Spare parts management

All systems will degrade over a period of time eventually it will lead to system failure. Therefore a proper spare part management policy is great importance for proper system operation, its not only helps to save time but also more cost effectiveness. Data has shown that investment in spare parts reaches huge sums, exceeding billions of dollars, in certain organizations. The control of spare parts is a complex matter. Common statistical models for inventory control lose their applicability, because the demand process is different from those assumed. An essential element in many models, i.e. forecasting demand, requires some historical demand figures which are unavailable or invalid for slow moving parts. Moreover, the shorter life cycles of products and pressure to compress product development lead times have made after sales parts demand more volatile and more difficult to forecast. But managers cannot afford just to wait and see: the production capacity of their enterprise may be endangered, or customer satisfaction may become unacceptably low. In both cases, the reputation of the firm is at stake. In this thesis, a literature review will be presented and a general framework of proper spare parts management will be developed.