Thomas Industrial Library

2.8.1 Sensitivity to Lead Time

The replenishment lead time is a value usually determined by the combination of internal paper processing time, vendor shipment response time, and delivery and receipt time. Any or all are subject to change and usually do. Smart suppliers always quote a shipment lead time that is conservative and can almost always be met. Furthermore, a strike at the supplier plant could invalidate even the latest delivery quote.

Figure 2.31 shows how the MIN and MAX for an item can vary as the lead time to replenish increases. The value of this analysis is the ability to show the wide range over which the lead time can vary and still stock the same amount of inventory. In Chapter 3 we will discuss lead time further, and introduce a concept known as the lead time bias.

2.8.2 Sensitivity to Criticality

The risk of running out of a spare is directly related to the criticality assigned to the part. We suggest setting criticality at only three levels: high (99.9 % availability), medium (99.0 %), and low (97.0 %), but any other level could be assigned. Figure 2.32 shows the days at risk and the minimum stock level required for various availability levels. Remember, availability is the combination of first having a failure, and then having sufficient stock in the storeroom to meet the demand. Probability theory comes into play in determining the chance of having a failure, after which the availability level chosen determines whether or not the item will be in the storeroom when requested.

2.8.3 Sensitivity to Mean Time Before Failure

Because initial spares (new spares) lack usage history unless they can be supplied from some other source, estimates of Mean-Time-Before-Failure (MTBF) must act as a surrogate for past usage when setting stocking levels. Figure 2.33 shows how MTBF levels can influence stocking levels. Maintenance personnel are usually the best source for these estimates unless the supplier of the spare has data and is willing to provide it.

2.8.4 Multiple Sensitivity Analyses

It is often useful to look at the sensitivity of MIN/MAX levels relative to more than one input parameter at a time. Figure 2.34 shows the sensitivity of the MIN/MAX to both criticality and lead time. In this example, the current 1/2 MIN/MAX is valid for only six of the fifteen possible combinations. For seven combinations, the current levels could be decreased and for two they must be increased.

Figure 2.35 shows a similar analysis when the availability is set at medium (99.0 %) and the MIN is determined against both lead time and annual demand.

Even more complex multiple-sensitivity analyses are possible. For example, when making initial spares buy decisions, it is possible to have lookup tables prepared in which the Number-in-Service, MTBF, and Lead Time can all be varied over a range for a specific level of Criticality. These tables help plant management to set the buy amount once they determine the criticality for the part, the expected number in service (usually available from the bill of materials), the estimated MTBF (usually available from the vendor or estimated by maintenance), and the projected lead time (a vendor input).

The advent of risk-based assessment allows all of these analyses to be completed quickly, and provides plant management with information that supports making better stocking decisions. When better decisions are made, risks to production are reduced and the money invested in stocking inventory is optimized.