NOTES - 13
EQUIPMENT
MANAGEMENT TIPS FOR THE CONSTRUCTION ENGINEERS
AND
PLANT & MACHINERY ENGINEERS
AN
INTRODUCTION TO CONSTRUCTION PLANT AND EQUIPMENT
SPARE
PARTS AND INVENTORY CONTROL
1. Importance of the
System
How important is a
proper system and method of procurement of spare parts in context of optimum
utilisation in construction plant and equipment and maximum productivity
thereby? A proper evaluation in this respect could be made only in terms of
losses sustained in production due to down time of equipment attributable to
non-availability of spare parts in time. On the other hand, in the process of
providing vital safeguard against eventual down time of equipment, it may also
happen that the stock of spare parts get to a level, where it amounts to
blocking up of capital in an unproductive manner due to comparatively lower
turnover of parts in usage, and leaving an excessive stock in reserve. Such
excessive stocking of parts, besides blocking up productive cash total, results
in additional loss due to heavy inventory holding costs and obsolescence costs
over long periods. It is therefore, only essential that the system or method of
accounting and procurement of spare parts be such as would, besides providing
proper assurance for availability of desired spare parts in proper time and
quantity, not result in excessive stocking or blocking up of capital
investment.
2.
Points for consideration for ordering spare parts
The user should form
the habit of ordering a good quantity of recommended spare parts, of the
consumable type, with each new machine.
Should users find the
availability of spare parts, locally, to be poor in their opinion, the user
should be specific in taking up the matter precisely with the manufacturers
involved or the distributors. As far as possible, the total cost concept",
should be the basis for purchase of equipment, if the total consumption of
spare parts in the life time of the machine is t o be properly evaluated in
deciding the purchase price to be paid for new equipment.
As a user, when you
receive a new machine, assess properly as to who would service the components
and assemblies in the machine - would the user himself organise necessary
facilities in this behalf, or he would list th services of the distributor of
equipment, or any other agency for this purpose? The 'unit replacement system'
helps to save down time costs and ensures more production with given units of
equipment.
Whether a private, or
a Governmental user try to get as many spares as possible from the local
distributors and encourage them to continually improve their repair parts
service? With a given "turnover" they can afford to work on power,
reasonable margins of profit and carry more of the slow-moving parts.
In case the user feels
that the parts prices are too high, the matter should be specifically taken up
with the manufacturers' warranty on your machine is in jeopardy, you must also
consider that if you buy most or almost all of your consumable fast-moving
parts from sources other than the machine distributor, you may need to pay more
for the slow-moving parts (high in prices, air transportation etc.).
Make sure that the
user gets a 'Repair Parts Book' with each new machine and that the book is in a
shape which makes the user understand it sufficiently well.
Good record keeping of
total machine costs- purchase price, repair figures, operating costs and even
the hours of availability--should pay excellent dividends for all users and
prove invaluable in their future planning.
The help of important
Government officials, who understand the importance of keeping the equipment
operating, that is vital to the growth of country's economy - is badly needed
to minimise the present delays on import licenses and customs clearance.
Controversial parts
that might be made locally, quickly, and of good quality, should be eliminated
from license requests, so that this argument does not contribute to the
processing delay.
Weight the advantages
and disadvantages of bringing spare parts into your country along with machines
purchased under foreign loans. Put emphasis on the consumable parts in all
cases, as it is usually the lack of these that can bring the projects to a
screeching halt.
3. Indenting and
Verification
The proposals for
procurement are initially framed by the respective Divisions of the
Project/Works Departments operating and maintaining the equipment and before
these requisitions are passed on to the Purchase Organisation, these are
referred to the Stores Department for verifying the following details:
i. What is the present
stock position in relation to each item covered by the requisition?
ii. What is the
quantity on order against each item, which has yet to be supplied against
previous orders?
iii. What is the
pattern of consumption of the item based on issues against the item in the
past?
iv. What is the issue
rate of the item, in case the item has been received and issued in the past?
4. Examination by
Purchase Section
The Purchase
Organisation on receipt of the requisition refer the same to the Financial
Advisor/controller, with a view for getting necessary clearance from financial
angle for processing the same. Simultaneously further examination of the
requisition is done in the Purchase Section, in respect of the following
points:
i. The number of
machines and their acquisition cost for which the spare parts requisition is
made.
ii. The average number
of working hours chocked by the machines in operation so far.
iii. The total amount
of purchase of spare parts for these machines in the past.
iv. Special remarks, if
any, regarding standard of performance of any of the parts which were under
test and trial.
v. Source of
procurement in the past.
vi. The time in which
the supplies have to be arranged whether the demand is emergent, urgent, or of
routine nature on advance planning basis?
vii. Have any items to
be air-freighted?
viii. Whether any
replacement part Number have been given in the requisition against some of the
items of spare parts?
ix. The manufacturers'
Serial Nos. of the machines and their model number etc., to be quoted while
placing the Purchase Order.
x. In case any
indigenously manufactured spare parts are to be procured, the particular items
to be so processed, have been clearly marked or not.
xi. For imported items
of spare parts, whether the details to be indicated in the Actual Users'
Important License Application have been properly given.
5.
Procurement action
The spare parts can be
procured
i. Against Rate
Contract.
ii. Against Parallel
Rate Contract
iii. Processing by
D.G.S.& D.
iv. Import license
after D.G.T.D. clearance v. Open market
The steps generally
involved in procurement of spare parts, may however, be listed as follows :
i. Preparation of
requisitions.
ii. Placement of
Indents.
iii. Invitation of
Tenders.
iv. Scrutiny of
Tenders.
v. Placement of Orders
on successful bidders with definite delivery schedule.
vi. Expediting
suppliers for supply of goods.
vii. Review of
deliveries against orders.
viii. Possible
cancellation of orders due to delay in supplies, or failure on part of the supplier
to fulfill the purchase contract, including cases of short supply of spare
parts and partial cancellation of orders.
6.
Organisation
The purchase
organisations are mainly responsible for processing the purchase requisitions
or indents for procurement of spare parts so that the required items are
physically received in proper time. This alone can provide for necessary
insurance against down time of equipment. What is important however, is that
quantitatively the supply should be adequate to meet the requirements of
maintenance and repair. This can be achieved only to the extent of indenters'
competence in properly scaling out the requirements. Technical scaling of
requirements involves integrated consideration of the conditions of work,
pattern of work, population of like items of equipment, repair and maintenance
facilities available, the age of the machine, the annual working hours and the
lead time involved in procurement. The purchase organisation has , therefore,
to be assisted by the equipment operatives in framing the indent properly,
based on a proper technical scale of requirement.
Where a Central
Purchase Organisation coordinates with a number of smaller projects, the
requisitions and indents are similarly processed by clubbing the demands together
for spare parts for like/identical items of equipment.
Occasionally, a senior
officer is nominated as a local officer for technical scrutiny of the lists of
spare parts received from a number of projects when a Central Purchase
Organisation acts on their behalf.
7.
Responsibility of Indenting
In some cases, this
originates from senior mechanics/ chargemen. The caliber of persons of this as
being what it is at present, the requisitions to give realistic assessment of
requirements as the requisition are prepared based o n the history performance
given makes and models of machines the help of History Sheets/History Cards,
these not be expected to serve any useful purpose. Consider why, in spite of
huge stocks of spare parts up at different project sites, certain items of
parts are still not available , even if these all in the category of
'fast-moving parts', whose consumption would be substantial and repetitive in
nature. The framing of such requisitions must necessarily be the responsibility
of an Assistant Engineer/the Sub-Divisional Officer, or a Graduate Engineer-
Supervisor, who have the requisite experience in operation, maintenance and
repair of the machines, or who are personally responsible for maintaining the
History Record of performance of the machines. If economy is to be really
entailed to the function of indenting, procurement and scaling down the
requirements of spare parts to the proper levels, it is high time that the work
of preparation of requisition for spare parts be assigned to competent persons
only, not leaving it to the lower staff who may have the necessary skill for
repair work, but not the scientific mind to assess or plan the requirement
methodically commensurate with the age and condition of the machine.
8.
Checking of Indents
The officer in
charge--- generally of the Divisional rank, Executive Engineer, who ultimately
places a formal indent with the Purchase Organisation directly or through the
Superintending Engineer/Superintendent Works, has to discharge his
responsibility by scrutinizing the total demand in a requisition in relation to
unit requirement of individual items of parts for a given machine, the pattern
of consumption of the item in the past, the stage in the service age of the
machine, the expected out-put in operational hours by the machine over a
pre-defined period in the future for which the requirement is being planned
(related to lead time for procurement), the classification group in which the
individual items would fall-the A.B.C.Analysis by virtue of the items, and the
total value of purchases of spare parts so far made for given items of
equipment, in consultation with the inventory control cell.
9. Need for an
inventory Control Cell
Here again, it is the
observed that in the normal course, even though some care is exercised
regarding the size of the indent to be made, meticulous check is not exercised
on the points mentioned above. The Divisional Engineer, who is mainly the
Inventory Control System and implement it in practice. Here is dire need of
separate inventory Control Cells being opened, after the persons operating on
the work in that Cell have been fully trained in this field.
10. Initial supply of
Parts
Recommended Parts
While it is admitted
that the user should form habit of ordering a good quantity of recommended
spare parts of the consumable type (the fast-moving items) in each machine, it
is very important to clearly understand the precise meaning of the
comprehensive term "recommended spare parts", What are these
recommended spare parts, and who makes the recommendations in this behalf?
About 15 years ago, the answer to this question could have been that the
distributors of equipment in India (when almost all the equipment was of
imported origin), were to give the details in respect of items purchased with
the machine; and this was the normal practice. Most of the users of the
equipment,ever, came to face a situation resulting from such recommendations,
where almost 30% to 40% of the recommended parts, initially supplied with the
machines, left over as slow-moving parts, which were not put in use for a
period of first 2 to 3 years of the service of the machine.
11. User to make
Assessment
It is essential for
the manufacturers of the equipment to develop the recommended lists of spare
parts to be initially supplied with the machines in a systematic manner in
consultation with the experienced users equipment in the country. However, the
user should make it responsible for making a proper assessment of the
requirement also.
There is no doubt,
that with the techno-advancement in the manufacture of items of construction
plant and equipment, the machines do get obsolete one; but the main principle
to be imbibed or to be guided that the identity of the parts in various systems
machine has not changed much. Taking into consideration the particular use of
the spare parts, the user can generally cash on his past experience in the
matter of determining as to how frequently any parts would require repairs or
replacement and which would be the parts which would be of this nature. It is
only a matter of cashing on past experience and utilizing it to the best
advantage in making a proper assessment of requirement of parts over a given
period of time in the operational life of equipment.
12. Factors considered
for the System
The elements or
factors which would help to establish the system or the method of purchase
scientifically, would be; (a) a Proper Inventory Control System and (b) backed
by an organisation manned by Properly train and qualified personnel.
The Inventory Control
System is a science by itself and a great deal of attention has to be paid in
organising it. This system would broadly cover the following :
a. Specific detailing
of requirement of spare parts in proper relationship to the yearly work-time table
of the machines, the progressive age of the machine in use, the consumption
pattern of important items of spare parts in different systems of the machine.
b. Identifying the
specific source of supply of spare parts within the country and abroad for given
items of equipment.
c. Making an
assessment of the lead time involved from the time a requisition is initially
prepared, to the time the spare parts are available within the country.
A proper organisation
means,
(a) Setting up the
Purchase Organisation, and
(b) Laying down the
purchase rules and procedure
(The Purchase Manual).
In setting up the
Purchase Organisation, and laying down the purchase rules and procedures, or
preparing a Purchase Manual, there are some common considerations which have to
be defined before detailed observations in this regard can be made.
13.
Inventory Control Systems
In the act of creating
inventory, there are two fundamental questions, which must be answered in every
instance namely(1) How much to buy at one time; and (2) when to buy this
quantity.
Answers to these two
questions must come from a proper consideration and evaluation of a number of
factors having a bearing on inventory and its control. Four of these factors
are fundamental and, without consideration for costs could form the basis for
decision on how much to buy, and who is to buy. These are as follows;
i. Requirements, on
demand, on a unit/time basis. This is based upon information from proper
records and forecasts schedules.
ii. Quantity in stock
and on order. This again is obtained from a proper record, held with the stores
organisation. The Ledger Record generally kept, shows stock balances,quantity
on order, and the maximum consumption at any time, or even in given periods of
time.
iii. Procurement time,
or lead time the total length of time taken to obtain a fresh supply of the
item.
iv. Obsolescence
consideration must always be given to the possibility of design changes, or
other factors, which would make the particular items obsolete.
Attention is also to
be given to reducing inventory costs and a accordingly, the following
consideration must also be added to the above list:
i.
The ordering costs : The expenditure on processing of purchase orders or the
establishment that handles the work of procurement of the items required.
ii.
Inventory carrying costs or inventory holding costs :
This factor includes
interest rate on average amount of capital invested in stock, insurance
charges, if the goods are insured in the ware houses, cost of depreciation and
obsolescence, and cost of storage facilities (that of premises or depreciation
of buildings cost of lighting arrangements, air conditioning arrangements etc.,
in case these are involved for proper storage of some of the items etc.)mainly
related to the floor space of the store area in relation to the particular
items under consideration, and handling costs.
While it is not
intended to enlarge upon the details of this subject too elaborately, it is
considered necessary to touch upon the basic details of the inventory control.
14. Regular Fast
Moving Spare Parts
All items whose
replacement frequency is fast and consumption and usage can be predicted would
fall in this category. The consumption would be proportional to the services
some of the machine (hours or miles' run) the number of units of operation, the
operating conditions and other factors such as operation efficiency and planned
maintenance. For earth moving equipment items such as track parts, filter
elements make parts, clutch plates, bushes, hoses, bearings, and other moving
and rotating parts, would fall under this category. it would be necessary to
stock these parts in sufficient quantities so as to maximize equipment
utilization. The storage of parts at project site is better, but central
storage also be necessary.
15.
Slow Moving Parts
These are those parts
which may some pattern movement, but the frequency of interval is fairly wide.
Such parts may have a movement of one or two in a year, and, in some cases, may
have movement over alternative years. With infrequent replacement of parts is
usually at the time of overhauls or in emergencies. These should be considered
for working at project site taking into account the number of similar machines
in operation. The replacement of such parts would be done by the central
inventory control. Parts in this category would be items like radiators,
radiator cores, cylinder heads, crankshafts, turbo-chargers, clutch drums, etc.
Slow moving parts should be essential to keep an account of the stocks at
various locations in the central inventory control unit.
16.
Emergency or Protective Stocks:
Items under this
category should only be kept in central inventory control. These stock items
would consists mostly of assemblies or sub-assemblies of machines which are not
normally required, but are required in emergencies, while the absence of these
would cost prolonged shut down of the machine, and result in serious loss of
production. These normally do not have any extremely slow movement, and it is
virtually impossible to predict when they will be required. Typically, an item
of this category may not be required for 3/4 years, but a sudden requirement of
2 numbers may crop up in one location, or the two separate positions. This
would be classified as a purely random occurrence. Investment of funds in such
parts is purely a 'risk' decision as to overcome costly losses sue to down
time. Items in this category would be gear assemblies, spare engines,
differentials, generators, motor, etc.
17. Record Keeping
The backbone of a good
inventory control systems is proper records. The following functions are
absolutely necessary in all inventory systems and must be installed at the
outset.
a. Historical record
of machine demands
b. Maintaining a
perpetual record of quantities of each item in stock and on order
c. Determination and
implementation of realistic inventory levels
d. Use of properly
trained personnel
The data processing
can be done with the use of advanced data base management softwares on high
speed computers.
18. A.B.C. Analysis
(high, medium and low value analyzed)
The firm basis of all
inventory control systems in the ABC analysis by consumption. ABC Analysis
enables the inventory control man to select the costliest items in the
inventory and thus by concentrating attention on 'A'category items, he controls
maximum inventory with least efforts. It also provides information on movement
of items for classifying into slow and fast categories.
It will normally be
found that the following holds good;
Items Value Category
10% 70% A
20% 20% B
70% 10% C
The first ten percent
of items costing 70% are called 'A' category items, next 20% items costing 20%
of value 'B' category items and the lowest consumption 70% of items costing 10%
of value are called 'C' category items.
The secrete of good inventory
control is to concentrate attention on 'A' and 'B' category items, which are
only 30% in number, but account for 90% in value of consumption or turnover.
If proper care is
taken to see that wherever figure of value is Rs.1000/- or over in respect of
individual items on unit price basis or for the total quantity against an item,
the items could be examined for verifying if basically the item is required at
all or if the quantity ordered/in stock, in respect of the items. This would
help in framing the requirements of costly items of spare parts on realistic
basis and consequently this would help in keeping down the value of spare parts
at the users' end.
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