Identification of stock levels for spare parts PC-220-3 and WA-200-1; Bharat Earth Movers Limited (KGF)

Abstract

The objective of the project is to design an inventory model that minimizes the stock of inventory of spare parts at BEML, KGF. Since the spare parts contribute substantially to the bottom line of BEML, it is imperative to identify as to what should be the minimum level of inventory to avoid stock-outs and what should be the maximum level to avoid overstocking. The methodology adopted was to form a data-base of spare parts having a movement of atleast one per month and contributing not less than Rs.120. Thereby all non stock items are exempted from continual stock monitoring. As per the given project, anly two equipments viz.,PC220 -3 and WA-200-1 are taken into consideration. For PC-220 equipment, 454 parts (24.72 %) and for WA-200 538 (27.02 %) of total computer parts-master are identified for closer scrutiny of the Management. The above components are classified into A-B-C, V-E-D, F-N-S and H-M-L classifications. This helps in identifying the level of control to be employed and to fix the service - level and buffer-stocks. At any point of time, the buffer-steck is the minimum quantity to be maintained. The ordering quantity, E0OQ, is calculated based on the ordering cost, inventory holding costs and demand for 93-94. The Reorder-level is fixed as sum of butfer-stock and lead-time consumption. The recommended maximum quantity is buffer stock = plus E0Q. Since lead-time is very high ( most of the cases it is 7 months, about 60% of the annual consumption), the maximum Quantity is taken as the sum of safety stock plus reorder level, as the former will be less than the tater. The final part deals with recommendations.