SPARE PARTS STUDY By Dave Hipenbecker This presentation was originally developed by our BIF group, the Baker s Industry Forum, which some of you may know or may not know is actually part of BEMA and was presented last year at the BEMA National Convention so I want to acknowledge a couple of other people that actually had some hands in putting this together. We had Rowdy Brixey from Bimbo USA, Jeff Dearduff from East Balt and Rich Berger from Sara Lee. And the real reason I want to let you know about those guys is because if I say anything you do not agree with, it is probably their ideas. (Slide 2) Spare Parts. Kind of an interesting topic when we talk about it. Many times we are at odds between our vendor clients as well as what we really need in the bakery to keep things going. (Slide 3) But if we really take a look at what it costs us for spare parts, if you take a look at what the cost of an hour s worth of downtime is, it can get rather expensive, anywhere from $8,500 to $10,000 an hour and these are averages obviously, it depends on the size of your facility and everything that you have going. And they are kind of broken down into some key components that we took a look at: labor, cost variance, transportation, and materials. There are a number of different things that affect those costs. (Slide 4) When we take a look at what we need as bakers from a spare parts list, we need all the available information possible on the parts that we need and the parts that we are going to get for new machinery. It is critical that we have subsupplier numbers, OEM numbers, especially for things on electrical drives, mechanical such as bearings, sprockets, bushings and whether or not the parts are domestic or internationally sourced, we need to group these things in a criticality mode and there are a lot of different groupings out other there depending on the company you are with. It could be critical, it could be high, but we need to make sure that we understand what the criticality of these things are. We need to know whether or not we can keep them onsite, readily available. We need to know whether or not it is something that is suggested by the OEM and we also need to know how we are going to get these and lead times are critical in that. It is also critical as we go through this to understand what kind of stocking levels we should have, whether or not we should keep things onsite, keep them regionally, whether or not they are available at the vendor. (Slide 5) It is critical that we communicate with our vendors as far as the type of computerized management systems that we have, if we have them. How do we manage our inventory inside our plants? We also need to know whether or not there is volume discounts especially for things such as wear parts. When we take a look at all the information that we need especially if we are going into something as a management system or a CMMS system for our spare Dave Hipenbecker brings 30 years of experience to the session. He is a packaging expert. He is held various positions within operations and engineering and is currently with The Kroger Company. Page 101
parts, we need to understand what the common name is from the OEM, that is really important. But along with that it is critical to know what is the common name maybe within your own company or within the industry. We need this so as we put these things into our system, we can trace them, we can find out whether or not that is a standard part for us or it is something that we need to stock or something we need to order. We need to understand how they are going to be supplied to us. We need to understand whether or not we can get OEM numbers from them. We need to know whether or not the supplier is making those internally or whether or not they are outsourced and we also need to know typically how many of these the supplier may be keeping on hand. And these are all questions we should be asking and we should be demanding actually when we get into equipment and ordering equipment from our various vendors. (Slide 6) There is a flow chart and a typical time line that goes along with the whole spare parts process. We typically ask for preliminary spare parts lists upfront, especially if we are buying a piece of machinery that the manufacturer has made before. That spare parts list may only be 85-90% complete, but it allows us to get our process started. As they complete their design engineering and final engineering, then we will get the remainder of the spare parts that may be required or suggested from the manufacturer, but the interesting thing is when we go into this and we get that edited spare parts list, we have a time line that is ticking at that point in time. Depending on how you enter your parts into your system and how you handle your spare parts, it can take anywhere from two to six weeks for a baker to get those parts into their system, get them ordered and get them in-house. The key here is that we want to make sure that we have the recommended spare parts on hand for startup. We want to make sure that they are there when we are turning that equipment on, so that if we do have a failure or something fails prematurely, we have the resources to fix it and we do not take that system down for extended periods of time during startup. (Slide 7) There are also a number of value-added features as we look at spare parts. One of the things is we want to make sure that the spare parts warranty or the parts warranty on the equipment starts at startup, not when the machine is purchased or not when we place the order. I think that is pretty self-explanatory. We want to make sure that there are provisions where we can get bulletins on upgrades and notices on an automatic basis from the vendors. We need to understand what upgrades are available and we need to start thinking of those upgrades strategically as we move through the system. And why strategically? Because most of these things require capital and we want to make sure that we can plan for these upgrades especially on some older equipment within our capital budgets and not rely on the plant having to either expense it or take it out of a maintenance budget, but we want to think of these strategically and plan for these upgrades. The life cycle estimates for future, we really need to get to the point where we have a predictive maintenance. We need to understand the mean time between failure of parts and components and we need to make sure that we pull as much information from the vendors as we can. There is a lot of history out there by vendors. They understand more than we think on what parts fail, what is the mean time between failure and all these things need to go into the calculation of what we do from a spare parts standpoint. It all comes down to managing the technology within our organizations. We need to know and understand what our standards are and not just our standards, but if you are at a corporate level ordering a piece of equipment, what are the standards at the manufacturing location because sometimes they are different and they are different for good reason. So if at any time you are hearing that something is different, ask the question why. We may or may not know at that time, but we do need to answer that question. If somebody is asking you for brand XYZ and you are providing ABC, we need to understand that and we need to understand why that is. The key for us is that we need to think of the maintenance and spare parts function not as a function within a facility, but we really need to view it as a strategy, a strategy for us to keep our equipment running, to minimize downtime, and for us to increase our profits within the baking cycle. (Slide 8) There are a number of alternative approaches out there to spare parts. We are typically moving more and more to consignment where we can, where we bring parts in and we pay for them as we use them. Page 102
Spare Parts Spare parts for startup. I talked about some of the infant mortality things, but typically the vendors know what will or typically may have an infant mortality when you are going through a startup. Ask them to bring those with them. Bring those parts with you and if we need them we will use them without depleting our spare parts inventory right off the start. So we will have those on hand. Are there any regional-based inventories, whether it is within your company or other companies that can help you going forward? What companies out there have equipment similar to yours that maybe we can share some spare parts if we need to or if we know we have an issue where a machine is down and they do not have the spare parts on hand at the manufacturer, who can we talk to where maybe we can get a spare part from there and get us back up and going and then replace that along with replacing the normal stock? We need to look more at web-based management solutions such as Ariba. How do we create digital databases out there...digital databases that allow us to cross-reference numbers, cross-reference suppliers, give us all the different serial numbers that we need in order to make sure that we can find parts efficiently and quickly? Onsite managed storerooms. Some companies are going to that where they have a large number of equipment from single suppliers where they are actually supplying a managed storeroom onsite, a dedicated stock, so to speak even in their own warehouses that we can draw upon. There are many forecasting and planning solutions out there particularly with SAP. Once again, it comes down to how do you manage the asset within your system. We can get to predictive ordering where we know we are going to have to take things. We can get to condition-based monitoring, knowing we have something failing and now have to stock that, but we can order it in time to replace it before it actually does fail. Lots of those things can be built into the logic of equipment and we should be looking at that more and more as we go forward. Assignable life cycles. Many of the people understand what the life cycle of their parts are and as you get to about 80% of that life cycle especially for critical parts, we should be ordering, we should be thinking about replacing those. But once again it comes down to understanding the equipment and understanding what your mean time between failures are. (Slide 9) This is a triangle that is called the Asset Health Care Triangle. It is out of the Strategic Management Asset Management Guidelines. And if you look down at the bottom where it says Managing the System, how many of us thought that once we had a good solid preventative maintenance program in place, we may have actually gotten a CMMS system and by golly, we got it, we are there. I think as you can see, that is really just the foundation of what is required in order to make sure that we are doing the things we do. Some of the other things that we had talked about as you move up that triangle to get to really what true asset management is. You are looking at vendor reliability, you are looking at external benchmarking, you are looking at things such as condition-based monitoring and getting more into predictable maintenance as opposed to preventative maintenance. (Slide 10) Let us take a look at the baker supplier relationships. We need to combat the infant mortality of components. We need to minimize the random losses. We need to make sure that we know what the failure and effect modes are of the equipment and the components and we need the help of the vendors to do that especially on new equipment. We need to pull upon their past knowledge, upon their databases, upon their people who are ordering spare parts from them currently for similar pieces of equipment. We need to take that information and we need to model that when it comes down to creating our own spare parts list, creating what we are going to keep in inventory or what we are going to ask them to keep in inventory for us or we are going to place on consignment. Often the losses that we see and many times the losses that occur or the downtime, the unscheduled downtime, is actually created because we have had human intervention in the machinery. We actually go in and we do a PM and we either miss something or we create another situation and pretty soon we create a failure. That is where we want to start moving to more of the predictive side, the condition-based monitoring, so that we are not always having to tear equipment down to do PMs. The airline industry went through that many, Page 103
many years ago where they were doing all kinds of PMs and they found the more PMs they did, the more failures they were having and so they started to go into more predictive measures. They started to go into conditionbased monitoring. And one key portion of this is to try and get it built into the equipment as you purchase it. With today s technology and today s electronics, there are many things we can do to do real-time conditionbased monitoring and let the equipment tell us when we need to replace something. We really need to move from that reactionary mindset that we are in today and get more into the proactive. The more proactive we are, the more meantime between failures we will have and we will create a much smoother operating environment in the plants. It is interesting when you think about spare parts. The carrying costs of an item within our inventory can be as high as 30 or 40% of the value of that item on an annual basis. Now what is that mean? We have got that value sitting in our inventory, we are paying taxes on that inventory and by the way, the more inventory we carry, the more taxes we pay, the less amount of capital dollars we have to spend on new equipment. So it is all about balance, it is all about managing your budgets, it is all about understanding what you need or do not need, what you can work out a consignment arrangement with. How can you be creative? How can you keep your vendors from depleting your spare parts, for example, when they come in and maybe you schedule them in to do annual PMs or semi-annual PMs and they pull all the parts they need out of your spare parts inventory and the next thing you know, you go to get a spare part and it is not there. How do we do that? It is a challenge to everybody and I will not say that I have all the answers, but it is something that as an industry we need to get better at. I want to tell you there are some resources out there for people to go to. (Slide 11) If you go to reliabilityweb. com, there is just a ton of information on there on how to create cultures of reliability. (Slide 12) The MRO zone, once again it is a bookstore. There are white papers out there that can help. There are all sorts of resources available to us out on the web and there are just volumes of books and literature written about this subject. (Slide 13) Once again, here are some books that as a group we can truly recommend. The Future of Asset Management, Asset Productivity: The Next Wave. Even things like the Maintenance Engineering Handbook. I do not know how many companies have maintenance engineers, but it is a terrific resource that is out. Improving Profitability Through Reliability and I can go on and on about the different resources that are available to us today that really may not have been several years ago and the access to them is right upfront. Thank you for your time. Predictive maintenance saves everybody money. It saves us from having the unscheduled downtime, it saves us from having times where we do not have spare parts and it keeps us up and going and makes us much more efficient. But the bottom line is, we all get better by establishing these kinds of partnerships with our vendors. Helping them to understand what it costs us to do business from an inventory and parts standpoint as well as simple things, like upgrades, what upgrades are available and start looking at things on a more strategic note as opposed to just being reactive all the time. Page 104
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