A PROJECT

PRESENTATION ON

OPTIMIZATION IN SPARE
PARTS INVENTORY
CONTROL OF AN
AUTOMOBILE DEALER
Guided by : Submitted By:
Dr. SHIENA SHEKHAR ADITYA SHARMA
 Abstract
Spare parts are the important item at
Automobile Dealer, which are essentially
linked with the parent vehicles for which those
are required.
 The basic objective of the work is to optimize
spare parts inventory and its management
while satisfying demand of customers.
 Based on demand patterns of spare parts
different inventory control models are
proposed. Major thrust of the work is on
inventory control of A and B class fast moving
items.
 Introduction
Problem Identification (Automobile Dealer)

Spare parts are those items which are identical to

certain parts in machine but whose life is less
than the operating life of the machine as a
whole . However , for automobile spare part
dealer , spare parts are like general items as
those are not of direct use to spare part dealer
but are required by general customers owning
vehicles.
Problem Definition & Objective
Function
Common problems associated with spare parts
inventory control are:

1-Excessive range of spares.

2-High obsolescence cost.
3-Problem of preservation and stocking.
4-Problems of procurement
5-Problems of coordination among spare parts
6-Reliability of spare parts
 CLASSIFICATION OF INVENTORY
CONTROL
1. ABC Analysis

2. VED Analysis

3. FSN Analysis

 ABC Analysis
The technique is popularly known as ‘Always
Better Control’ or the alphabetical approach.

Also called ‘Peroto’s Analysis’ which tells that

75% of the phenomena is due to 10%
contributors (‘A’ Class), 15% of the
phenomena is due to 15%(‘B’ Class)
contributors and 10% of the phenomena is
due to 75% contributors (‘C’ Class).
Class A
5 – 15 % of units
70 – 80 % of value
Class B
30 % of units
15 % of value
Class C
50 – 60 % of units
 5 – 10 % of value
 VED Analysis
This analysis is based on criticality of the
item. Criticality of the item can be determined
from the production down time loss, resulting
due to spares not available when required.
Based on criticality spare parts are classified
into three classes-vital, essential and
desirable.
 FSN Analysis
The items may also be categorized into
classes according to the descending order of
their usage rate, or movement. F stands for
fast moving, S stands for slow moving and N
for non-moving.

 FSN analysis is especially useful to find

obsolete items.
JOINT CLASSIFICATION &
STRATEGIES
Strategies to be adopted are summerised for ABC/VED
cross, XYZ/FSN cross are discussed in Gopalkrishnan ,
Sundaresan, ‘Spare Parts Management’.

1)ABC-XYZ Analysis

2)ABC-VED Analysis

3)XYZ-FSN Analysis
1) ABC-XYZ Analysis

X Y Z

A Critical analysis should be Attempts must be Items are within

done to reduce stock. made to convert to Z control
category.
B Consumption and stock No further action Can be viewed
should be reviewed more necessary normally
often.
C Steps should be taken to Cannot should be Can be reviewed
dispose the surplus. tightened annualy
 2) ABC-VED
Analysis

Vital Essential Desirable

A Constant control and regular Moderate stocks Nil stock

follow-up

B Moderate stocks Moderate stocks Very low stocks

C High stocks Moderate stocks Low stocks

3) XYZ-FSN
Analysis

F S N
X Tight inventory control Reduce stocks to Quick disposal of items
very low level at optimum price
Y Normal inventory control Reduce stocks to Should be disposed as
low level early as possible
Z Can reduce clerical labour Reduce stocks to Can afford to dispose at
by increasing stocks low level lower price
 INVENTORY CONTROL MODELS :

Star,Miller, ‘Inventory Control and Practice’ and Hadley,

Whitin, ‘Analysis of inventory Systems’ gives good
description of inventory control models.
Inventory problems can be classified into ways,
(1) Knowledge of demand: certainity,risk,uncertainity.
(2) Decision process: static, dynamic.
These are the models for dynamic
decision process involving risk or uncertainity.
1) Continuous Review System.
2) Periodic Review System.
Continuous system (fixed-order-
quantity)
constant amount ordered when
inventory declines to
predetermined level.

Periodic system (fixed-time-period)

order placed for variable amount
after fixed passage of time
Order quantity, Q
Demand
rate
Inventory Level

Reorder point, R

0 Lead Lead Time

time time
Order Order Order Order
placed receipt placed receipt
FORECASTING FOR INVENTORY
CONTROL

 Forecasting methods or techniques can be

grouped into two categories:

1. Qualitative.

2. Quantitative.
 Quantitative Methods
Regression Models

Time Series Models

 Conclusion
The purpose of this work has been to set up
the rules for inventory control of spare parts.
For the selective control of spare parts
preliminary classification of spare parts have
been done. The preliminary analysis consists
of ABC,FSN classification. 
The proposed model will help each and every
organization to understand the sensitivity,
criticality and limits each parameter, which
will help the management to earn more profits
and reduce their losses.
 Scope of Future Work

A Decision Support Module can be developed

for inventory control, which is based on the
collected data .
This capability of the module will help to
control the inventory in better way .
 References
 Silver, A Edward, Pyke, F David, P Rein. ‘Inventory Management andProduction
Planning and Scheduling.’ Third edition, John Wiley & Sons Inc, 1998.
 Prof S K Mukhopadhyay,Prof K Pathak,K Guddu, ‘ Development of Decision Support
System for Stock Control atArea Level in Mines’,IE(I) Journal-MN Vol 84, Aug. 2003.
 Robert Goodwill Brown. ‘The balancing of effort in forecasting’, Journal of Forecasting,
Vol 1,Issue 1,July 1981.
 Norman Gaither,Greg razier, ‘Operation Management’,South-Western/Thomson
Learning,Edition-9.
 Gopalkrishnan.P,M.Sundaresan, ‘Materials Management-An Integrayed
Approach’,pub;prentice hall of india private limited(1987).
 Star,Martin K. and David W.Miller, ‘Inventory Control Theory and
Practice’,pub;Prentice Hall of india private limited(1986).
 Martand Telsang, ‘Industrial Engineering & production Management’,pub;S.Chand &
Company Limited(1998).
THANK YOU