| |August 20219short lead time items that need high, medium, and low in-ventory levels, respectively.· Historical Consumption: Consumption is commonly expressed in terms of quantity (fast moving, average con-sumption, and slow moving) and value (high turnover, me-dium turnover, and low turnover).· Cost: Unit cost is a key factor in the determination of the degree of monitoring and control required for inventory of spare parts. So they are classified as high cost, medium cost, and low cost.KEY ASPECTS OF EFFECTIVE SPARE PARTS MANAGEMENT· Stocking Criteria: This consists of guidelines on when to stock and when not to stock a part.· Stock Levels: This decides how much to stock, minimum and maximum stock levels and reorder quantities.· Stockouts: This includes impact analysis and root cause analysis of stockouts, followed by implementation of cor-rective measures.· Stagnant Stocks: This includes root cause analysis, im-plementation of corrective measures and approach for re-duction of existing stagnant stocks.· Stock Review: This encompasses verification of correct-ness of stock levels, identification of potential stockouts & stagnant stocks, and corrective actions for improvement of inventory composition, turnover, and availability.CURRENT TRENDS IN MANAGEMENT OF SPARE PARTS· Dealers & Channel Partners: Increased collaboration with dealers and channel partners to achieve lower inven-tory carrying cost, higher market penetration, lower pro-cessing costs and faster collection of receivables.· Drop Shipments: Direct delivery of goods from suppliers of an OEM to its customers, dealers, or channel partners for shorter supply chain cycle time, lower transportation & handling costs, and lower inventory carrying cost.· Profit Center: Transformation of after-sales service into a profit center that can play a critical part in boosting bot-tom-line growth and long-term profitability.· Marketing of Spare Parts & Services: Offerings such as comprehensive maintenance contracts, extended war-ranty, health checks, and refurbishing services.After-sales service now represents the single largest op-portunity for revenue and profit growth for companies in-volved in manufacturing of industrial products. It provides an opportunity to improve margins, offset the commoditi-zation of products, and differentiate a product in the mar-ketplace. As manufacturers strive to achieve customer de-light and loyalty, effective and efficient after-sales service is very essential. Spare parts management is the central component of a complete strategic service management process that is used to ensure that right material and re-sources are at the right place at the right time. Given the profitability of the spare parts business, manufacturers are looking towards the spare parts management function as a vital part of their operations, both from an internal operational perspective as well as from the service per-spective.
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