Spare Parts Inventory Management & Demand Forecasting

For Spares Parts for Injection Moulding Machine

A Project Report submitted by

Aakash Parikh
PGDM LSCM Batch 2022-2023
BK School of Management & Professional Studies
Gujarat University

1
 Abstract
Spare parts management is an essential operation in the supply chain for most of
the companies especially Machine manufacturing companies, where the life span
of machine is more than 15 years, owing to its strategic importance in supporting
equipment availability and continuity of operations.
In many supply chains, the demand of spare parts is highly uncertain compared
to traditional fast-moving products. This is due to the fact that spare parts
demand is highly intermittent, mostly observed with a long period between
consecutive orders, where a no demand period is followed by a period of an order
signal. As spare parts are critical to the continuity of operations, companies tend
to stock more inventories to mitigate the risk of irregular demand pattern. Alpha,
a manufacturing company that sells injection moulding machines and the spare
parts that support them, faces challenges in its spare parts demand forecast and
inventory management. This challenge has recently been negatively impacting
the company’s inventory costs and customer service level, where the actual
inventory is consistently higher than the targeted level. Meanwhile, higher
inventory levels are not being translated into higher service level to its
customers. In summary, the company has seen increased costs with a lower
service level. Therefore, the aim of this project is to find best possible solutions
to improve the demand forecast accuracy and the spare parts service level of the
company while optimizing inventory management.

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 Acknowledgement

I would want to convey my heartfelt gratitude to Prof. Gaurav Vatsa, my

mentor, for his invaluable advice and assistance in completing my project. He
was there to assist me every step of the way, and his motivation is what enabled
me to accomplish my task effectively. I would also like to thank my friend and
my colleague Mr. Vishwas Dharaiya and for the data which he has provided to
complete my project, without which I would not have been able to perform
efficiently on this project.

I would also want to thank B.K School of Management for accepting my project
in my desired field of expertise. I’d also like to thank my family for their support
and encouragement as I worked on this assignment.

3
 Disclaimer
The original name of the company has been replaced by the hypothetical
name due to the confidentiality purpose. Also, the vendor names are
mentioned as Imported supplier with Country for imported goods and
Domestice Suppliers for indigeneous goods.
All the data provided in the report are true and actual for which the project
has been carried out.

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Table of Content:
Introduction To Alpha …………………………………………………….. 6
List of Tables
Table 1 : SKU Classification based on ABC ………………………….......... 9
Table 2 : Avg Inventory and ITR …………………………………………… 10
Table 3 : Vendor Lead Time ………………………………………………… 12
Table 4 : Breakdown Performance ………………………………………….. 13
Table 5 : FSN Classification ………………………………………………… 18
Table 6 : Avg Safety Inventory ……………………………………………… 18
Table 7 : Revised Vendor Lead Time After Covid ………………………….. 21

Chapter 1 : Inventory Management and Classification

1.0 Introduction ………………………………………………………….. 7
1.1 Inventory Management ……………………………………................ 7
1.2 Inventory Classification …………………………………………….. 7
1.3 Inventory Levels & Inventory Turns ………………………………... 9
1.4 Obsolence Inventory Cost …………………………………………… 11
1.5 Lead Time …………………………………………………………… 11
1.6 On Time Delivery …………………………………………………… 13
1.7 Inventory Management And Customer Satisfaction ………………… 13
1.8 Inventory Cycle Count ……………………………………................. 14

CHAPTER 2: Demand Forecasting And Techniques

2.0 Introduction ………………………………………………………….. 15
2.1 Demand Forecasting Techniques ……………………………………. 16
2.2 Safety Inventory Based on Demand Forecasting ……………………. 18
2.3 Safety Inventory Review …………………………………………….. 19
Actual Challenges Faced By Company in Demand Forecasting and Inventory
Management ……………………………………………………………….. 20
Suggestions To Improve Inventory Management and
Demand Forecasting ………………………………………………………. 23
Conclusion ………………………………………………………………….. 25
References ………………………………………………………………….. 26

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 Introduction to Alpha
Alpha, is into the manufacturing of Injection Moulding machine from 50 Ton to
4000 Ton with a capacity to manufacture 3000 Machines per annum. Alpha
serves a diverse range of Industries and has a longlasting relationship with more
than 15000+ customers worldwide and leading market share in India and other
countries of the world.
Basic model of IMM is shown in below image
Alpha is serving below industries with a commitment of supplying its spare parts
for 15 years from the date of supply of its machine,
Alpha has a strong service commitment of technical support as and when
required and to arrange for the spare parts within 48 hours of the actual
breakdown reported by service engineer.

Alpha is serving below industries from last 25 years since its inception.
Automotive Industries, Electrical & Electronics Consumer Goods, Household
Furniture Toys Industries, Agriculture, Writing Instruments, Medical
Instruments, PVC & CPVC Applications, PET Applications, Mobile Phones,
Crates and Closures.
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 CHAPTER ONE
INVENTORY MANAGEMENT AND CLASSIFICATION
1.0 Introduction
In this chapter, the literature used the existing information about inventory
management and demand forecasting and its effect on customer satisfaction.
1.1 Inventory management
The main aim of inventory management is to ensure that organizations hold
inventories at the lowest cost possible while at the same time achieving the
objective of ensuring that the company has adequate and uninterrupted supplies
to support in field machines with minimum breakdown time.
Below Inventory Management techniques are already introduced by the
company.
1) Vendor Managed Inventory: The Vendor Managed Inventory (VMI)
process is a vendor-driven replenishment and planning process. With
the VMI module, vendors can view and manage inventory levels, shipping
as required to maintain the ideal inventory level at the customer end

2) KanBan : The Supplier Managed Inventory (SMI) process is a supplier-

driven replenishment and planning process. With the SMI module,
suppliers can view and manage inventory levels, shipping as required to
maintain the ideal inventory level at the customer site.
From above mentioned techniques, VMI is not introduced in Spare Part
Management but both the techniques are introduced in machine
manufacturing planning and machine parts purchasing.
1.2 Inventory Classification
The first step in inventory management was the classification of the SKUs based
on business requirements. Using only a single criterion for classification does
not serve well in spare parts industry because many spare parts are desired to be
in stocks not only to provide higher revenue but also to ensure customers will
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receive their orders without delay. Such business decisions play a major role in
inventory classification in the spare parts industry.
Alpha who has total 19000 machines and one machine almost comprising of
neaely 2000 parts, in field which are in operating conditions across India, Africa
and UAE, it is very difficult to manage the right inventory.
Therefore, we decided to use multi-criteria inventory classification, which is
believed to yield better results as it considers more parameters that impact
inventory holding. We considered four parameters: (1) Average Unit Cost, (2)
Annual Revenue, (3) Lead Time (4) Strategic Importance.
1. Average Unit Cost :
Average unit cost is the standard cost of 1 unit of each product. It includes
purchasing cost and logistics cost to bring the item from supplier to Alpha
Facility. In some cases, the unit cost is in a different currency. The standard
exchange rate is then used to convert the price into INR.
2. Annual Revenue :
Annual Revenue is the revenue generated by each product in a full year. In other
words, it is the number of units sold times the average selling price for each
product. If a product is sold free of cost (or complementary as a warranty
replacement), then Annual Revenue can either be assumed as “zero” or equal to
the total cost of the product. However, whatever assumption is made, it should
be standard across the catalog.
In Alpha, we are calculating in the total revenue though the item is sold in FOC
as the total consumptions doesn’t vary and data against purchase doesn’t get
complicated.
3. Lead Time: LT
Lead time is the planned delivery time in days. It is the time from order to
delivery of any product from the supplier facility to the Alpha facility.
4. Strategic Importance: SI

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Certain products are strategically important and companies. In general,
companies tend to store more units to ensure they are never out of stock. The
need to have 100% availability can be due to marketing needs, long lead-time or
criticality of the product. Strategic importance of a SKU is defined by three
numerical values: 1 = low importance, 2 = medium importance, 3 = high
importance.
We have classification as per below for Strategic Importance
Low Importance : Consumables Items and without which machine cant go
under breakdown situation
Medium Importance : Machine can go under Breakdown because of part failure
but having a short lead time and mostly readily available parts
High Importance : Machine definitely goes under Breakdown because of part
failure.
Most of high importance item are imported items and having a very high lead
time. These SKU’s need to be maintained with regular review and must be
available to cate the customers demand at any point of time.
There are total 8000 SKU’s classified on the basis of above considered factors
and divided into ABC categories

Category SKU’s
A Category 4800 SKU’s
B Category 1600 SKU’s
C Category 1600 SKU’s
Table 1 : SKU Classification based on ABC

1.3 Inventory levels & Inventory Turns :

High levels of inventory increases the probability that the customers are likely
to get what they want, increases sales and service levels. High inventory levels
however lead to both stock holding costs and in-store logistics errors. This is

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because it becomes difficult for the employees to perform shelving and
replenishment which makes goods physically available in the store but the
employees cannot trace those Maintaining optimum levels of inventory is
important in an organization because excess inventory results in stock holding
costs (storage charges, breakages, Warranty outs, Interest on material cost)
Company on an average maintaining the inventory level as per below table.
This clearly shows how increasing the inventory can results in high sales and
customer satisfaction level but at the same time it is also increasing the cost to
the company in terms of material cost, storages,etc which is directly reflected by
looking at the inventory turn levels.
Sales Value of Goods ( YTD )
Inventory turn Ratio = ___________________
Average Invenotry Value

Average Begin Inventotry Value + Closing Invenotry

Invenotry Value = Value
________________________________________
2

YEAR Avg Inventory in CR Sale in Cr. ITR

2016-17 14.02 57.1 4.07
2017-18 14.46 63.14 4.37
2018-19 17.76 69.42 3.91
2019-20 15.17 52.81 3.48
2020-21 21.61 74.46 3.45
2021-22 27.56 90.79 3.29
Table 2 : Avg Inventory and ITR

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1.4 Obsolence Inventory Cost :
Obsolete inventory is a term that refers to inventory that is at the end of
its product life cycle. This inventory has not been sold or used for a long period
of time and is not expected to be sold in the future or there is change in design
which can also result in obsolete Inventory. There can be other reasons also
which can lead to obsolence of particular item. This type of inventory has to be
written-down or written-off and can cause large losses for a company.

Obsolete inventory is also referred to as dead inventory or excess inventory.

This is the direct cost to company or a direct loss to the company in terms of
monetary aspects.

By March 2023, Alpha has a Obsolete Inventory of INR 2.6 CR out of the
average inventory of 30 CR. This approximately accounts to 8% of Obsolete
Inventory which is extremely high as per the current industrial standards. The
main reason is the company’s commitment of supplying spares for a long
duration and 48 hours commitment of breadown supply.

1.5 Lead Time

In today’s competitive market and customer focused, companies are facing
challenge of developing a process that are responsiveness to the demands of the
customers. For Spare parts, many customers are raising their demands when the
machine is under breakdown rather than raising demand for preventive
maintenance and increase their Inventory carrying cost.
In such conditions where company is using customer satisfaction approach to
gain the trust and good will in the market, try to cater the customer demand.
Here, Alpha having below major suppliers for their machines are having lead
time which is extremely high , try to maintain the optimum level of inventory to
cater their customer demands.

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Major Suppliers Description of Items Lead Time
Imported - Valves, Servo Motors and
Germany Drives, Pumps 180 Days-150 Days
Imported - Control Parts, Drives and
Austria Motors 180 Days
Transducers, Drives and
Imported - Italy Motors 120 Days
Imported -
France Fixed Pumps and Cartridges 150-180 Days
Imported -
Germany Oil Filters 180 Days
Domestic
Suppliers Regular Screw and Barrel 8-10 Weeks
Domestic
Suppliers Nitrided Screw and Barrels 12 Weeks
Domestic
Suppliers Screw Barrel Parts 6-8 Weeks
Domestic Platens (Stationary and
Suppliers Moving) 8-10 Weeks
Domestic
Suppliers Clamp Cylinders 8 Weeks
Domestic
Suppliers Traverse Platens 6-8 Weeks
Imported -
Thailand Bi-metallic Screw and Barrels 16-20 Weeks
Table 3 : Vendor Lead Time
As shown in above table, by looking at the lead time of suppliers, it is very
difficult to cater the breakdown demand of customers.

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1.6 On Time Delivery :
Customers are more satisfied if the time taken to deliver their products is less
than the time they are willing to wait once they have placed an order. Flexibility
is paramount in meeting the delivery deadlines and therefore information sharing
is required to enable the members of the supply chain to meet specified delivery
elates by the customers Customers are said to be more satisfied if their suppliers
are able to meet and fulfill their orders within the required time
Below is the actual Delivery Performance of spare parts for Breakdown
requirement.
within Shipped
within 48 Above Grand %
Month 24 in 3 to 7
Hours 7 days Total shipment
Hours Days
Oct-22 397 29 59 25 510 83.53%
Nov-22 477 56 113 3 649 82.13%
Dec-22 517 54 59 5 635 89.92%
Jan-23 508 48 48 8 612 90.80%
Feb-23 492 55 28 13 588 93.00%
Table 4 : Breakdown Performance
1.7 Inventory management and customer satisfaction
Better inventory management enables better customer satisfaction. Customers
are satisfied when suppliers fulfill their orders on time. This makes company
keep buffer stocks to fulfill customer orders or enter into long term relationships
which require commitment and trust. Commitment is the desire to continue a
relationship and may be defined in three dimensions; inputs to it, its durability
and its ongoing consistency. Trust is the belief that a party's word or promise is
reliable and a party will fulfill its obligations in an exchange relationship. High
levels of trust lead to high levels of customer satisfaction. On time deliveries
which result into repeat purchases, positive word of mouth and reduced
inventory carrying costs on the customers' side. Customer satisfaction is
obtained through reducing order cycle time which leads to on time deliveries to
the customer through reducing the manufacturer's production lead time.
Customers are satisfied when suppliers are flexible and responsive.
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1.8 Inventory Cycle Count :
Inventory cycle count means the counting of all inventory physically against the
system stock to find out the discrepancy in existing stock.
Alpha, do the complete cycle count for all ABC items once a year and for AB
category once a year. This is applicable to both Spares Stores and Production
Stores.
Inventory Cycle Count is very important for the company to identify how the
inventory is handled in the company. High the variance in the inventory poor is
the inventory management and inventory handling and vice versa.
In Alpha, till now in the history highest variation which was observed during the
main Inventory Audit i.e ABC class was 1.08% during year 2020.

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 CHAPTER TWO:
DEMAND FORECASTING AND TECHNIQUES
2.0 Introduction
In industries that have a production system, the product goes through multiple
processes and undergoes several machines in order to get the final product
intended. All machines require maintenance and spare parts. Spare parts must be
available whenever needed in order to prevent the whole production line from
being stopped and thus affecting the production rates. Therefore, companies
started to develop their own spare parts management system in order to analyze
and manage any spare parts related issues
Different quantitative and qualitative forecasting methods are applied to predict
the future demand of spare parts in order to consistently ensure their availability.
Time series methods are considered the most common and reliable quantitative
methods. In time series forecasting, there is a major difference between
forecasting the demand of finished goods and forecasting the demand of spare
parts.
Some traditional forecasting techniques might not be applicable for spare parts.
Spare parts forecasting poses a large challenge for all forecasters. The reason is
that the demand is stochastic and a big proportion of the demand data is zero for
several periods of time resulting on having inaccurate results. Classifications of
parts can serve for accurate forecasts. Classification can be based on the
importance, frequency or cost of parts or even a combination of different criteria.
This can assure that the essential or frequently needed parts are always available.
However, storing unessential or rarely used parts can add unwanted costs.
Therefore, it is important to control the quantities of spare parts without risking
the stoppage of the production line. Achieving this will result in maximizing the
company’s service level and eliminating unnecessary high inventory costs.
The management of spare parts is an important activity for companies in many
different sectors. The spare parts category tends to have a higher level of demand
uncertainty when compared to traditional fast-moving products, given the nature
of the demand itself. Customers only look for the product when the current part
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is not functioning anymore and this can occur within the lifespan of a machinery,
which can last for decades. This demand behavior is reflected and characterized
by an intermittent pattern (i.e. long periods of time between two demand signals).
Furthermore, given the complex nature and variety of machinery, spare parts
tend to have a high number of stock keeping units (SKU's). In addition to the
aforementioned factors, the fact that many spare parts are critical to the
continuity of operations lead companies to hold higher inventory levels in order
to mitigate risk.
Alpha is a manufacturing company that designs, sells, and services industrial
machines. In addition to the main industrial machines, the company also sells
the software that operates them, and the spare parts that support them. The
company ships more than 20,000 spare parts orders (including chargeable and
FOC orders) per year into more than 40 countries to more than 4000 customers.
Around 8000 SKUs, coming from approximately 200 vendors are stored and
supplied from India location.
In its spare parts segment, the company faces challenges in its demand forecast
quality due to the high uncertainty of customers’ orders, caused by the lack of
predictability of order patterns. This uncertainty has been negatively impacting
the company’s inventory costs in recent years, where the actual inventory is
consistently higher than what had been targeted. Meanwhile, higher inventory
levels are not being translated into higher service level to its customers.
2.1 Demand Forecasting Techniques :
Demand forecasting techniques play a critical role in inventory management. If
you can accurately forecast market demand, you can take action to ensure you
hold the correct stock to maximize sales and profit. However, producing an
accurate inventory demand forecast is no mean feat.
Inventory demand forecasting is the process of predicting customer demand for
an inventory item over a defined period of time. Accurate inventory demand
forecasting enables a company to hold the right amount of stock, without over
or under-stocking, for optimum inventory control. Historical data trends and

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market knowledge of how demand can fluctuate are often used to forecast
inventory demand.
There are various Demand Forecasting techniques which are used in the
industries depending on the range of products they offer. Generally there are two
major Demand Forecasting Techniques:
1) Demand Forecasting based on Survey Analysis : Survey Analysis
projects the demand based on the survey conducted by the Sales person,
current market trend, analysis performed by the market experts.
This method can be used where the industry is dealing with the FMCG
products, bulk or batch items where demand can be analysed based on the
survey.
2) Demand Forecasting based on Statistical Analysis : This is ideal method
for the industry for Demand forecasting where the demand is highly
uncertain and does not follow any trend or seasonal usages. This method
can be used in manufacturing industries who are focused on their
Aftersales services and supply of spare parts and are customer focused.
Alpha, also forecast demand for its spare parts based on the past
consumption data. Consumption Data for the last three years are pulled
from ERP system and bifurcated into FSN (Fast, Slow and Sporadic)
Moving parts.
Alpha, considered below criterias to classify FSN category.
1) Fast Moving Items : Items are classified into Fast Moving items if its
consumption is regular and it is consumed continuously for a period of
six months and generated revenue of INR 100K per month. For eg. If a
unit whose value is INR 100K and has been sold 1 unit per month for
six months it will move into the Fast Moving category.
If say any item, sold 10 units in single month and then there is no
demand for entire year then it will be moved to Sporadic item has it is
only consumed once in a year.
2) Slow Moving Items : Items are classified in to Slow Moving if its
consumption is 3-5 times a year. Rest criteria i.e value and quantity will
remain same as of Fast Moving Items.
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 3) Sporadic Items : Items are classified in to Sporadic demand items
whose consumption is once or almost nil in a year. Value and quantity
parameter remains same.
From above, it is seen that the Alpha does not follow value and quantity to
categorize FSN items. Below is the total no. of items falls under FSN category
for Alpha range of spare parts.
Category SKU’s
Fast Moving 6300 SKU’s
Slow Moving 1300 SKU’s
Sporadic 400 SKU’s
Table 5 : FSN Classification
2.2 Safety Inventory Based on Demand Forecasting :
Safety inventory is carried to satisfy demand subject to unpredictable demand
fluctuations and to reduce product shortages. This type of inventory cushion is
also called safety stock or buffer inventory.
Alpha derived its safety inventory on the basis of Demand Forecasting on FSN
which is based on no. of items turned integrating it with inventory management
ABC which is based on revenue generation.
Below is the data for Safety Inventory for last six years carried by Alpha

Avg. Safety Inventory

Year
(In Cr.)
2016-2017 8.5
2017-2018 8.5
2018-2019 10
2019-2020 9.5
2020-2021 12.6
2021-2022 18.5
Table 6 : Avg Safety Inventory

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2.4 Safety Inventory Review :
For any industries, Safety Inventory review is must to maintain the right items
at any point of time to deliver the right item at a right time. There are basically
two review methods follow for the Safety stocks.
1) Continous Review
2) Periodic Review
In Alpha, we are constantly monitoring the Safety Inventory as per the ABC and
FSN classification. We constantly keep track on the consumption and
accordingly replenishment activities are being carried out.
Every quarter, we carry out the complete review of the Safety items and
accordingly safety stocks are alter based on the consumption patterns. We are
maintaining the safety inventory based on the consumption patterns of last three
years and for the newly launched machines.
We eventually keep on decreasing the stock level for the phase out machines.
Very small quantity and unique parts only are kept in inventory and once the
sufficient amount of parts are on hand, we remove the parts from safety stock.

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ACTUAL CHALLENGES FACED BY COMPANY IN DEMAND
FORECASTING AND INVENTORY MANAGEMENT
Component varieties increasing so keeping spares stock is big threat
- In recent times, Alpha has introduced 2 new series of machines. As the
machines are newly introduced and the most expensive machines of its
product range, Alpha is giving strong commitment for spare parts supply
and service to customers.
- Keeping the Spare parts for new machines has significantly increased the
Inventory and Inventory carrying cost for the company.
- Company has already started incurring the cost of material, Storage costs,
etc without being rotated and before any revenue generated from the spare
parts.
- To support the newly introduced sold machines in field, almost 3 Cr spares
already procured to support the same and it puts extra pressure on
maintaining the spare parts inventory for all ongoing machines in field
from the allocated budget of Spare Parts Inventory.
Increasing of lead time for Import parts
- Alpha, having almost 50-60% of items are imported items, is facing
extreme challenges with respect to lead time for imported items after
Covid-19 as the LT has indefinitely increased by almost 50% in most of
the items.
Below are the list of items whose lead time is significantly increased.

Major Lead Time Lead Time

Description of Items
Suppliers Before Covid After Covid
Imported - Valves, Servo Motors 90 Days - 120 150 Days-180
Germany and Drives, Pumps Days Days
Imported - Control Parts, Drives
120 Days 180 Days
Austria and Motors
Imported - Transducers, Drives and
60 Days - 90 Days 120 Days
Italy Motors

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Imported - Fixed Pumps and
120 Days 150-180 Days
France Cartridges
Imported - 90 Days - 120
Oil Filters 180 Days
Germany Days
Imported - Bi-metallic Screw and
12-16 Weeks 16-20 Weeks
Thailand Barrels
Table 7 : Revised Vendor Lead Time After Covid
Frequent obsoletion of parts
- The company is focused more on the Customer service attributes and
service commitments, company always holds high inventory than the
regular level or determined budget.
- High Inventory levels increases the sales but also lowers the inventory turn
ratio.
- As company is into the constant upgradation and introducing the new
machines, it also give rise to obsolete parts. The parts doesn’t directly
stopped being used in the field as the machines of same models are also in
field, but eventually the sales will decrease and the parts will remain in
inventory as dead stock.
Increasing of lead time & No Clarity for Future Supply for Control parts
- Alpha, who had a tie up with Austria Company for the supply of Control
Parts that is the heart of the machine, has been adversely affected due to
the non availability of semi-conductor and eventually it failed to supply the
Control and Control parts to Alpha.
- Alpha got adversely affected and almost 150 Machines were put on hold
due to non availability of Control. Austria Company finally discontinued
its product and introduced its new version once the situation got normal
but it lead Alpha to change its software and became more complex.
- So, Alpha decided to divert some of its regular running machine which
does not require much customization to other control manufacturer whose
software was developed in past.
- So Spares Department once again put under tremendous pressure to gather
and maintain the control parts in inventory.
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Common vendor base between Production & Spares leads to Delays due to
priority on open orders.
- Common Vendor Base leads to the differences between Central Puechase
team and Spares Purchase Team.
- Vendor consider Central Purhase Team order on priority due to high
volume and eventually it lead to delay in Spares Purchase Order delivery.
- As Production Purchase is continuous cycle for vendor, they prefer to
continue the production line for the same instead of spares order with
variable production line.

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Suggestions To Improve Inventory Management and Demand Forecasting
Involve Design Department :
- Design Department should be involved for the forecasting of spares based
on the VED classification. VED classification based on the data of in field
machines should be carried our by Desing Department.
- VED (Vital, Essential and Desirable) spare parts should be clearly
identified based on the conditions of in field machines as per the details
provided by service and sales team during their visit at customer end and
during the health check up of machines.
- Design department can also provide the list of spares which attract high
wear and tear, so accordingly procurement actions and safety stocks can be
maintained by spares team.

Service Engineer Vist for Health Check :

- Regular visit of Service engineer should be plan in a quarter for health
check up of the machine to prevent breakdown of the machine upto some
extent by providing preventative spare part list to customer and also by
informing the probability of required spares within next coming months.
- Spares Forecasting should be done by Service engineers region wise for
the next six months to maintain the correct inventory and satisfy the
customer demand with highest satisfaction level.
Alternate whose Lead time is less :
- The company should find out a way of replacing the high lead time by its
equivalent item with a short lead time and eventually reduce the
availability time.
- For Eg. Company is using Drives and Motors from 5 different vendors and
all the drives and motors are non compatible to each other and also not one
to one replaceable. Here, company need to maintain the stock of each drive
and motor for new machine manufacturing as well as Spare Supply.
- Company can prepare the equivalent kit againt high lead time item to
immediately support the breakdown machines in field.
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Vendor Managed Inventory and KANBAN :
- VMI should be introduced for high consumed items and which are common
in all machines, here VMI can be introduced for local suppliers. VMI can
decrease the inventory carrying cost of the company and can also save the
storage space.
- VMI can be introduced for Oil Filteration unit and its filters, Electrical and
electronics items, etc. Also, VMI can be introduced for consumble items
and are supplied from local vendors.
- KANBAN can be introduced for extremely high consumed items, where
vendor takes the responsibility of filling the stock at Alpha warehouse
regularly and maintain the minimum level of inventory.
- KANBAN can be introduced for Filters, Mechanical parts, Hardware,etc.
Profile Cutting for Screw and Barrel :
- This concept can be used to reduce the lead time of Screw and Barrel by
atleast 1-2 weeks and which can be made available early and demand can
be cater.
- Here, rough machining can be done and as per the regular diameter of
screw and barrel so that the time for the same can be saved when the
demand arises

Offer Inventory for Sale to Sales & Service :

- Monthly available Inventory stocks should be circulated to Sales and
Service team to sale the available item on Ex-Stock basis.
- Proactive aspect should also be started as a preventive maintenance
resulting in available items to be sold to customer as a preventive
maintenance and stocking of some essential items at customer level. This
may help in increasing Inventory turns.

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Conclusion :

Maintaining sufficient stocks of spare parts is essential for any

organization in order to quickly carryout repair operations and prevent the
stoppage of production operations. The nature of spare parts demand,
which is known to be lumpy and intermittent, leads to the consideration of
different forecasting methods.
Here, through the case study of Alpha Industries, we have identified the
challenges faced by the company in demand forecasting of spares and
suggested some ways how demand forecasting may be improved and
inventory can be managed in a sorted manner.

25
References :
https://www.scirp.org/journal/paperinformation.aspx?paperid=64279
https://www.eazystock.com/blog/8-best-inventory-demand-forecasting-
techniques/
https://www.lokad.com/kanban-inventory-management
https://www.vskills.in/certification/tutorial/demand-forecasting
Supply Chain Management by Sunil Chopra, Peter Meindl, Dharam Vir Karla
https://www.researchgate.net/publication/260634553_Integration_of_demand_
forecasts_in_ABC-
XYZ_analysis_Practical_investigation_at_an_industrial_company
https://www.investopedia.com/terms/i/inventory-management.asp

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