Stock Analysis (Economic)

This screen can be opened by navigating to  (Extra -> Stock management -> Stock analysis -> Stock analysis (economic)):

Taking items on stock means that availability increases and the risk for downtime decreases, which should lead to lower overall costs. The consequence will be that stocking items will raise costs. Whether or not it is sensible from an economical point of view to stock items therefore depends on the expectation that costs due to downtime will be higher than the stock costs. The economic stock analysis presents a number of keen overviews that will help analyze which items should be stocked and which should not, based on a chosen scope.

List of overviews

Asset Strategy Optimization supports two different Analysis reports, operating on the active scope in the FMECA tree. These are:

1. Assets with linked spares

2. Spares with linked assets

Assets with linked spares

Application

The overview can be used e.g. to get an indication of the cost involved with having all listed spares on stock, according to the recommended minimal stock required. Further manipulation of the overview can be done easily by exporting the overview to Excel, using the Excel export button on the bottom left.

Fields

The meaning of the column fields is explained in the following table:

Spares with linked assets (future years)

Application

The overview can be used e.g. to:

• assess per spare whether it would be sensible to take it on stock, by comparing the yearly production loss with yearly stock costs

• get an advice how many items should be taken on stock now and in a few years, and what would be the corresponding economical order quantity

Further manipulation of the overview can be done easily by exporting the overview to Excel, using the Excel export button on the bottom left.

Fields

The meaning of the column fields is explained in the following table:

How economic stock analysis works

The basics

To perform an economic stock analysis the following prerequisites need to be met:

• Stock items are defined

• Stock items are linked to Parts or Components

  • For each stock item, the following is known as a minimum:

  • The purchase price

  • The stock costs per year

  • The delivery time

  • The emergency delivery time

  • The Reorder Point (see below)

  • The Recommended Stock Quantity (see below)

• For a Model the following should be defined:

  • The Production loss per hour

• For a failure cause, the following should be defined:

  • The failure type (time/usage)

  • The distribution of the MTTF (especially in case of unpredictable failure, aka Exponential distribution)

  • The function loss (as a percentage of the production loss for the whole Model, per hour)

• For the corresponding FBM, at least the following is known:

  • The maintenance effect (down, no effect, out of service)

  • The maintenance time

  • The maintenance action (repair or replace)

  • The (total) maintenance costs

• Whether or not there is preventive maintenance

• As a prerequisite, a number of key factors must be defined (see below)

All data mentioned above, are used to perform the economic stock analysis. This is done as follows:

Stock items or extra downtime?

For each predictable failure, an evaluation of stock costs against downtime costs while waiting for a new item will assess whether or not keeping stock is favorable. This evaluation takes all of the above into account:

Key factors

To assess a stock item as stock candidate in the overviews described above, the following key factors play a role:

1. Safety Stock

The safety stock is the calculated minimum number of specific stock items that should always be present in order to limit stock out. This should prevent situations where a certain stock item is no longer available as the last piece has just been used, while a new order has not yet been delivered. The level of availability in this formula is a measure of certainty that an article is actually in stock if needed. A certain risk level is always involved. The value in Asset Strategy Optimization is not expressed as a percentage, but as a class value: poor, limited, intermediate, good, excellent.

The safety stock level is calculated using the following formula:

Situation when Safety Stock value is 0

Normally, the indicated safety stock is calculated by choosing the maximum of either the calculated safety stock or the indicated 'minimal required' stock quantity. However, there is an exception when the calculated safety stock value is 0 : in this case, the indicated safety value will always be  0. See the table below for some examples.

2. Economic Order Quantity

The economic order quantity is a calculated optimal quantity of ordered stock items taking three elements into account: the order and handling costs, the holding costs, and the demand of a certain article. For an article with a low price and a high order cost, a higher order quantity would be advised.

The economical order quantity is calculated using the following formula:

3. Recommended Stock Quantity

The recommended stock quantity is the sum of the Safety Stock and the EOQ (in case of a greenfield situation where the article is not yet in stock). To guarantee that the minimum number of safety stock is always available, it is important to reorder in time with the EOQ as a minimum. The ideal remaining stock quantity when this order should be placed is called the Re-order Point.

The recommended stock quantity is calculated as follows:

4. Reorder Point

The Reorder Point (ROP) is the remaining quantity of stock at which a new order must ideally be placed in order to replenish in time and to guarantee sufficient safety stock levels. The user may add the result of this calculation to the Material Master of the ERP/EAM/CMMS system.

The reorder point is calculated as follows:

Exporting the overview

Each of the overviews discussed above can be exported as is to an Excel spreadsheet, using the button called Excel Export at the bottom left. The user may choose a name and destination. The result will be a flat format Excel file in the exact representation as shown in the overview.

Setting the values for the economical spare analysis overviews

To make the discussed overviews work properly, certain values will need to be defined first (for the FMECA model in scope), as will be described below:

Property screen for FMECA mode in scope (left part of screen in FMECA tree)

Fields

The meaning of the fields is described in the table below: