Linking the spare parts management with the total costs of ownership: An agenda for future research

Journal of Industrial Engineering and Management JIEM, 2016 – 9(5): 991-1002 – Online ISSN: 2013-0953 – Print ISSN: 2013-8423 http://dx.doi.org/10.3926/jiem.2083 Linking the Spare Parts Management with the Total Costs of Ownership: An Agenda for Future Research Orlando Duran1 , Irene Roda2 , Marco Macchi2 Escuela de Ingeniería Mecánica, Pontificia Universidad Católica de Valparaiso (Chile) 1 2 Dipartimento di Ingegneria Gestionale, Politecnico di Milano (Italy) , , Received: July 2016 Accepted: October 2016 Abstract: Purpose: This manuscript explores the link between Spare Parts Management and Total Costs of Ownership or Life Cycle Costs (LCC). Design/methodology/approach: First, this work enumerates the different managerial decisions instances in spare parts management that are present during the life cycle of a physical asset. Second, we analyse how those decision instances could affect the TCO of a physical asset (from the economic point of view). Finally, we propose a conceptual framework for incorporating the spare parts management into a TCO model. Findings: The recent literature lacks discussions on the integration of spare parts management with the Total Costs of Ownership (TCO). Based in an extensive literature revision we can declare that the computation of costs related to spare parts management has been neglected by TCO models. Originality/value: The contribution of this paper is twofold. First, a literature review and identification of a series of spare parts management decision instances and its relationship with TCOs is presented in this paper. Second, a conceptual framework is suggested for linking those -991- Journal of Industrial Engineering and Management – http://dx.doi.org/10.3926/jiem.2083 decisions instances to a total cost of ownership perspective. Some research questions and future research challenges are presented at the end of this work. Keywords: spare parts, total costs of ownership, life cycle, assets management 1. Introduction Total Costs of Ownership Costs (TCO) or Life Cycle Costs (LCC) corresponds to a managerial system that is focused on the modelling, quantification and control of the all the costs that are present during the design phase of a physical asset (a system, a line or a component) the operation or exploitation stage and it ends with its disposal of the asset. A series of publications on the evaluation of the total costs of ownerships of industrial assets can be found in the literature since 1970 (Kaufman, 1970; Ntuen, 1985; Taylor, 1981). In present days, scientific research on TCO is increasing in importance (Thiede, Spiering & Kohlitz, 2012). Nevertheless, several gaps can still be identified, for instance, most of the currently existing life cycle cost models assume a no systematic and fragmentary approach (Xu, Elgh & Erkoyuncu, 2013). In addition, there is a lack of adequate cost models that take into account the links between system performance parameters, and the costs involved, and the configuration complexity of asset systems (Chen, Zheng, Feng & Li, 2013). Finally, the computation of costs related to spare parts management has been neglected by those TCO models. In the next sections we address and discuss the main decisions instances in spare parts management during the life cycle of an asset and their implications into TCO. We propose a referential framework which is intended to delineate and de-scribe the linkages between the spare parts management and the different phases of an asset life cycle. There we looked at the problem from the perspective of the following question: “how all the decisions taken by spare parts managers do may affect the TCO?”. Through an extensive literature review and the construction of the proposed reference framework we derived at a set of research questions. Those questions are commented at the final section of this manuscript. -992- Journal of Industrial Engineering and Management – http://dx.doi.org/10.3926/jiem.2083 2. Literature Review Total ownership costs represent a main concern during the life cycle of a physical asset. Through the adoption of a TCO model, managers will improve their decisions throughout the entire asset life cycle. According to Hokstad (1998), in order to obtain the total life cycle cost, it is necessary to break the total cost down into a series of cost elements. The identification of the elements and their individual scopes need to be determined breaking down the total costs. Roda and Garetti (2015) proposed the use of a Cost Breakdown Structure for supporting TCO assessments. In this paper we suggest three dimensions: the cost category, the product’s lower indenture levels and the time in the life cycle when the work/activity is to be performed. For the sake of relevance, we will concentrate on the third dimension. Life cycle phases will also be accounted for as the cost categories will distinguish between: • investment costs (prior to start of operation) and • maintenance/operating and “risk” costs occurring regularly during operation. As we will discuss later in this work, the behavior of the spare parts management costs highly depends on the phase of the life cycle phase in which the cost of ownership are being quantified. One in few works that incorporates the aspect of spare parts costing into a LCC model is that presented by Carpentieri and Papariello (2006). In that paper, the authors take into account the maintenance costs for two different applicable maintenance policies, i.e. preventive and corrective. The model allows also the numerical calculation of the spare parts which are annually necessary, their cost and the time for maintenance and replacement. Jun and Kim (2007) incorporated with more detail the spare parts aspect into a life cycle model for a railway vehicle. They highlighted that an optimized strategy in spare management can decrease the operational costs. Carpintieri, Guglielmini and Mangione (2007) presented a simplified LCC model which integrates some spare parts management aspects. That work proposes the use of a simulation model from which the demand behavior could be extracted and used as an input for a TCO model. However, the paper does not consider the effect that diverse inventory policies can cause into TCOs. Carpientieri and Papariello (2006) incorporated some sort of spare parts management aspects into a LCC model, taking into account, maintenance costs to the model. Jun and Kim (2007) added more details related to spare parts management into a railway system LCC model. Some recent works have been devoted to model the failure rate changes in order to consider all the different phases along the time of the asset life cycle (Mahmoud & Farouq-Mohammed, 2010; Tian, Tian & Zhu, 2014). After the literature revision, we can confirm that there is little work done regarding the integration of spare parts costs into life cycle or ownership costs models, being most of it related to specific cases of applica (...truncated)