Using Off-Site Spare Part Stocks to Maintain Systems

Companies that rely on assets to run their business often need to maintain stocks of spare parts. Where to set up these stocks, how many parts to keep in them and how often to restock them is a logistics question that affects the ability of the company to fix failures and maintain their systems. It is difficult to strike a balance between carrying enough parts to meet the company's needs and containing the costs involved in sustaining such stocks. A blend of on-site and off-site spare part stocks can be a cost-effective strategy. This article explains how to set up and use a combination of on-site and off-site spare part stock profiles when analyzing your systems using BlockSim 7.

Many times companies will try to minimize the amount of spares carried on-site and resort instead to off-site stocks. There are many potential reasons for and benefits to using an off-site spare stock strategy, such as:

BlockSim 7 allows you to model the use of both on-site and off-site spare parts stocks and compare the associated costs. To illustrate this process, we present the following simplified example.

In this example, we study a manufacturing company that wants to evaluate two strategies for managing spare parts over a year of production time.

Block	Failure Distribution (hrs)	Repair Distribution (hrs)
A	Weibull (β = 1.5 ,η = 5000)	Normal (Mean = 6, Std = 2)
B	Lognormal (LogMean = 5.5 , LogStd = 1)	Normal (Mean = 6, Std = 2)
C	Weibull (β = 2 ,η = 1000)	Normal (Mean = 6, Std = 2)
D	Exponential (Mean = 10000)	Normal (Mean = 6, Std = 2)

The next two figures illustrate how to specify the above failure and repair distributions for one of the blocks (A) in BlockSim 7.

To determine the spare parts needs for each block type, we first run a simulation (for 1 year = 8760 hours of operation) without any spare parts policies assigned within the RBD (i.e. BlockSim assumes that the spares are always available and can be obtained immediately). The expected number of failures (Expected NOF) values displayed in the Simulation Results Explorer can be used as an indication of how many failures to expect in a year and, therefore, how many spare parts would be needed.

Note: Your results may vary depending on the number of simulations and the seed used.

Based on the above figure, we estimate the following spare parts requirements (with quantities rounded up from the simulation results).

The following table shows the fixed and time-dependent costs involved in stocking each type of part on-site. The Direct Cost per Item describes the direct cost of each spare part (for example, the price of the part). The Indirect Cost per Item per Unit Time in Pool describes the indirect costs of maintaining the spare part in the pool over time (such as warehouse rental fees, electricity, personnel, etc.).

On-Site Spare Part Stock	Direct Cost per Item	Indirect Cost per Item per Unit Time in Pool
On-Site Stock A1	$100	$2
On-Site Stock B1	$150	$3
On-Site Stock C1	$160	$5
On-Site Stock D1	$200	$8

We will also consider the cost of downtime (i.e. loss of opportunity and profit that could be generated if the system is working). For this example, that cost is $1000 per hour of system downtime.

Select Add New Resource then Spare Part Pool Policy from the Project menu to create the on-site spare part stocks for each of the block types. The following figure shows the spare part policy for block A.

Link the spare part policies to their associated blocks by selecting the appropriate policy from the Spare Part Pool drop-down menu on the Corrective page of the Maintenance tab of each block's Block Properties window. The next figure illustrates this step for block A.

We then simulate the system (for 1 year = 8760 hours of operation) and obtain downtime and spare part related costs. The System Overview summary of the simulation is shown next.

Note: Your results may vary depending on the number of simulations and the seed used.

The following table summarizes the financial consequences of implementing this strategy.

Down Time	699.16 hrs
Cost of Downtime	$699,160
Spare Parts Related Cost	$1,096,633.22
Total Cost	$1,795,793

In addition to the on-site spare parts stocking costs described before, we may also consider the cost of stocking the parts in a more cost-effective off-site spare parts warehouse. However, this strategy also introduces delays for obtaining the parts from the off-site warehouse and additional costs for shipping the parts.

Off-Site Spare Part Stock	Direct Cost per Item	Indirect Cost per Item per Unit Time in Pool	Additional (Shipping) Cost	Shipping Delay (hrs)
Off-Site Stock A2	$80	$1	$20	Normal (Mean = 24, Std = 2)
Off-Site Stock B2	$100	$2	$20	Normal (Mean = 24, Std = 2)
Off-Site Stock C2	$110	$3	$20	Normal (Mean = 24, Std = 2)
Off-Site Stock D2	$140	$7	$20	Normal (Mean = 24, Std = 2)

One part for each block type will be kept on-site and the remaining parts will be stored in the off-site stock. Create the off-site spare part stocks for each of the block types by selecting Add New Resource then Off-Site Spare Part Pool Policy from the Project menu. The following figure shows the off-site spare part policy for block A.

The on-site stocks will feed from the off-site stocks as needed. This relationship is made by specifying the number of parts to be added as needed, the shipping cost and the delay, as shown next for Block A.

Link the on-site spare part policies (which are, in turn, linked to the off-site spare part policies) to their associated blocks by selecting the appropriate policy from the Spare Part Pool drop-down menu on the Corrective page of the Maintenance tab of each block's Block Properties window. The next figure illustrates this step for block A.

We then simulate the system (for 1 year = 8760 hours of operation) and obtain downtime and spare part related costs. The System Overview summary of the simulation is shown next.

Note: your results could vary depending on the number of simulations an the seed

The following table summarizes the financial consequences of implementing this strategy.

Down Time	733.29 hrs
Cost of Downtime	$733,280
Spare Parts Related Cost	$795,127.47
Total Cost	$1,568,414.57

By comparing the financial impact summary tables for the first and second strategies, we determine that the second option is the more cost-effective spare part management strategy in this particular case, with projected savings of $227,376.95 per year.

This article described the use of BlockSim 7 to model and compare on-site and off-site spare part policies in order to find a cost-effective spare parts management strategy. Variations of the strategies discussed in the provided example can be used to compare other blends of on-site and off-site spare parts policies. In some cases, off-site spare part stocks can prove to be beneficial for cutting costs and achieving a more lean operation. Also, off-site stocks can be restocked by other off-site stocks, creating a more complex logistic network of spare parts distribution. For example, consider a company that has one central spare parts warehouse that supports several key regional off-site spare parts warehouses, which in turn support other sites. Such a logistics structure can grow in complexity as demand rises in other locations (new production facilities, servicing sites, etc.).