Spare Parts – The Forgotten Key to Keeping Production and Cash Flow Running
Visible Problem, Invisible Solution
Spare parts management is something most companies don’t want to deal with – until it’s too late. Yet spare parts are a sort of insurance policy for production. When they’re missing, production stops. And when production stops, money flows away.
I once witnessed a situation where a critical production line stopped because of a cheap part worth less than ten euros. Since the warehouse “didn’t consider it important,” it wasn’t in stock. The result: an entire shift lost, tons of stress, and damage worth thousands of euros. There are countless similar stories across industries. Spare parts directly determine whether production keeps running – and yet companies often only start taking them seriously after having this expensive experience.
This article shows how to turn spare parts management from a potential bottleneck into your competitive advantage.
Why It (Often) Doesn’t Work: Top 5 Symptoms of Ineffective Spare Parts Management
In Czech companies, we encounter all kinds of extremes – from small storerooms where parts are found “by memory” to state-of-the-art, high-tech automated warehouses with 3D printing capabilities. Most companies, however, fall somewhere in between – and face the same recurring problems:
How To Tell When Something Is Wrong?
The state of spare parts management cannot be captured by a single metric, but by a combination of indicators. One of the most widely monitored – and easily comparable – is the Spare Parts Investment Ratio (SPIR), which shows the ratio of spare parts inventory value to the reproduction value of assets.
|
Industry |
Typical Range (%) |
Best Practice (%) |
Comment |
|---|---|---|---|
|
Process industry (chemicals, petrochemicals, energy) |
1.5–2.5% |
~2% |
High reliability requirements, long lead times |
|
Automotive |
1–1.5% |
~1% |
Strong focus on lean, high standardization |
|
Discrete manufacturing / engineering |
1–2% |
~1.5% |
Broader technology mix, missing spare parts classification |
|
Heavy industry / mining |
2–3% |
~2.5% |
Hard-to-source, critical components |
|
Food & FMCG |
1–2% |
~1.5% |
Necessary balance between hygiene and reliability |
Practical example: If a company has machinery worth about €100 million, the difference between 1% and 3% SPIR means up to €2 million in excess dead capital sitting in the warehouse – and yet the most critical parts may still be missing.
And who is responsible? That’s often the biggest issue. Maintenance points to procurement, procurement to maintenance, IT claims “the system would work if someone set it up correctly.” Meanwhile, management pushes for maximum OEE (Overall Equipment Effectiveness) while simultaneously cutting the spare parts budget.
What Works: Core Principles of Effective Spare Parts Management
Effective spare parts management doesn’t depend on miracle software but on clearly set principles and systematic data work. The key is proper criticality-based classification, which defines what must always be available and what can be managed differently. Clear ownership and data governance are essential since quality data is the basis for sound decision-making. Digitalization and predictive models then make it possible to optimize inventory and reduce tied-up capital without jeopardizing production reliability.
The key to effective management is the right classification of parts. It’s not enough to simply define criticality, but to use a combination of methods:
- ABC analysis by part value (A = high, C = low),
- XYZ analysis by consumption predictability (X = stable, Z = irregular),
- Criticality assessment based on production impact.
This makes it possible to segment parts into groups like AX (high value, stable demand) or CZ (low value, irregular demand). From there, it’s clear which parts should always be in stock, which should only be ordered on demand, and which can be managed alternatively (e.g., refurbishment, sharing across plants).
The Future of Spare Parts Management in the 21st Century
The discipline is shifting from operational to strategic. Targets are clearly measurable:
- Inventory reduction of 20–40% while maintaining availability.
- Availability of critical parts >98%, dead stock below 10%.
- Service level >95% (part available on first attempt),
- Minimized SPIR based on company goals - the ratio of the value of spare parts inventory to the reproduction value of assets.
- Part search time reduced from the typical 5–15 minutes to <5 minutes through digitalization and clear records.
- Sustainability & circular economy: refurbishment, recycling, 3D printing.
Alongside digitalization, new forms of supplier collaboration are emerging:
- Vendor Managed Inventory (VMI): The supplier holds stock directly in the customer’s warehouse and guarantees replenishment based on actual consumption. The company reduces tied-up capital while ensuring availability.
- Service agreements with suppliers: Contracts where suppliers provide not only parts but also service interventions, or guarantee availability of critical components within a defined timeframe (e.g., delivery to the customer’s warehouse within 4 hours).
These models show that spare parts management is no longer just an internal warehouse issue, but part of a broader supply chain strategy and partnership – with a direct impact on availability and reduction of tied up capital.
How to Start: Recommended Roadmap for Companies
Conclusion: Spare Parts Are More Than Just a Warehouse Issue
Spare parts are not just “bolts on a shelf.” They are investments that directly protect production and cash flow. Companies that approach them strategically suffer fewer outages, lower costs, and more reliable operations.
As we tell our clients:
“Spare parts management is not about storing metal – it’s about protecting production.”
