Surviving the Spare Parts Crisis. Joel Levitt
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such as the battery fires (true breakdowns) experienced during the rollout of the Boeing 787, are unacceptable from the view of both safety and loss of asset.
In almost all cases, after the safety and environmental consequences are evaluated and eliminated as much as possible, all the subsequent consequences are really variations on economic themes. Here are some examples of the cost of downtime:
| Power plant downtime | $160,000 hour |
| Oil Refinery 400,000/ b/d | $100,000 hour (just the refiner’s margin) |
| Automobile assembly line | $500,000 hour |
| Cigarette manufacturing | $240,000 hour |
From a risk management perspective, the evaluation of consequence goes like this: With the right parts in stock (or otherwise available), it may take two days to put a failed power plant back on-line. Without the part available, it takes four weeks (lead time) and two days (for the repair). If the kit of parts needed for the repair costs $100,000, is it worth it to stock? The answer really depends on the probability. Would you pay $100,000 as an insurance premium against that particular failure? Is the cost worth incurring even if we never have the failure?
Having the right parts helps keep the consequences of breakdown to a manageable level. This type of thinking is the same you use for making decisions about insurance. You contract with a company to pay the premium in order to have them shoulder the consequences you are unwilling to take. If you are willing to take the risk, then you don’t insure it. Questions and considerations like these are at the heart of risk management.
This is Not About Owning the Part, But Having Timely Access to the Part
Here is one thing you need to know before we go ahead: Having the part available does not necessarily mean that you are stocking it. In all the scenarios that follow, having the part available is what is important — not actual ownership of the part. It is critical that this distinction is understood.
Here are two often-used strategies you can use to have a part available without having it in stock:
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