 One key objective of parts and supplies management is to minimize equipment down time. If spare parts and supplies are not readily available, costly delays can result. In fact, non-availability of parts is the primary cause of in-shop equipment down time. Another objective is to avoid unnecessarily large inventories which are also costly. Although better prices can be obtained by large quantity purchases, there are costs associated with storage and handling. The cost of maintaining parts stocks can add 50% or more to the cost of parts. The two objectives to minimize down time and inventory costs are obviously in conflict. The challenge of parts and supplies management is to balance down time and inventory costs. There are four major elements of the parts and supply management system. Stock numbering and classification. Stock selection and stock levels. Inventory management and fuel management. Stock numbering schemes should facilitate identification and location of parts to expedite equipment repair and allow effective inventory control. In most cases, the part numbering schemes used by equipment and parts manufacturers are not compatible nor convenient for storage and retrieval in a typical stock room environment. The complete Standard Parts Identification System, SPIS, is composed of four sub-elements plus the manufacturer's part code. They include the component code, eight digits, manufacturer's ID code, five digits, product condition code, one digit, fleet code, three digits, and the manufacturer's part code varies. The component code consists of an eight-digit code with three sub-elements, major group system, two digits, assembly, three digits, and parts, three digits. The first digit of the major group system code identifies the major group of vehicle components, as shown here. The second digit in the group system code identifies the operating system within the major group. The assembly code identifies parts assemblies within a group system. For example, assembly code 003 is a fan assembly. The part code is a three-digit code which identifies a specific part in the assembly. For example, in the fan assembly, part code 010 is a fan belt. The meaning of this code also varies with the type of assembly. The manufacturer's ID code consists of five letters. A large list of manufacturer's codes is provided in the ATA manual, but additional ones may be added. The ATA code for a Cummins diesel, for example, is CMMNS. The product condition code is a one-digit numerical code used to identify a component as new, used, or rebuilt. For example, one is new, two is rebuilt, and three is used. The fleet code is a three-digit numerical code for those agencies that maintain several fleets or have portions of their fleets assigned to different geographic locations or wish to identify several classes of equipment. The manufacturer's part code can be used to identify the manufacturer's part number or a user assigned number. Manufacturer's part numbers are variable in length and can be both alphabetical and numerical. Here is an example of a complete code for a typical part. It includes major group, power plant, cylinder block, main bearing, manufacturer, condition, fleet, and part number. Stock classification systems are developed to aid in inventory management. Some parts are relatively easy to obtain at reasonable prices and are not stocked in large quantities. Others may be used so infrequently that the cost of stocking them cannot be justified. Some require long lead times and cannot be obtained easily. Some are critical because the downtime cost while waiting for the part to arrive would be prohibitive. A useful stock classification scheme typically includes four types, regular stock, which includes parts with relatively high usage and fast turnover, seasonal stock that varies with the season, critical stock, which includes parts that are critically important to the operation, and trial stock, including parts placed in inventory on a trial basis to determine proper stocking levels. What is the proper stock to select and at what level should it be maintained? A general answer is not possible. Equipment types and usage vary widely from one agency to another, as do sources of supply and purchasing practices. Several considerations influence whether a parts inventory should be maintained in-house or not. A good starting point is to consider the no inventory situation. What would be the consequences of buying each item locally as needed? If there is a local supplier and if the agency has a history on parts usage, the cost of having someone chase each part can be determined and added to the additional down cost incurred while waiting for the part. As the number of parts stocked increases, the storage costs increase, more shelves or another room may have to be added. As the inventory grows, how can one be sure that the part needed is still in storage? These considerations indicate the need for record keeping and inventory control. If the parts purchases amount to large quantities, better prices may be obtained from non-local distributors. However, quantity discounts from remote sources must be weighed against the cost of ordering, such as phone calls and shipping. The point at which an order should be placed is called the reorder point, ROP. This is the level of stock which is sufficient to meet demand while replacements are ordered and received plus a safety margin or buffer. The ROP depends upon the usage rate and the vendor lead time. The formula for computing the ROP is ROP equals U times L plus S, where U equals average number of parts used monthly, L equals average vendor lead time in months, and S equals safety stock level. The ROP is normally calculated after there is sufficient historical usage data. Initially, however, a reasonable estimate will have to be made based on experience. The safety stock level is the number of parts that should always be on hand in case of unforeseen circumstances. The level may vary with different classes of parts and rates of usage. The number of parts which should be ordered when the ROP is reached is called the reorder quantity, ROQ. A formula is used to calculate the ROQ. ROQ equals the square root of 2 times C times U divided by I times P, where C equals cost of placing a single order, U equals average monthly usage, P equals unit cost of part, and I equals inventory carrying cost per month per dollar of average inventory. The inventory carrying cost, I, is determined by adding the total monthly cost of keeping an inventory. The costs may include utilities, building space, equipment depreciation, obsolete parts, counter costs, and current expenses. Then I can be computed as follows. Total inventory cost per month divided by average dollar value of inventory. The ROQ is normally calculated after sufficient historical data has been developed, but initially, an estimate will have to be made based on estimates of cost and usage. The next key phase is parts and materials inventory management. This requires careful upfront planning. Effective inventory management ensures that inventory levels are kept at the most economical point. The key components of an inventory management system are parts master file, parts ordering, parts control, stock on order control, and inventory evaluation. The parts master file is the principal source of information about all parts stocked. The parts master record stock status report must be updated for each occurrence of any one of the following events. Completion of initial inventory, receipt of new stock items, issuance of parts from stock or return of unused parts to stock, disposal of obsolete parts, and change in price or change in reorder point, reorder quantity, or safety stock level. The parts master file is updated as each change occurs, but revised reports are normally issued once a month. As parts are issued from stock, the parts master file must be updated. When the quantity of parts on hand reaches the ROP, a low stock notice should be prepared. Each time a part is issued from stock, when the level is at or below the ROP, another low stock notice should be issued. The low stock notice should indicate usage for the last 12 months. To avoid a build up of obsolete parts, a procedure must be established to detect inactive stock. At least four times a year, every part in the parts master file should be compared to the low stock notice reports. When older equipment is sold or disposed of, any parts associated with it should also be disposed of, unless the parts are interchangeable with other equipment still in use. To ensure that the parts manager is constantly aware of outstanding orders, a stock on order file should be maintained. As each order is placed, the order should be recorded in the stock on order file. As each order is received, it should be noted in the stock on order file. Periodically, the parts manager should review and evaluate inventory policies and procedures. This should include a review of items stocked, usage rates, and turnover to determine if the items still warrant stocking. A review of ROP, ROQ, and safety stock level. And a review of usage of non-stock forms. Inventory control, as opposed to inventory management, deals with the physical aspects of handling the inventory. Purchasing, pricing, charge out procedures, record keeping, and security. Parts may be purchased by two methods, requisitions and purchase orders, and field purchases. A purchase order is the normal method and should follow the agency's standard procedures. Field purchases are made when a part is needed that is not in stock. These are normally small items needed to expedite repairs. They are handled on a cash basis. As parts are received and added to the inventory, the parts master file should be updated by the parts manager. The cost of parts is assigned to the appropriate job and piece of equipment by entering the cost on the work order. The usual practice is to establish an average price for each part. The average pricing method combines the unit cost of new parts coming into inventory with the cost of parts already on hand. Another key component is fuel management. Many of the concepts and techniques used for spare parts management are also applied to fuel management. The main differences are the need for separate storage and handling facilities and for better control methods. The key aspects of fuel management are size and location of distribution facilities, standardized purchasing procedures, monitoring fuel usage, security and automated fuel systems by considering monthly fuel usage and using the ROP, ROQ and safety stock procedures discussed earlier in this chapter. The size of fuel storage tanks can be determined. Location of the tanks requires some additional analysis. For small, centrally located equipment fleets, a central fuel storage facility is appropriate. In addition, one or more mobile refueling facilities may be necessary to reduce unproductive travel time from work sites. A purchasing agreement should be negotiated with a fuel distributor based on price and delivery considerations. Specifications and annual usage estimates should be established for the various fuel grades required. Fuel delivery tickets should be verified by occasionally spot-checking tanker truck gauge readings before and after delivery or by stick readings at the tank before and after delivery. As fuel is used, basic information about the transaction should be recorded, the quantity and type of fuel, pump number and date should be recorded along with the employee's ID, equipment number and odometer or hour meter reading. Several security measures are commonly used. The first and oldest is to padlock the fuel pumps and issue keys to only those who are authorized to use fuel. There are a number of commercially available automated fuel systems. While specific designs vary, most will provide automated accounting of fuel usage. With automated systems, it is a relatively simple matter to monitor fuel and oil usage by piece of equipment. When usage levels exceed normal ranges, the need for PM work may be indicated. High usage should be a flag for further investigation to determine the cause and correct it. In this course, we've covered the basics of the Parts and Supplies Management System including stock numbering and classification, stock selection and levels, parts and supplies inventory management and fuel management. For more information on this or other IRF videotapes, write to the International Road Federation or call the numbers on your screen.