Spare Parts Management Is a Strategic Topic

“Go to the stores supervisor, Jan Willem.” That is an often-heard response when I ask an asset manager or procurement director to talk about spare parts management. Make no mistake, I enjoy speaking with these supervisors. They understand exactly what happens in the hidden corners of an organisation, which is vital information if we want to make any real impact.

On the flip side, when having coffee with a CFO, their world is infinitely far removed from these practices. Their worlds and language are shaped by concerns about ever-growing working capital, expenditure, and unplanned write-offs affecting the P&L. These are largely irrelevant to the stores.

This is a clear case of strategy not aligning with operations. Something that becomes evident within just two conversations.

This disconnect clearly illustrates a lack of alignment between strategy and operations — something that becomes evident after just two conversations. The key question is: how can this gap be bridged?

A coherent decision framework for spare management

The effectiveness of a spare parts organisation depends on many decisions made across different departments and organisational levels. In some cases, these decisions are incorrect, unclear or simply not made at all.

The purpose of this paper is to present a framework that captures all spare parts-related decisions. Once understood, it becomes a practical method for auditing and improving the spare parts organisation.

Segmenting planned and unplanned demand

A practical example

Without clear inventory governance, engineers approach the warehouse and issue parts for all types of demand without prioritisation.

During planned activities, such as large-scale maintenance shutdowns, demand increases significantly, depleting available stock, including items that may later be required for unexpected breakdowns.

The result is predictable:

Planned maintenance consumes inventory intended for breakdowns
Emergency repairs cannot be completed due to stock shortages
Warehouse operations become chaotic

The stores department is blamed regardless of the outcome.

Now consider a different scenario

At a strategic level, reliability engineers clearly distinguish between:

Planned maintenance
Condition-based maintenance
Breakdown maintenance

> Maintenance activities are decomposed into tasks and Bills of Materials (BoMs).

> At a tactical level, maintenance is planned 3–9 months in advance. Demand reservations are made early to ensure the availability of long-lead items.

> At an operational level, material reservations are confirmed when maintenance activities are scheduled.

> The warehouse operates according to a goods-to-person principle. All reserved materials are kitted per work order and delivered to engineers 24 hours before execution.

What can we learn from this example?

Even without advanced sophistication, properly aligned decision-making leads to:

Planned maintenance is being executed according to schedule
Breakdown stock no longer being cannibalised
Significantly less warehouse chaos
Improved service levels and equipment uptime

To better understand this framework, we divide it into three perspectives:

Supply chain
Maintenance
Procurement

Now let’s study the framework in more detail. To better understand this framework, we divide it into three perspectives:

Supply chain
Maintenance
Procurement

The primary focus of this paper is the supply chain perspective.

Supply chain perspective

Getting the biggest bang for your buck

The supply chain function acts as the bridge between demand and supply.

The simplest way to guarantee availability is by building massive inventories. Historically, some industries (such as oil and gas) adopted exactly this philosophy. Their reasoning was straightforward: spare parts costs were insignificant compared to downtime costs.

Today, however, financial constraints are unavoidable. The modern challenge is therefore clear: How do we achieve the highest service level with the lowest possible inventory investment?

That is precisely the objective of strategic supply chain management.

Supply Chain Strategy: From analysing the battlefield to plans of attack

A good strategist behaves like a fox: analysing the battlefield carefully and acting decisively. In spare parts management, strategy begins with understanding:

the needs,
the constraints, and
the opportunities.

The needs include parts/goods maintenance needs, demand profiles and criticality profiles.

Common constraints are often financial in nature; for example, working capital may be limited. However, organisations also face operational constraints, such as limited storage capacity and resource availability. Other constraints are less visible and originate in the supplier market. The balance of power may not be in your favour, or suppliers holding stock may simply not be available locally, as is often the case in import-dependent countries such as Namibia.

At the same time, many opportunities may exist. These may be technological, such as the use of AI or 3D printing; commercial, such as providers offering spare parts management as a service; or collaborative. Even monopolistic OEMs (Original Equipment Manufacturers) can often provide a better service when forecast information is shared.

This comprehensive strategic analysis provides a structured overview of assortments, including critical and non-critical spare parts, consumables, rotables, and tools. For each assortment, “the bridge” is constructed by considering all the above factors. In practical terms, this bridge or supply chain strategy is defined by the maintenance requirement and the fulfilment method. An example of non-critical slow movers is shown below.

Supply Chain tactics: Continuously optimising the supply chain

In many organisations, tactical supply chain management is reduced to maintaining Min-Max inventory levels. Even then, adjustments are often reactive, with inventory parameters increased only after a painful stock-out occurs.

While this may solve short-term problems, it inevitably leads to growing working capital.

At its core, tactical supply chain management should operate according to a continuous Plan-Do-Check-Act (PDCA) cycle. See a brief explanation in the table below.

A PDCA is not a magic wand. This process cannot function effectively without digitisation. Spare parts environments often contain tens of thousands of parts or SKUs, making manual optimisation impossible.

Advanced forecasting and inventory optimisation tools, like Lanza, are therefore essential to enable:

Accurate inventory settings
Management by exception
Automated replenishment
Forecast-driven planning

Forecast information can also be shared with suppliers, improving their service capabilities and availability.

Conversely, supply chain teams can support maintenance planning through stochastic BoMs (probabilistic material lists), which typically require analytical capabilities and historical data not readily available within maintenance departments.

Supply Chain Operations: Becoming an Efficient Logistics Service Provider

This is where we meet the stores supervisor again, but ideally under much better circumstances. With proper planning and inventory optimisation:

Replenishment becomes largely automated
Inventory levels become more reliable
Counter traffic decreases significantly
Warehouse space utilisation improves

Inventory is primarily reserved for true breakdown demand. Planned maintenance materials are managed through cross-docking and work order kitting processes.

Ideally, the warehouse operates on a goods-to-person model, in which maintenance kits are proactively assembled and delivered to technicians.

As a result:

Warehouse stress decreases
Operational discipline improves
Maintenance efficiency increases

Finally, peace and discipline are back in the store. See a summary below.

Maintenance Perspective

Plan What Can Be Planned

The ultimate vision is compelling:

Advanced condition monitoring and IoT systems predict failures before they occur. Suppliers deliver parts proactively, eliminating the need for a break-fix store and reducing working capital to near zero.

Reality, however, is more complex.

Many failures, especially electronic failures, remain unpredictable. Moreover, advanced monitoring technologies are expensive and require specialised expertise.

From a spare parts perspective, maintenance contributes in two critical ways:

Making demand more predictable
Defining the operational impact of stock unavailability (criticality)

Below, we translate these contributions into decisions on various levels.

Maintenance strategy: Decide on planned and unplanned maintenance

At this level, organisations decide where planned maintenance is appropriate and where breakdown maintenance is acceptable.

Planned maintenance is highly beneficial from a spare parts perspective because:

Tasks are predefined
Material requirements are known
Procurement and logistics can prepare in advance

Breakdown maintenance, by contrast, requires inventory availability. Since stocking every possible spare part is financially impossible, inventory decisions must rely heavily on criticality assessments. The trick is to apply practical, scalable criticality methods, which are essential given the scale of modern spare parts assortments. Recently, Lanza (www.lanza-solutions.com) incorporated such methods.

Maintenance tactics/planning: Be creative with material lists

Many maintenance plans define only inspection frequencies and scope, offering little value to supply chain teams. The challenge is stochasticity: a certain part may be required after inspection number one, but not after inspection number two and again after inspection number three.

This is where stochastic BoMs, also known as percentage-based material lists, become valuable.

These lists, vital information for the supply chain, describe the likelihood of material consumption during planned maintenance activities. While the exact demand for a single maintenance event cannot be predicted, aggregate annual demand often can.

This information is extremely useful for stockbuilding and suppliers.

Procurement perspective

Contract what you can

The impact of not having a strategic function in place is nowhere as apparent as in the procurement pillar. Without supplier agreements in place, buyers are forced into repetitive three-quote processes:

Tediously time-consuming
Administratively heavy
Often yielding minimal commercial benefit

When multiplied across thousands of spare parts, this creates enormous inefficiencies and headaches.

Reliable spare parts supply requires robust contractual frameworks.

Strategic procurement: Be realistic about competition

Many spare parts can only be sourced from OEMs. In these cases, competitive tendering offers little value because the supplier effectively holds a monopoly.

The logical approach is therefore:

Agree on pricing structures
Establish lead-time commitments
Formalise supply agreements

The ‘bolts and nuts’ assortment is also relatively straightforward. Here, lead vendor strategies can significantly simplify supplier management.

Real competition exists primarily in:

Generic components
Frequently consumed items, and/or
Higher-value spare parts.

These categories require proper market analysis and effective sourcing strategies.

As a rule of thumb, organisations should aim for at least:

90% contractual coverage. Minimum.

Tactical procurement: Get the highest contractual value

Procurement does not stop once a contract has been established. A similar PDCA cycle can be applied, as in tactical supply chain management. Demand plans can be shared with suppliers, enabling them to anticipate future requirements more effectively. Continuous improvement is achieved by measuring not only supplier performance, but also client performance, for example, demand forecast accuracy.

By combining robust contractual agreements with a structured PDCA approach, contracts generate measurable operational value rather than simply existing on paper.

Operational procurement: Eyes on, hands off

With contractual coverage exceeding 90%, operational procurement becomes highly streamlined. Most purchasing activities evolve into simple call-off processes that can be digitised and automated.

As a result, procurement professionals can focus their efforts on high-value activities such as:

Strategic sourcing
Three-quote process for difficult-to-source materials
Supplier development
Risk management

Putting it all together

The picture below illustrates the comprehensive, coherent decision framework for spare management. You can use it in a workshop with all stakeholders. You will easily identify the fits and the gaps. Moreover, it will help you explain why spares problems occur.

Of course, if you need a third pair of eyes and ears, feel free to…

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