Achieving a 75 Percent Cost Reduction Against Vendor Recommendations Through Spare Parts Optimization

  • As part of its comprehensive asset management program, an offshore project identified the need to develop a spare parts strategy during its design phase.
  • PinnacleART was selected to perform a detailed spare parts analysis, in order to deliver an optimal stocking strategy based on risk.

  • By selecting PinnacleART to facilitate the analysis, the client received a spare parts strategy that will help the facility reduce stocking costs, while maintaining optimal uptime.

INTRODUCTION

In 2012, an offshore oil and gas project located off the coast of Southern Africa initiated the construction of a new processing facility. Expecting to produce 111,000 barrels of oil per day, the project identified the need to develop a spare parts strategy during the design phase of construction. By developing the strategy in this early stage of construction, the spare parts plan is able to be based on equipment criticality, in order to optimize cost associated with stocking parts and minimize the risk of not stocking certain parts.

CORPORATE CHALLENGE

An important goal for any process facility is to keep costs low, while simultaneously maintaining uptime. While meeting this goal requires the application of many asset management practices, having a spare parts plan in place is critical to effectively managing uptime and costs associated with unexpected asset replacement. Therefore, the challenge is to minimize the number of parts held in inventory (i.e. minimize costs), while ensuring the part is available when needed (i.e. minimize risk).

Ideally, inventory requirements need to be defined during project detailed design phase so they can be ordered and stocked prior to project start-up. For this, two items must be developed: a listing of parts for each equipment in the project and the number of each unique part that should be kept in stock for this equipment.

Typically, vendors make recommendations for spare parts needed for their equipment, however, their recommendations do not consider risk (i.e. probability and consequence of failure) for the operating equipment. Instead, the recommendations only consider the need to repair the failed equipment. Thus, if the vendor recommendations for spare parts are accepted without being reviewed, the result will be excessive stock (i.e. too much cost). If too few parts are stocked, repair times for equipment will increase, potentially resulting in production losses, which usually far exceed the cost of the corrective work order—including labor and materials.