Spare Parts Inventory Management. Phillip Slater

may also deliver some items directly to individual sites and storerooms. This is known as a multiechelon system and is also shown in Figure 1.11.

      Multiechelon systems provide a number of inventory management opportunities that can result in reduced inventory holding levels and reduced procurement costs:

      1. Slow-moving spares. If the central storeroom holds slow-moving spares, it saves each site from independently investing in the same slow-moving items.

      2 Bulk procurement. If a vendor provides significant price breaks for quantities larger than a single site would order, or if the vendor supplies only in quantities greater than a single site should stock, then a central warehouse can be used as a distribution hub. Of course, care must be taken to ensure that the economics of this makes sense.

      3. Excess parts redistribution. When one site finds that it has excess parts, the parts can be more easily redistributed to other sites via the central location. Care must be taken to ensure that the central location does not become a dumping ground for unwanted spares.

      4. Repair management. For repairable items of significant value, utilizing the central hub to manage the repair process can provide improved repairs management and, with added volume, reduced costs.

      5. Improved response times. By holding spares that have a long supply lead time at a central location, a company can significantly cut the lead time for supply to its own sites and so hold less safety stock.

      6. Shared safety stock. If executed correctly, a multiechelon system can enable companies to hold less safety stock across their entire network.

      However, there are also issues to be managed:

      1. Visibility. To work effectively, each location needs to be able to see how much stock is held at the central hub and preferably at all sites in the network.