Solving the spare parts riddle

Spare parts management can be challenging for mining operations. North American Mining spoke to Dr. Frits de Vroet, an expert in inventory optimization, about the issues involved.

by Jonathan Rowland

Maintaining operational efficiency and productivity at mining sites is a game of overlapping (sometimes competing) strategies, played on a dynamic board with ever-changing pieces. A critical element is the mine’s ability to keep its equipment, whether mobile equipment or static plant, performing at an optimum level at any given time. This is itself a game within a game. Success relies on various factors, but among the most important for success is managing spare parts inventory.

Effective spare parts management is, however, easier said than done. Particular challenges “stem from the unique nature of the mining industry’s operations and equipment,” Dr. Frits de Vroet told North American Mining. The owner of C-Insight Pty Ltd and business development consultant for Slimstock inventory optimization software, de Vroet has considerable experience working in and researching spare parts management in mining and remote locations.

Spare parts management: a riddle wrapped in a mystery inside an enigma?
Mining companies face several challenges when managing their spare parts inventory. At the top of these is the fact that operations may grind to a halt due to a lack of some essential spare parts. “The unavailability of these parts can lead to significant production losses and increased downtime costs,” said de Vroet. Yet, ensuring just these critical parts are available is not as easy as it sounds.

Consider the vast array of heavy machinery and equipment that operate at a mine, each of which requires numerous specific spare parts. Then combine this with the unpredictable nature of equipment breakdowns, which makes accurate forecasting difficult, the remote location of many mines, and the often long lead times and complex logistics involved in procuring and transporting spare parts to the site. It’s little wonder that stockouts and overstocking are issues that plague many mining operations.

And the challenges do not stop there. “Mining equipment often has a long lifespan, but individual components can become obsolete as technologies advance or manufacturers discontinue support,” continued de Vroet. “Sourcing replacements for obsolete parts can be difficult and expensive, potentially leading to prolonged downtime or the need for costly upgrades.” There are also counterfeiting and quality concerns, which threaten equipment reliability and safety, and make “verifying parts’ authenticity and quality crucial.”

Lastly, there is the issue of data management. “Accurate inventory records, usage history, and maintenance schedules are crucial for effective spare parts management,” concluded de Vroet. “Integrating technology solutions like inventory management software and predictive analytics into traditional mining practices can be challenging, but is essential for streamlining processes and improving decision-making.”

The power of data: cracking the riddle
Predictive maintenance uses data analytics to identify trends and patterns in equipment performance, allowing maintenance teams to “anticipate when specific parts will likely need replacing,” explained de Vroet. “This allows for more accurate demand forecasting than strategies that rely solely on historical data or reactive maintenance approaches.”

Machine learning is having a significant impact, enabling the analysis of extensive datasets to build predictive, proactive maintenance schedules. This approach leads to even more accurate preemptive repairs and anticipation of spare parts demand, thereby mitigating the risk of unplanned breakdowns and the resulting emergency spare parts demand, which can cause prolonged outages when spare parts are unavailable or sourced from international suppliers.

More accurate demand forecasting also supports optimized spare parts inventory levels. “Maintaining a large inventory of spare parts ties up considerable working capital, with costs including the purchase price, storage, insurance, potential obsolescence, and the opportunity cost of the capital,” said de Vroet. “By analyzing equipment usage and wear patterns, companies can predict which spare parts are likely to be needed, and when, ensuring adequate stock levels are maintained without excessive inventory and the high carrying costs that this entails.”

Another common issue that data analytics can help solve is the visibility and traceability of spare parts. “This is often a challenge in the mining industry, compounded by the fact that the same spare parts are often supplied by different suppliers, resulting in different part numbers and the duplication of storage locations,” de Vroet continued. “Mining companies can gain real-time visibility of current inventory levels by integrating data analytics with inventory management software and computerized maintenance management systems (CMMS). This allows better tracking of parts, identification of slow-moving or obsolete stock, and optimization of warehouse space.”

Inventory management software also provides spare parts visibility across multiple sites, providing a comprehensive view of holdings. “This facilitates better resource allocation and reduces the likelihood of duplicate purchases,” said de Vroet. Meanwhile, data-driven insights “support better decision-making in vendor negotiations, capital expenditure planning, and overall supply chain management.”

However, despite these advantages, “many mining operators have not taken advantage of the available solutions for inventory optimisation and predictive maintenance, as there is often a separation in accountability for uptime, inventory holding (and cost), capital investment (in inventory), and procurement,” noted de Vroet. “Decision making about spare parts inventory usually resides with local asset management and maintenance, who are often extremely risk-averse.”

Not all spare parts are created equal
Weighing the cost impact of spare parts against the need for operational reliability can be tricky. Mining companies often emphasize the latter for obvious reasons, but some steps allow a more balanced approach. “A criticality assessment is paramount,” explained de Vroet. “A critical spare is a component whose failure would halt production, pose a safety risk, or cause significant environmental damage, and for which there is no readily available alternative with a short lead time.”

According to de Vroet, mining companies should implement rigorous criticality assessment frameworks to categorize spare parts based on the potential impact of their failure. “This involves analysing factors such as equipment function, failure frequency, lead time for replacement, safety implications, and environmental risks. This assessment directly informs inventory stocking levels, ensuring that high-criticality parts are readily available while minimizing investment in low-criticality items.”

The second step is accurate demand forecasting using data about historical usage, equipment maintenance, operational parameters, and advanced analytical techniques, such as machine learning. This includes the predictive maintenance and inventory management software mentioned earlier, alongside enterprise resource planning (ERP) systems. While just-in-time (JIT) inventory is generally not fully applicable to all mining spares due to remote locations and long lead times, “a more nuanced approach that incorporates elements of JIT for frequently used, non-critical items can be considered in conjunction with robust stocking of critical spares,” said de Vroet.

Based on the outcome of these first two steps, mining companies can determine optimal inventory levels for different spare parts without hurting operational reliability. This involves calculating the following key metrics:

• Minimum stock quantity: the reorder point that triggers
  the procurement process.
• Maximum stock quantity: the upper limit to avoid overstocking.
• Safety stock: additional inventory to buffer against unexpected demand fluctuations or delivery delays.

The relationship between a mining company and its spare parts suppliers should also be considered. “Building strong relationships with reliable suppliers is crucial, especially for critical spares with long lead times,” noted de Vroet. “Exploring options like vendor-managed inventory (VMI) for some categories of parts, where the supplier takes responsibility for managing inventory levels at the mine site, can also help optimize stock and reduce holding costs.”

Finally, the decision over whether to stock a spare part involves a “clear financial trade-off,” de Vroet concluded. “The cost of holding inventory (storage, insurance, obsolescence, tied-up capital) must be weighed against the potential costs of a stockout (downtime, lost production, emergency procurement fees, potential damage to equipment). Criticality assessment helps quantify the potential impact of a stockout, providing a financial justification for holding even expensive, slow-moving critical spares.”

Further tips for tracking and managing the lifecycle of spare parts
In addition to the aforementioned strategies and solutions, de Vroet mentioned a few more best practices to support effective spare parts tracking and management:

Robust identification and cataloguing. Implement a standardized and detailed cataloguing system for all spare parts, ensuring each part has a unique identifier, a clear description, manufacturer details, compatibility information with equipment, and a criticality ranking. Accurate and consistent data entry is fundamental for effective tracking and management throughout the lifecycle.

Standardized work order processes. Integrate spare part tracking with standardized work order processes. When a part is requested or used for maintenance or repair, it should be linked to a specific work order. This provides a clear audit trail of part usage, connects part consumption to specific equipment and maintenance activities, and improves data accuracy for forecasting and analysis.

Tracking technologies. Employ tracking technologies to improve the accuracy and efficiency of part identification and movement, such as barcode scanning for quick and accurate recording of inventory transactions, and RFID tags for automated tracking and identification of critical or high-value spare parts, particularly in large or complex storage areas.

Regular audits and security measures. Conduct regular physical counts and audits of spare parts inventory and implement security measures to protect against theft or unauthorized access. This includes controlling access to storage areas through surveillance systems and maintaining accurate records of who accesses parts and when.

Training and procedures. Ensure that personnel involved in spare parts management, maintenance, and operations are adequately trained on inventory procedures, system usage, and the importance of accurate data. Standardized written procedures should be in place for all key processes.

Managing spare parts at remote mines
de Vroet lastly addressed the management of spare parts at mines in remote locations, such as the Canadian Northwest Territories diamond mines or Baffinland’s Mary River iron ore mine in Nunavut. “One of the primary strategies for managing inventory in remote locations is the strategic positioning of critical spare parts inventory,” said de Vroet. “Rather than relying solely on central warehouses, mining companies establish an inventory of high-criticality components on-site or at strategically located regional hubs near the mine.”

Given the long supply lines to remote mines, logistics and transportation planning are even more vital than in better-connected mines. “Mines should establish reliable transportation routes and modes, potentially using a combination of road, rail, air, or sea freight depending on the location and urgency,” continued de Vroet. “Developing strong relationships with logistics providers experienced in serving remote industrial sites is also essential to ensure the timely and secure delivery of parts. This may also involve setting up consolidation points closer to the mine to optimize shipments.”

Finally, remote mines may consider implementing collaborative inventory strategies with nearby mining operations or other regional industrial sites. “Sharing or pooling specific critical but rarely used spare parts can reduce individual inventory holdings while ensuring access in an emergency,” concluded de Vroet.

Dr. Frits de Vroet has over 30 years of experience in business transformation, technology strategy, operational excellence, and supply chain management. He has worked across five continents in various industries, including mining, holding senior leadership roles at BHP Billiton and WesTrac, among others. Frits currently works with Slimstock, the provider of Slim4 inventory optimization software, advising companies on inventory optimization with a focus on the mining and mining services industry.