Manufacturing News
12th Annual Replacement Parts Survey

12th Annual Replacement Parts Survey: Improving inventory practices

July 7, 2014
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Food Engineering’s  12th annual replacement parts identifies the “who, what, why and how” of replacement parts purchasing, inventory maintenance, condition monitoring and related topics. Key objectives of the survey are to identify the type of job functions involved in replacement parts and components decisions; information about replacement parts and components that industry professionals rely on; the most important factors when selecting a supplier; and maintenance replacement and inventory management strategies that are currently utilized.

 

Spending and maintenance decisions

In the 2014 Replacement Parts and Components Trends Survey, food and beverage manufacturing personnel report spending more on replacement parts and components in 2013, with a mean spend of $1,529,092, compared to $1,245,308 the year before. The median spend, however, stayed constant at $500,000.

In fact, this year’s survey saw the highest mean average spend on replacement parts and components since 2008, before the full effects of the US economic recession began to impact the industry. Twenty-one percent of respondents to this year’s survey spent less than $100,000 on replacement parts compared to only 16 percent in last year’s, but the number of respondents spending between $500,000 and $1,000,000 increased from 16 to 19 percent, while those spending between $1,000,000 and $5,000,000 increased from 27 to 30 percent.

As in last year’s survey and those in previous years, maintenance personnel were most frequently involved in the majority of maintenance decisions this year, followed by plant operations personnel. However, respondents did report a slight year-over-year increase (from 13 to 16 percent) in the involvement of general administration/executive management professionals in the majority of maintenance decisions.

Regularly scheduled visual inspections as a maintenance replacement strategy continues to dominate other methods at 54 percent, with  “replace it when it breaks” coming in at 23 percent. In 2012, the gap was even wider, with 56 percent reporting the use of visual inspections, compared to 20 percent relying on “replace it when it breaks.”

Nine percent of respondents indicate applying predictive tools such as heat measurement, energy use or vibration analysis, compared to 8 percent last year. Time-based parts replacement schedules and automated measuring of parts and components each saw a slight drop in usage rates to 6 and 4 percent, respectively, while 4 percent of respondents say they use a volume-based replacement schedule.

 

ROI and OEM

Forty-four percent of respondents say they have quantified the maintenance costs of most machinery parts and are able to calculate the return on investment of higher-quality parts, compared with 48 percent in last year’s survey.

The percentage of respondents who say most parts are commodities, with price the determining factor when specifying replacements, increased from 32 percent in last year’s survey to 36 percent in this year’s survey, with 11 percent of respondents indicating that manpower shortages force them to choose the highest-quality parts to prolong mean time to failure.

The survey found 12 percent of companies use only high-quality OEM parts at their facilities. A third of those who use non-OEM parts find they do not work as well as higher-priced parts. Another 30 percent say less expensive parts work just as well, while 25 percent say they experienced premature machine failures.

Five percent of respondents say they received parts that may have been counterfeit, down from 9 percent last year. Seven percent say they experienced other issues, the most common of which was that, although some non-OEM parts work just as well, they must be evaluated on a case-by-case basis.

 

Product availability and on-time delivery

Product quality remains the most frequently cited important factor (at 96 percent)  when selecting a replacement parts and components supplier; 96 and 95 percent of respondents, respectively, cite the importance of product availability and on-time delivery. This emphasis on availability and on-time delivery fits a trend toward finding solutions to reduce unscheduled downtime due to equipment failure, a major concern for food and beverage processors.

Nine out of 10 respondents say value for price paid is an important consideration, and just over three-quarters say the same of technical service support. Roughly two-thirds say company reputation and product warranty are important, and while 59 percent cite a previous relationship with a supplier as important, that number is down 10 percent since last year’s survey. Meanwhile, lowest price went from an important consideration for only 31 percent of respondents last year to 40 percent of respondents this year, reflecting the drive to find economical solutions to replacement parts inventory and ordering challenges.

When it comes to best practices in component sourcing, respondents  cite using trusted/preferred vendors; availability of parts; finding OEM- and OEM-qualified replacements; and attempting to achieve lower cost. “Sourcing OEM parts directly to receive same or better quality as the OEM at a better price” was a best practice offered by an engineering professional.

Other answers referenced efforts to improve available information for decision-making, such as “full partnership and sharing of data, information and plans on a regular basis,” and “a decision tree… applied to each component to determine stocking requirements including sourcing.”

Other best practices receiving multiple mentions include instituting a company-wide purchasing program; obtaining multiple quotes; undertaking a phone/internet search; having access to a searchable database; ordering high-quality parts; and ensuring on-time delivery. Several respondents also mention matching replacement parts to the correct OEM when subcomponents may have been made by a separate manufacturer. 

 

Automated ordering and delivery services

A quarter of respondents say their company uses no automation system in its replacement parts ordering process, but over one-third say they use a computerized maintenance management system (CMMS). Another 18 percent use system-generated purchase orders, while 15 percent use standardized hard copy purchase orders, and 5 percent utilize a direct data link to a parts supplier or distributor.

This year’s survey shows a trend away from system-generated purchase orders, which was the automation system in place for half of respondents in last year’s survey. In addition, the percentage of respondents who use a direct link to a supplier or distributor was halved from 10 to 5 percent. 

Just over one in 10 companies never consider the lifecycle cost of replacement parts when making new equipment purchase decisions. Over one-third of respondents say they always do, and an additional 54 percent say they sometimes do.

 

Improving efficiency, reducing cost

While nearly two-thirds of respondents say they have made no changes in their inventory practices in 2013—up from 58 percent in 2012—22 percent say they reduced their inventory, and 16 percent say they increased it. In 2012, 30 percent decreased inventory; 12 percent increased it.

Respondents report decreasing inventory for a number of reasons, with popular responses including cost reduction and the need to get rid of slow-moving or obsolete parts. An executive manager cites his or her company’s focus is on “obsolete parts removal,” a concern echoed by an engineering professional whose company is “reducing inventory so we don’t have obsolete inventory.”

Other answers include parts consolidation; improving turnover; keeping only critical parts on the shelf; and resetting the maximum and minimum inventory levels.

Popular reasons for increasing inventory were to increase efficiency and reduce downtime; improve production rates; and plant expansion and/or the addition of new equipment.

Interchangeability concerns provided another reason for increasing inventory. “We are getting in a wide variety of equipment that does not allow parts interchangeability,” says one respondent in a QA/QC role.

Preventative maintenance is far and away the most popular maintenance repair operations (MRO) practice, leveraged by 79 percent of respondents. Placing parts in kits for routine maintenance is the next-most common practice at 40 percent, compared to 46 percent a year ago. Thirty-seven percent of respondents utilize vendor-managed inventory, representing a reduction of nearly 10 percent from last year’s 46 percent, while 35 percent say they remanufacture or re-engineer parts onsite to improve performance or reduce costs, compared to 48 percent last year.

Central warehousing of common parts for all plants is a practice leveraged by just over one-quarter of respondents, compared to 34 percent last year, while consignment’s popularity remained roughly flat at 16 percent compared to last year’s 18 percent.

Among the 45 percent of respondents whose companies have implemented MRO cost-cutting strategies, predictive and preventative maintenance is the most common strategy. Company-wide purchasing agreements or contracts, inventory reduction and improving inventory turns on slow-moving parts are other popular MRO cost-cutting strategies.

The number of respondents indicating they track turns as a measure of inventory management increased by nearly 10 percent in this year’s survey at 56 percent, compared to 48 percent last year. And while inventory value remained the most commonly tracked measure of inventory management at 58 percent, it saw a decline of 6 percent from last year’s responses. Just over one-quarter of respondents say they outsource to local supply houses, while 4 percent track another measure, and 3 percent say they track none.

The greatest challenge for minimizing inventory, say 23 percent of respondents, is multiple sourcing options for ordering parts. Another 20 percent cite insufficient funding to organize and streamline inventory practices, 15 percent say lack of parts naming consistency, and 13 percent say the absence of a searchable parts database is the greatest challenge.

Of course, challenges create opportunities for innovation. By far, the most common opportunities for innovation in parts and components management, as identified by survey respondents, is barcode scanning/tracking, which received nearly twice as many mentions as automated ordering and complete use of CMMS, the next-most frequently cited opportunities for innovation. Availability of parts with on-time deliveries and better tracking abilities round out the five most popular responses. Utilizing a computerized database or predictive maintenance, ensuring software compatibilities and standardization, and training are other commonly identified opportunities for innovation.

Sixty-nine percent of respondents  using remote diagnostic and troubleshooting services do so solely via the internet, using the plant’s Ethernet pathway, compared to 80 percent last year. Twenty percent access remote machine diagnostics solely via a modem built into the machine. Fifty-nine percent of respondents who use remote services relay the information to parts ordering and maintenance personnel.

Based on survey results, condition monitoring has declined, with 29 percent reporting no condition monitoring at all this year, compared to 20 percent last year. Thermal imaging is the most popular tool, utilized by half of all respondents, followed closely by infrared sensors. Vibration analyzers saw a drop in popularity from 54 percent usage in 2012 to this year’s 43 percent.

One-third of respondents say they use oil analyzers for condition monitoring, compared to 45 percent in last year’s survey, while one-quarter use ultrasonic analyzers, compared to 30 percent last year. Stethoscopes were the only condition monitoring tool to see a significant increase in popularity, from 12 percent last year to 17 percent this year. The number of companies not using condition monitoring tools at all increased  from 20 percent last year to 29 percent in this year’s survey.

With FSMA-mandated food safety standards and requirements in mind, the 2014 Replacement Parts and Components Trends Survey asked respondents for the first time how their maintenance management systems are integrated with their food safety plans. An encouraging 82 percent of respondents say their maintenance team receives food safety-related training on a regular basis, while an additional 11 percent say their team is beginning to receive food safety-related training. Just 5 percent of respondents say their maintenance team does not receive food safety training of any kind.

 

About the survey

The report’s statistics and comments reflect the responses of Food Engineering readers who returned mailed questionnaires or elected to complete the replacement parts survey online. Plant operations, general administrative/executive management and engineering professionals each represent roughly one-quarter of respondents at 27, 26 and 25 percent, respectively. The remaining 22 percent of respondents are split between maintenance personnel (15 percent), purchasing personnel (4 percent), research and development personnel (3 percent) and quality assurance/quality control personnel (less than 1 percent).

About half of the respondents (52 percent) work for a company with between 100 and 499 employees. Twenty-two percent work for a company with less than 100 employees, 15 percent work for a company with over 1,000 employees, and the remaining 11 percent work at companies with between 500 and 999 employees.

The primary products produced by 23 percent of respondents are processed meat, poultry and seafood, while 14 percent produce bakery and snack food products, and 11 percent produce beverage products. An additional 10 percent produce dairy and frozen novelty products, 9 percent produce frozen food and prepared meals/fruits and vegetables, and 7 percent are co-packers or co-manufacturers of food/beverage products. Seven percent produce shelf-stable foods/soups; 5 percent produce candy, sugar and confectionery products; 5 percent produce cereal and grain-based products; 5 percent produce dietary supplements/chemicals and food ingredient products; and 4 percent work at divisional/central headquarters.

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