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A systems approach to spares management

The ASM initially was created for the spares management for aircraft (thus the name Air-craft Sustainability Model). It has be adapted to accommodate a wide range of other systems and industries. The ASM bases spares requirements explicitly on each item’s effect on overall system performance as well as the item’s unit cost

Managers are often required to estimate the spare parts requirements for a system, (a fleet of aircraft, for example) or a set of equipment for a particular function (moving oil, producing electricity, etc.). A typical operating system has various components (motors, valves, pumps, etc.). When those components fail, they must be replaced with spare parts (spares) before operations can continue. This document describes US based Logistics Management Institute’s ASM approach to answering a basic question: What spares are required to support the system over some future period?

To answer that essential question, Logistics Management Institute (LMI) has developed the ASM, a system-oriented approach to spares management. The ASM initially was created for the spares management for aircraft (thus the name Air-craft Sustainability Model). It has be adapted to accommodate a wide range of other systems and industries.

The ASM bases spares requirements explicitly on each item’s effect on overall system performance as well as the item’s unit cost. We measure overall system performance in terms of availability: The probability that the system will be operating within normal parameters, The probability the system does not become inoperative over a period for lack of a spare.

In this context, a spares benefit is measured in terms of the projected increase in system availability by adding that spare to the inventory. Spares can then be ranked in terms of benefit, then divided by cost as a measure of the desirability of adding them to the inventory. The ASM system approach is significantly different from the traditional item approach for generating spares requirements, which treats all items the same. The traditional approach sets all spares requirements to a level that meets an item’s performance measure, such as a stock-out protection level, a fill rate, or a confidence level. Such an approach cannot explicitly consider the overall performance of the system, nor can it be constrained to a set total cost for the spares mix - the ASM can.

Basic input

The ASM (which is implemented as a PC model) remains flexible because the components that make up the system and the exact scenario can vary. Some users limit the ASM to estimating spares for only the most critical items under constant (steady state) operating conditions, while others include all the expensive reparable items over changing (dynamic) operating conditions. Whatever the operating condition, once the system and scenario are defined, the basic question remains the same: What mix of spare parts is required to keep the system at some level of operational performance for a specific scenario?

Method

The ASM implies a system approach that uses a probabilistic mathematical model to produce an optimal solution. This means a solution in which no other mix of spares can provide a greater system availability for the same cost, or the same system availability for less cost (within the scope of the model assumptions and data). In fact, the system approach, as implemented by LMI, does not produce merely one solution, but a range of solutions over possible cost constraints. How does the system approach work? It develops criteria for prioritising spares procurement on the basis of a marginal analysis technique. Candidate buys are ranked in order of decreasing benefit (improvement in availability that would occur if the spare were added to the inventory) per unit cost, and then added, in that order, to the inventory until a target budget or target availability (the definition of availability focuses only on spare parts and assumes everything else, such as personnel and maintenance, operating as planned) is reached. The system approach produces much better results (about a 25 per cent improvement in terms of system availability) than an item-oriented approach.

Applications

The ASM is well tested, and it is adapted to a wide range of systems and environments. Computer models developed by LMI are in use with the US Air Force, NASA, foreign militaries, and some commercial uses. While the system environment, operating tempo, and concept of operations are very different among users, the same potential benefits exist for everyone - simultaneously increasing availability and reducing cost. The key is suitably tailoring the approach to reflect the particular system operations and making the model straightforward to use: A user enters an availability target or budget constraint, and the model computes the optimal mix of spares for the given target.

Details of the system approach

A key step in the ASM’s system approach is the extension of the usual measures of inventory performance to measures that more directly relate to a particular system. For inventory performance that measure is the number of backorders, unfilled demands for spare parts. Backorders can exist and be measured at any location in the supply system. The most important place to measure backorder is with the end user at the operating storage site, but backorders - even at site level - are not the entire story. We must look further, and consider the effect of backorders on the system. To some extent, this depends on the complexity of the system, how dispersed its sites are, what policy and procedures exist for cannibalisation, what systems have redundancy, and many other factors that must be taken into account. Also, for management and planning, the system must project future backorders that result from actions taken today. Thus, we must project item-expected backorders and derive the probable effect of those expected back-orders on the systems.

Benefits of the system approach

The system approach to sizing spares inventories has been adopted, in varying degrees, by each of the US military services and has been official Department of Defense policy since 1985. Its benefits are well documented. A study showed that using the weapon-system approach of LMI’s Aircraft Sustainability Model to compute wartime spares kits saved 27 per cent of the budget for the C-5 and C-141 fleets while still effectively supporting the mission of these aircraft. Another study showed that using LMI’s Aircraft Availability Model (which also employs a weapon-system approach) achieved savings of $350 million out of a $1.76 billion replenishment spares budget without increasing the level of backorders.