Production Inventory Management

Respond by Don to reader's inquiry... 

Managing Machine Spare Parts - The Cost of Inventory verses the True Cost of Downtime.

Managing Machine Spare Parts - Cost of Inventory verses Cost of Downtime


Hello, I am trying to find some information on budgeting for a medium sized manufacturing plant to help justify spare parts inventory along with yearly maintenance and general upkeep. Do you know where I can find statistical information on "world class operations" such as inventory of spare parts, repair costs, failure rates etc...

I have seen in the past some articles that show spare parts spending but they did not have any reference to the size of the facilities vs the dollars spent. What I would be really interested in some relation to the size, complexity of the operation (machine costs) and the percentage of dollars spent in maintaining that equipment and how the cost of maintenance increases with the age of the machinery.

Thank you for your assistance, Terry


Hi Terry:

Sounds like you are out to cost justify spare parts, which is one of my pet peeves. A few years back, a 'Fad' (and I don't use that word lightly) started about "how companies could save drastically by inventory reduction". I rank that methodology down with the "reduce employees to save money" method. (Very low)

You see, reducing inventory to save truly works with bulk material, but not with general machine parts. If you read one of my books on the true cost of downtime, and review a website I have dedicated to the topic (, you will get an idea of where I am coming from.

A typical scenario, a fuse, a solenoid, or even a motor is not stocked in a facility's inventory due to a company's inventory reduction plan. Then 3 years later, a machine goes down requiring one of them. It take hours, a day, or even a week (for overseas parts) to get the part and return the machine back to production.

In this hypothetical scenario, to store that part cost from $5-$500 over that 3 year period. "The True Cost of Downtime" (TDC) shows us that the machine being out of production waiting on the part cost for example,  $1,000-$10,000 per hour of downtime.

If you combine the knowledge of TDC with your log of breakdowns / parts needed over the years and apply a TDC evaluation to existing parts and OEM recommended spares, you should have the most cost effective inventory management solution.

True Down Time Cost Analysis - 2nd Edition Ebook - Coauthored by Mike Sondalini

The True Cost of Downtime - by Don Fitchett

Maintenance Storerooms - Computer Based Training CBT CD

Hope this helps because there is not a mass collection of statistical information on ("world class operations" or other wise) inventory of spare parts, repair costs, failure rates etc... You have to go to each machine's OEM and request spare parts recommendation list, MTBF info, and estimate cost of repairs. The time it would take to do this for every machine would cost more than the few dollars you would save by not stocking a particular part.

Another note too, as far as recommended parts list and MTBF info from the OEM, it may likely be biased to the OEM's advantage, not yours. That means the recommended parts list may be more parts recommended than if a third party did the analysis on any particular piece of equipment. The MTBF info will most likely be less than in actuality, to make their equipment appear more reliable or just because the MTBF is based on ideal; unrealistic conditions.

Even if this spare parts/breakdown information you seek was available for every machine in existence or most, the environment that two like machines exist in would vary the needs much. Machine A is on ran 8 hours per day, PMed as recommended, ran with in specs. Machine B is ran 24/7 until break down, PM is a low priority in Machine B facility. The parts and breakdown frequency between Machine A and B would be night and day.

Well, that is my opinion, hope it provides some insight. Thank you for your inquiry.


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