Problems associated with spares inventory are as follows:
1. Spares constitute about 2% of project cost.
2. Various reports estimate the total value of dormant non- moving and obsolete inventories as over Rs. 10,000 crore in the country.
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3. About one third of spares inventory is non-moving and obsolete in nature.
4. The inventory carrying charges, including cost of capital, is about 30 percent.
5. Several organisations in our country attach great importance to the marketing of spares.
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6. The margin of profit of spares for the replacement market varies from 50 to 300 percent.
7. The suppliers normally prohibit their ancilliary units from dealing directly with the industrial buyer.
8. The users define spares as available in plenty when not needed and not available when needed.
9. About 10 percent of the value of a machine is invested in spares at any point of time.
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10. This is obvious as we see huge spare parts inventories simultaneously co-existing with machines lying idle for want of spare parts resulting in lower capacity utilisation.
11. As much as 40 percent of the total working capital is tied up in spares inventories, in spares intensive industry.
12. According to finance ministry guidelines, the banker should keep a watchful eye, if the spares inventory exceeds five percent of the total inventory value.
13. As much as 75 percent of maintenance expense is accounted for by spare parts.
14. The purchase cost or order processing cost is about Rs. 600 per order and varies considerably.
15. Since the selling companies desire an inventory-turnover ratio of six to eight, there is a large number of shortages for the buyer.
16. A low inventory owing to turnover implies obsolescence, the cumulating at seller’s end.
17. Long lead time and exorbitant prices are ideal conditions for spurious spares.
18. While everyone talks about shortage cost due to nonavailability of spares, no one has exactly estimated it.
19. The developing countries are forced to buy equipments from different nations, making standardisation a difficult task.
20. Spare parts are identified by suppliers’ part numbers and not by internal codification.
21. Information on consumption, reliability, categorization, inventory levels, etc. is not readily available in many organisations.
22. The supplier is unable to supply spares as he has changed his models; whereas the buyer’s organisation prolongs the life of the equipment beyond economic levels due to paucity of capital for replacement.
23. The modular approach for replacing only full modules renders the other parts obsolete.
24. Over Rs. 1000 crore worth of spares are imported per annum for the existing machinery.
25. The testing and inspection facilities need to be improved in many organisations.
26. Spare parts are identified by suppliers’ part numbers and not by internal codification.
27. Communication between seller, service engineer, buyer, warehouse manager, maintenance staff and operating personnel need to be improved much, in individual organisations.