Thomas Industrial Library

1.8 THE A-B-C- ANALYSIS

The previous discussion about RUKIs is a natural lead-in to looking at the typical A-B-C analysis. As we have said, a few items normally account for most of the inventory and usage of spare parts. This is best represented in Figure 1.8, which plots cumulative usage against total inventory items. Group A items are those items that comprise about 70 percent of the inventory value, but only 10% of the line items; Group B, 20 percent of the value and about 20 percent of the items; and Group C, only 10 percent of the value, but all of the remaining items.

Clearly the Group A items are the RUKIs. It is the management of these items that should be the highest priority for the material management team. Several suggestions for doing that are: 1) limit management’s effort so that it works only on the RUKIs, 2) focus only on those RUKIs that are out-of-balance, that is, RUKIs that have reorder points or reorder quantities higher or lower than optimum, and 3) prioritize reporting of out-of-balance RUKIs so that the “big hitters” are the first to be reviewed and adjusted, and the “small potatoes” are reviewed last, if at all.

1.9 INVENTORY MANAGEMENT TECHNIQUES

Over the last years several different techniques have been devised to improve the availability of spare parts when needed. Let’s look at the three best:

1.9.1 Material Requirements Planning (MRP)

The philosophy of MRP is based on the concept of determining the future time-phased requirements for material and taking the necessary actions to insure the material is on-hand when required. Critical path scheduling is often used to keep the project on schedule. The key to successful MRP is the scheduling process, which determines when certain activities are going to happen. For example, if an overhaul of a utility turbine generator is scheduled for the April spring outage, ordering of expected materials for the overhaul must be backed dated from April and reflect the expected lead time to manufacture or procure the materials. Besides overhauls, other activities that frequently use MRP are assembly line operations and equipment preventative maintenance procedures.

1.9.2 Distribution Requirements Planning (DRP)

DRP is normally used in free issue situations where stocks such as fasteners, screws, and flashlight batteries are available for maintenance to pick up without filling out an issue ticket (just help yourself). Generally the stock items are low cost and purchased in bulk so that precise inventory control is not justified.

1.9.3 Non-Forecastable Requirements Planning (NRP)

NRP is the process used when you have no idea when the material will be needed, if at all, and you must rely on the use of risk-based processes to set stocking levels that will meet operations availability objectives. The principal use of NRP is the management of rarely-used items; MRP and DRP won’t work here.

Figure 1.9 summarizes what we know and don’t know about a situation when employing MRP, DRP and NRP techniques. For all three techniques, we usually have a pretty good idea of how many of some item will be needed. With MRP and DRP, we usually know when it will be needed, but not with NRP. And with MRP and NRP, we usually know why we need something; with DRP, we are not concerned with why. Because each technique has its advantages and disadvantages, the key is to apply the techniques where it works best.