Spare Parts Planning

Purpose built for service parts, Smart ensures the right part will be available precisely when you need it, maximizing uptime and service levels without inventory bloat.

Problem

Poor part availability erodes the reputation of MRO based businesses through unplanned downtime, scheduled maintenance delays, and violations of contracted SLAs. Having the right parts at exactly the right time eliminates these risks. However, that ideal is nearly impossible to achieve because of the prevalence of intermittent demand. Traditional planning solutions don’t effectively address intermittency, resulting in widely inaccurate estimates of demand forecasts, reorder points, and safety stock. Compounding the problem are extremely long supplier lead times on consumable parts and unpredictable repair/return cycles for expensive repairable parts. All this uncertainty causes planning to devolve into a reactive and manual guessing game. This wastes tens of millions annually in unneeded parts purchasing, expedites, countless hours of avoidable equipment downtime, and lost revenue.

Solution

The Smart IP&O software suite includes mission critical forecasting, supply planning, and inventory optimization solutions coupled with accelerator add-ons designed to address the unique challenges facing MRO and Aftermarket Spare Parts businesses. The inventory optimization workbench drives what if scenarios leveraging Smart’s patented probabilistic forecasting that yields optimal Min/Max and safety stock recommendations. Smart’s Repair and Return functionality accurately simulates the inflow and outflow of expensive repairable spare parts recommending if planners should wait for repairs to be completed or to purchase additional spares from suppliers. Capital budgeting and project-based planning nets accurate order schedules by reconciling available supply with planned and unplanned demand to ensure the parts are purchased when needed.

White Paper: What you Need to know about Forecasting and Planning Spare Parts

This paper describes Smart Software’s patented methodology for forecasting demand, safety stocks, and reorder points on items such as spare parts and components with intermittent demand, and provides several examples of customer success.

Smart Spare Parts Planning and Inventory Optimization

5 Gen2 Forecasting Software provides better estimates of forecast uncertainty

Predict Service Levels

Optimize Reorder Points

Balance Network Inventory

Spare Parts Planning Overview and Features

Intermittent Demand Problem

Some product items have an intermittent demand pattern that makes them all but impossible to forecast with traditional, smoothing-based forecasting methods. Items with intermittent demand – also known as lumpy, volatile, variable or unpredictable demand – have many zero or low volume values interspersed with random spikes of demand that are often many times larger than the average. This problem is especially prevalent in companies that manage large inventories of service and spare parts in industries such as aviation, aerospace, automotive, high tech, and electronics, as well as in MRO (Maintenance, Repair and Overhaul).

Intermittent demand

In these businesses, as much as 80% of the parts and product items may have intermittent or lumpy demand. Intermittent demand makes it difficult to accurately estimate the safety stock and service level inventory requirements needed for successful supply chain planning. Because forecasts of intermittent and lumpy demand have been so unreliable, most companies forecast inventory requirements relying primarily on subjective business knowledge, forecast only a fraction of their higher volume inventory, use simple “rule of thumb” estimates, or traditional statistical forecasting that incorrectly assumes a particular type demand distribution for inventory control. The result is that billions of dollars are wasted every year because of either excess inventory costs or poor customer service due to stock-outs.

Bootstrap your way to optimal inventory levels

Intermittent demand – also known as lumpy, volatile, variable or unpredictable demand.

The Smart Solution

SmartForecasts and Smart Inventory Optimization use a unique empirical probabilistic forecasting approach that results in accurate forecasts of inventory requirements where demand is intermittent. The solution works particularly well whenever demand does not conform to a simple normal distribution. Our patented, APICS award-winning “bootstrapping” technology rapidly generates tens of thousands of possible scenarios of future demand sequences and cumulative demand values over an item’s lead time. These scenarios are statistically similar to the item’s observed data, and they capture the relevant details of intermittent demand without relying on the assumptions commonly made about the nature of demand distributions by traditional forecasting methods. The result is a highly accurate forecast of the entire distribution of cumulative demand over an item’s full lead time. With the information these demand distributions provide, you can easily plan your company’s safety stock and service level inventory requirements for thousands of intermittently demanded items with nearly 100% accuracy.

The Benefits

Companies using our powerful intermittent demand forecasting and planning solution typically reduce standing inventory by 20% in the first year, increase parts availability 10-20%, and reduce the need for and associated costs of emergency transshipment to close gaps in their supply chain. Repair and service parts inventories are truly optimized, leading to more efficient operations, improvements in customer service, and significantly less cash tied up in inventory.