Stock management a component of production planning model with simultaneous production of spare parts Piotr Cyplik, Lukasz Hadas Logistic Systems Department Poznan School of Logistics Estkowskiego 6 St, 61-755 Poznan, POLAND Abstract-This paper presents, proposed by the authors, application classical models of stock replenishment in production planning model with simultaneous production of identical components for the need of own assembly and as spare parts in machine industry plants. The goal of the thesis was to elaborate a production planning model which would allow to combine all demand sources within one production schedule and to decrease spare parts stock with simultaneous production of identical components (spare parts, subassemblies) for the need of own assembly and as spare parts. The proposed production planning model has been based on the classical stock management theory and material requirement planning methods. It results in merging production management and stock management in a one coherent material flow management system. The research was done in GRUNDFOS POMPY Ltd. Company. GRUNDFOS is one of the biggest pump producers in the world. The model has been verified through its implementation and resulted in a decrease of spare parts stock by nearly 50%. I.INTRODUCTION The material requirement planning at the beginning of its existence was treated as alternative of standard methods of stock management. The evidence of it can be the definition in “Terminology in Logistics” European Logistics Association 9, which material requirement planning in stock planning and management describes as the approach to stock planning and management based on two logistics activities: 1) The simulation of future stock quantity done on the basis of the currant stock level and anticipated demand or scheduled changes of stock level. 2) Calculating the material and goods requirement on a lower level on the basis of product structure. These two activities are taken repeatedly on each level of the product complexity. In this way the entire material requirement is defined on the basis of the final product demand. In the previous issues of the dictionary this definition of material requirement planning preceded the one which in the recent issue is listed as first. Another evidence of such approach to the idea of material requirement planning is a classic book by O. Wrigh “Production and inventory management in the computer age”. The publication of this book, in fact, introduced the theory of material requirement planning, preparing the ground for another classic book by J. Orlicki. 8 II.THE ASSUMPTIONS OF THE PRODUCTION PLANNING MODEL The production planning model with simultaneous production of identical components for the need of own assembly and as spare parts should be inseparable with the model of stock determining in machine industry plants. This means that there is a mutual correlation between the method of production and the adopted system of stock replenishment. It is particularly crucial in plants with the developed distribution network of final products. The adopted system of stock replenishment in the links situated the closest to the client is strictly connected with sales planning, which in turn influences the production planning directly. The purpose of working out the model was to reduce the level of goods on hand, thus it was justified to reorganize the process of stock replenishment in their decoupling point. Accurately determined time and size of the order in this point reflects in working out such a production planning which meets the expectations that were assumed in the purpose. The basic assumptions of the model include: 1) The production planning is done based on the material requirement planning method and is computer supported. The method of material requirement planning is applied to production planning from the moment of generating spare parts requirement in the decoupling point. 2) The spare parts demand is treated as independent demand. Repeated production aimed at a diverse group of receivers is assumed. The producer has a limited influence on the final products users, thats why the failure of particular parts take place at random. 3) The spare parts stock in the decoupling point results from: - Uncertainty of demand. - Uncertainty of deliveries - The necessity of maintaining production continuity. 4) The main schedule was worked out in the make to stock or mixed versions. In the make to stock option planning takes place exclusively according to the requirement forecast. In the mixed version confirmed orders are taken into account as well. Such an assumption enables considering production of the same products, both in a standard form and in adjusted to individual orders of customers. III.THE MODEL OF PRODUCTION PLANNING That model of production planning with simultaneous production of identical com