Safety Stock, Essay Example

According to the literature, “spare part quantity determination is a function of the probability of having a spare available when required, the reliability of the item in question” and the quantity of items used in the system (Blanchard et al., 1995). It is therefore reasonable to utilize the Poisson distribution to determine the level of protection desired, or the safety factor, when determining spare part quantities. Ultimately, it is challenging to determine the precise number of spare parts that will be needed prior to the manufacturing of the product, so it is valuable to calculate the extent to which additional parts may be needed to optimize this process. Applying an understanding of the Poisson distribution therefore allows professionals to gain a greater understanding of the safety factor needed so that processes will run smoothly.

Using the Poisson distribution, the preferred equation to calculate the level of protection desired is as follows:

In this formula, P is equivalent to the probability of having a spare of an exact part available when it is needed, S represents the total number of these spare parts that are carried in the stock, R is the probability of the survival of these spare parts, and is dependent on several other variables including time. As time increases, the probability that these spare parts will be available also decreases. To determine R, an additional equation is used, R=^e-K*lambda*t. In this equation, t represents the time. K is the amount of the parts of a particular type that are available. Last, it is important to consider that ln R is the natural logarithm of R.

P is a direct measure of the spare parts available and could therefore be considered the safety factor as well. When this number is high, a greater number of spare parts will be necessary. Likewise, when this probability is low, a smaller number of spare parts will be necessary. When the safety factor is high, there is also greater need for inventory maintenance and cost for procurement. Thus, the probability of the need for spare part stock is also an indicator of risk for the risk for running out of stock for the particular item that the part makes up. A product can only be made if its component parts are available, so it is necessary to run this analysis for different components of a finished product to determine when it will be beneficial for the organization to order a greater amount of parts. Naturally, as a result of running out of stock, the profitability of the manufacturing practice will decrease as well, provided that the demand for the product being manufactured is high, or does exceed the speed of product production.

When considering the safety factor, it is also necessary to determine which other processes impact this particular variable. In particular, “one should consider system operational requirements and establish the appropriate level at each location where corrective maintenance is accomplished” (Blanchard et al., 1995). Different types and levels of this maintenance may be needed for different spare parts. For example, the extent to which these parts influence the functionality of the product or the degree to which another part could be used to simply replace the part impacts the extent of its importance. Thus, the probability of the safety factor when determining spare part qualities is only representative of a quantitative understanding of this relationship. There are several qualitative factors that cannot be accounted for when attempting to determine the safety factor or some of the variables related to it.

Overall, it is valuable for manufacturing facilities to calculate the safety factor for the parts of all of its manufactured products to ensure that production does not halt due to a diminished availability of these pieces. While it is challenging to track the need for these parts, an additional consideration into this equation should be not only the supply and demand for the product, but the quantity of the component parts that are needed to make this product. Thus, manufacturers can achieve a more holistic understanding of the factors that they need to consider prior to the manufacturing of certain components or products. In doing so, these organizations will be better able to determine which vendors to acquire the component parts from in addition to how many, over a time span that will allow them to remain in constant supply of necessary pieces. Calculation of the safety factor is necessary because art the most basic level of manufacturing, understanding this value will allow for the direction of higher level decisions in the business setting. Thus, to truly partake in lean practices and generate a product that is produced efficiently and in a cost effective manner, determination of the safety factor is the first step to ensure that the entire process is optimized for success. It is therefore apparent that a bottom-up approach is sometimes necessary to make such manufacturing goals achievable. Thus, calculating the safety factor is a necessary process.

References

Blanchard BS, Verma D, Peterson EL. (1995). Maintainability. John Wiley & Sons.