The total cost of ownership holds the key for spares sourcing. Graham Hill reports.
The need to keep production in the oil and gas sector up and running is critical given the substantial cost of unanticipated downtime.
However, in most facilities, the number of spare parts needed to cover all possible breakdown eventualities can be complex and extensive, with high associated costs.
For example, it is impractical for a facility to hold in stock every type of carbon and silicon carbide seal ring it could possibly need due to the vast range of sizes, shapes and materials in which these products exist.
The cost of a comprehensive stockholding even in this one area could run into hundreds of thousands of pounds – and can rarely be justified even when set against the costs of downtime while a replacement is sourced.
Even in the presence of state-of-the-art condition monitoring equipment, with the ability to predict with great accuracy when a component is likely to fail, there will almost inevitably be a loss of production while waiting for the new component to arrive.
Facility operators are of course heavily reliant on component suppliers to be able to manufacture a replacement part to order and ship it to wherever in the world it is needed within a few days.
For many years, 10 days was the norm, but advances in manufacturing techniques and ever-improving transport links mean that in most instances, a five-day turnaround – or even quicker - from order placement is frequently achievable. This is thanks to the introduction of innovative manufacturing processes for the high-temperature sintering of silicon carbide and process enhancements for carbon materials by the leading players in the sector.
Typically, component sourcing is handled by in-house procurement departments who will issue a request for quotation via an ERP system, with the decision on which supplier is then engaged often based on who responds quickest and who can cost-effectively deliver the component with the shortest lead time.
What this method of sourcing is not always best-placed to do, however, is to ensure the best value for money in terms of total cost of ownership. Just because a part can be supplied quickly is no guarantee of its quality or service life – and sudden or unanticipated failure of the new part could prove very costly in the long term.
However, as with many other areas of procurement, purchasers are not always given the freedom to use suppliers based on criteria other than purchase cost. Indeed they are often assessed and rewarded solely on their ability to deliver savings on initial purchase cost – with little thought given to the longer-term costs of sourcing decisions made solely on that criterion rather than other elements such as quality, performance and technical support.
This means that not only are production facilities not necessarily getting the best possible product for their application; but they are also potentially missing out on the benefits of development in materials technology which could see a component, costing more to buy initially, achieve rapid payback through enhanced performance and longer service life.
With the turnaround time reduced, the extra cost of a better quality component is less of an issue when compared with the additional days of downtime.
Another less ‘tangible’ factor of this commoditised method of sourcing – and one which is again hard for procurement teams to measure purely in monetary terms – is the technical support, application advice and after-sales service offered by many of the leading players in the sector.
While some suppliers are content simply to respond to a request for quotation and supply exactly the same component as before, the trend among the leading component manufactures is to understand the application operating conditions and challenge the brief to explore if a different material or a modified design may help to optimise performance or service life.
Once again, a relatively small additional cost at this stage has the potential to deliver drastic reductions in total cost of ownership of the final component supplied.
However, those companies which simply work reactively with suppliers and order exactly the same product, without enabling them to suggest a best alternative, are potentially missing out on major opportunities to enhance performance, reduce energy usage and extend maintenance intervals.
The ability to interact with customers in terms of technological advancements and design optimisation is therefore vital in order to ensure the best component for the job is being sourced, reducing total cost of ownership and minimising overall operational and production costs.
Graham Hill is with Morgan Advanced Materials – Seals & Bearings, Redditch, Worcestershire, UK.