies en word die voorraadvlakke geaffekteer deur kontrasterende doelwitte tussen verskillende departemente. Bestuurders van onderdele word daagliks gekonfronteer met besluite rakende risiko’s en kostes, soos om toepaslike voorraadvlakke te bepaal en om te besluit wanneer om bestellings te plaas. Hierdie besluite word dikwels intuïtief geneem met min feitelike ondersteuning en insette in die besluitnemingsproses word gereeld beperk tot sekere departemente. Ten spyte van die geweldige akademiese belang in die onderwerp, is daar min suksesvolle praktiese toepassings. Die meerderheid van studies in die literatuur fokus op spesifieke elemente van onderdele bestuur, soos vooruitskatting en klassifisering van parte, terwyl minder op die besluitnemingsproses konsentreer. Hierdie studie stel ’n besluitnemingsraamwerk vir die bestuur van onderdele voorraad voor. Die raamwerk is gegrond op ’n deeglike literatuurstudie wat die essensie van onderdele bestuur ondersoek, maar ook die interverbondenheid van die probleem in ag neem. Voorraadbestuurbeginsels en verwante onderwerpe soos Voorsieningskettingbestuur en Fisiese Batebestuur word dus bespreek. Die breë omvang van die literatuurstudie lei tot ’n holistiese benadering wat sub-optimering van die probleem voorkom. Die voorgestelde raamwerk som beginsels uit verskillende relevante studievelde op in ’n stapsgewyse metode wat voorgestel word as ’n besluitnemingsraamwerk. Die doel van die raamwerk is om bestuurders te voorsien met ’n gestruktureerde proses, gebaseer op feitelike inligting, om besluitneming in die veld te verbeter. Verder poog die raamwerk om die fundamentele konsepte in voorraadbestuur vas te vang in ’n eenvoudige manier sodat die raamwerk maklik geïmplementeer kan word in die praktyk. Die voorgestelde raamwerk is gevalideer deur middel van ’n gevallestudie in die Suid-Afrikaanse mynbedryf. Die gevallestudie toon dat die voorgestelde raamwerk prakties is, die besluitnemingsproses op ’n gestruktureerde wyse lei, en bestuurders help om beter, ingeligte besluite te neem.

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