All systems including the best systems will sometime fail, hence the need to have sound contingencies, key among them being stoking spare parts. At the same time, spare parts are expensive to acquire and may also be expensive to stock hence increasing the cost of production in a logistics or supply chain system (Stefanovic, 2015). Entrepreneurship is almost always a carefully balanced tradeoff between incurring costs and making savings hence the need to have a spare parts strategy. A good spare parts strategy ensures that a logistics system only incurs the expense necessary to retain a quantity of spares that is as close to the necessary amount as possible. The balance in this scenario is predicated on the fact that having too many spare parts in store might increase the cost of production to the extent that it eats too much into the profits. On the other hand, not having enough quantities of spare parts in store can lead to sudden production halts that can severely affect the cost of production (Stefanovic, 2015). The safety factor within the spare parts retention matrix relates to how adverse a slowing down or halting of production can be to the entire system. In the most logistical system, the safety factors have various components all of which are critical in determining how much specific spares needs need to be kept in stock .
Considering the level of protection desired is critical to enable an understanding of how adverse it would be for a company, if a certain production component either slows down or halts due to a lack of spares. There are elements of a production system whose stoppage or slowing down would only amount to a marginal embarrassment for the company. For example, when a company is manufacturing goods for stockpiling because all its important deliveries have been made, a delay in production cannot be perilous for the company. On the other hand, there are critical times in the production cycle when any delay in the production system would lead to a lapse of an important deadline or the failure to satisfy a critical obligation (Driessen et al., 2015). In such instances, the company may lose critical business because of the delay, incur penalties, lose repeat business, or even incur a negative reputation. For example, when a company is operating to fulfill an urgent order for important long-term customers, delays can be dangerous because they risk not only being in breach of a contract but also losing the big customer entirely. Proper evaluation of the safety factor will enable a logistician to tell the difference between the two situations above. If the company is operating under the lax scenario above, then there will be no need to stock many spare parts. On the other hand, if the company is operating under the strict scenario, then it will be important to err on the side of caution by stocking more than enough spare parts so that the company may not be in peril of delayed production. In this regard, the safety factor becomes critical as it enables the company to avoid sales and marketing perils while contemporaneously limiting the costs of incurring and storing spare parts (Stefanovic, 2015).
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Considering the level of protection desired is important as it enables a company to decide which spare parts to keep and which ones to acquire as and when the need arises. Production varies exponentially from organization to organization so does the array of spare parts needed to keep the organization going (Driessen et al., 2015). For example, production systems with thousands of parts may be able to operate at near optimum capacities without hundreds of different parts, yet there is a singular part that would absolutely halt the entire system down, in the case it needs replacement. On the other hand, there are spares that need to be replaced regularly hence it is possible to predict when they shall need replacement next, but there are those that just break down suddenly and without notice hence needing to be replaced immediately as and when the need arises (Stefanovic, 2015). The general idea behind a good supply chain management strategy is the minimization of cost while avoiding jeopardizing both business and profits. In establishing this careful balance, the safety factor will be important in evaluating which spare parts to keep in stock and in what quantities, which spare parts to stock only regularly depending in as and when they will be needed, and finally, which spares not to stock and only look for when the need for them arises. Based on the above, safety factor evaluation will have the combined effect of preventing the stocking of the wrong spare parts at a high cost for the company and also not having critical parts as and when needed.
Considering the level of protection desired enables an understanding of which important spares may not be easily accessible in the market or may be expensive to transport rapidly, hence would be safer to stock than to seek as and when they are needed. The instant safety factor consideration combines the gravity of the need for the spare part as and when it arises with the capacity of the spare part to be easily availed (Driessen et al., 2015). For example, a spare part may fall under the critical safety factor category so that when it becomes necessary, it has to be availed almost immediately. However, the specific spare happens to be stocked by a supplier who can avail it expeditiously and without extra cost to the company. Such as spare, although very necessary would not be reasonable to stock in large quantities if at all. On the other hand, there could be a spare that needs to be transported over a long distance and will also be urgently needed. With such a spare, the issue of cost will arise as rapid transportation, such as air transport will exponentially increase its cost, yet delaying it through alternative cheaper transport such as road, rail, or water will increase the damage that its absence causes (Stefanovic, 2015). In such a case, the spare should be kept in large quantities so as to eliminate propensity for scarcity. This final safety evaluation factor operates as a balance to ensure that only those spares that are both absolutely necessary, hard to find, and expensive to acquire quickly are stocked in large quantities. All the other spares that are, for example, easily available locally will not have to be stocked so that safety and cost are kept at an optimum balance.
Based on the examples and analysis outlined above, it is definitive that considering the level of protection desired is crucial and critical in logistics and supply chain management. Every system , no matter how well organized and refined is subject to the vagaries of wear and tear and also sudden damage. In some cases, repairs are not possible without spares hence the need for a logistician to have spares at hand. On the other hand, buying too many spares may create either a surplus or the need for unnecessary warehousing both of which would be counterproductive. Similarly, not having essential spares as and when they are needed will either hurt production or necessitate acquiring spare parts at exponentially higher prices more so from a perspective of transportation. Considering the level of protection desired is important because it enables the keeping of a balance between which spare parts to stock and which ones to requisition as and when they are needed. At the same time, evaluating the safety factor also enables management to establish what quantities of each set of spare parts to stock if at all. The evaluation will enable the company to balance between overspending on spare parts and running too high risk due to lack of spare parts.
References
Driessen, M., Arts, J., van Houtum, G. J., Rustenburg, J. W., & Huisman, B. (2015). Maintenance spare parts planning and control: A framework for control and agenda for future research. Production Planning & Control , 26 (5), 407-426
Stefanovic, N. (2015). Collaborative predictive business intelligence model for spare parts inventory replenishment. Computer Science and Information Systems , 12 (3), 911-930
