Digital Innovation for industrial spare part management

Digital Innovation for industrial spare part management

SPARETECH succeeds in digital innovation for industrial spare parts management.

Management Summary

SPARETECH introduces a digital innovation in industrial spare parts management. Using intelligent software and modern algorithms, SPARETECH is the first provider to automatically identify its customers’ faulty master data and to update it with the correct information of the original spare parts manufacturer. This not only increases machine availabilities and lowers costs, but also reduces stock levels in the production network by up to 25%.

The eternal spare parts dilemma

Machine failures are a daily reality in every manufacturing company. If the machine failure is due to a defective component, such as a distance sensor or a hydraulic cylinder, this part must be replaced as soon as possible – as long as the required spare part is in stock. Due to physical (storage space) and economic (storage management costs) limitations, and because of the enormous variety of spare parts, it is simply not possible to keep all parts in stock for a company’s entire machine environment. When urgently needed spare parts are not in stock, costs increase.

In individual cases, an unpredictable machine failure can cost hundreds of thousands of Dollars, if not more. Cost surcharges for the short-term procurement of critical parts are accepted in order to minimize downtime costs. In an average automobile production plant, these costs can reach to $17 million annually.

Today’s market for industrial spare parts management is characterized by isolated island solutions. Machine manufacturers try to gain direct access to the customer system by offering their own individual after-sales systems that trigger automatic orders (i.e., predictive maintenance). Traditionally, after-sales of components and spare parts account for 50-60% of machine manufacturers’ business. Due to the multiplicity of machine manufactures per manufacturing company, plant operators are forced to create after-sales networks per individual machine manufacturer. As a result, plant operators receive no transparency regarding common parts between individual machine manufacturers. In addition, operators are victims of the agency problem because they have no way of transparently comparing the prices of replacement parts needed. In addition to the prices, this leads to excessive inventories, high warehouse management costs and above-average capital commitment. Figure 1 illustrates the problem.

Figure 1: Isolated spare parts management today

The consequences of poor spare parts availability can be summarized as follows:

    • High procurement costs for (short-term) spare parts orders
    • High manual labor costs for warehouse and master data management
  • High inventories and capital tie-up costs, as the simplest solution to hide availability problems, is the accumulation of spare parts inventories

There is, however, a better way

Using intelligent software, SPARETECH offers a solution for the availability problem of spare parts for machines and plants. The basis for this forms SPARETECH’s industry-independent and unique product database for machine spare parts. By using innovative software and advanced algorithms, SPARETECH identifies its customers’ faulty master data and provides the correct information from the original spare part manufacturer. This not only increases plant availability and saves costs, but also reduces stock levels in the production network by up to 25%.

First, what is the root cause?

Before sketching the solution, however, it is important to identify the actual root causes of the problem. These can be represented along a typical parts management process (Figure 2).

Figure 2: Causes of problems in the parts management process

Problem Causes 1-4: Manual Data Maintenance in the ERP System

Suppose a replacement part is needed due to a failure or the announcement of a failure (quality problem). In order to remedy this situation, the responsible maintenance employee searches for the spare part in their ERP system but cannot find it. Multiple root causes are likely:

  1. The part was never created and ordered in the system
  2. The part was created incorrectly (for example, typo in item number or type designation)
  3. The employee’s search is incorrect (wrong article number entered in search field)
  4. No transparency about which parts may be available in the production network

For all four causes, the human is the potential source of error. Often, not all parts information (bill of material) are initially transferred to the ERP system when customers buy a new machine, since it’s manual work, time consuming and error-prone.

If the required spare part cannot be found in the system, a request is generated and the first order submitted. If there is an error in the spare part number of the request, then the correct part is never consumed, resulting in unnecessary warehouse congesting as parts which are needed are never actually consumed.

Causes 5 and 6: No transparency about the fastest and cheapest way to replace the part

Once the spare part request has been created in the system, the next step is to obtain it as quickly and inexpensively as possible. There is no overarching solution on the market today that offers this transparency. The manual search via internet platforms such as Google or Bing is complicated and provides mainly technical product information of the spare parts manufacturer or equipment vendor. In addition, these searches are unlikely to find the best-priced products, since SEO optimized providers are ranked by the money they spend on ads which is reflected in the product price.

The customer only receives a binding offer through the countless customer portals of the manufacturer or by calling customer service. This process is time-consuming and costly, especially in the event of an unplanned incident.

Another problem is that there exists no platform for which manufacturing companies can track and share their respective spare parts availability. This lack of a sharing platform is not due to lack of between-company collaboration, but instead due to complex IT solutions. To make matters worse, poor master data quality destroys any collaboration efforts among all actors involved in the production network. Network economies of scale simply can not be realized because the data is not available, not network-compatible, and is sometimes flawed.

From this, the following causes can be summarized:

  1. There is no price transparency among existing suppliers of spare parts (alternatives), and thus high procurement costs
  2. Low master data quality impedes any collaboration efforts (for example, duplicate and triplicate part numbers are stored in the ERP system; incorrect entries)
  3. No collaboration platform exists on which manufacturing companies can collaborate to improve their spare parts management.

SPARETECH as the solution

In order to revolutionize industrial spare parts management, the Stuttgart-based company SPARETECH GmbH focuses on solving the above-identified causes of problems.

SPARETECH has the largest, cross-industry and independent product database for machine spare parts. By using intelligent and unique software and advanced algorithms, SPARETECH identifies its customers’ faulty master data and provides the correct information from the original spare parts manufacturer. In order to make this possible, customers can upload their ERP master data in their private SPARETECH account and have them checked for errors. In addition, all parts lists of all systems can be uploaded to the customer and generated by the SPARETECH matching algorithm in the desired ERP format.

At the same time, duplicates are detected so that the result is an error-free “digital twin” without redundant master data. In this way, SPARETECH becomes an enabler for any digitization project and a permanent partner in support of Industry 4.0. Figure 3 illustrates the solution model.

Figure 3: The SPARETECH solution

If SPARETECH accounts are linked within a production network, spare parts can be located quickly in the event of a fault. Quick communication with network partners is enough to find out if the spare part can be transferred quickly. In this way, economies of scale can be realized in one’s own corporate network. And in case of cross-company collaboration, beyond that.

Using SPARETECH`s software-based solution for spare part management, manufacturing companies unleash the potential of collaboration through digital innovation. Adapt the use-case for your organization and start implementing your digital agenda. Our team of Technicians, Data Scientists and Industry experts is there to answer any questions.

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We look forward to working with you soon.
Your SPARETECH team

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