In procurement and inventory management, the way you classify and name spare parts can significantly impact operational efficiency. A standardized spare parts classification system enhances clarity and reduces confusion, leading to more efficient retrieval and spare parts management. Aligning your procurement organization by classes can result in time and money savings. Here, we explore the best practices for classifying spare parts in your inventory.

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What is spare parts classification?

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Spare parts classification is grouping parts according to shared characteristics such as the part's type (e.g. mechanical, electrical), value (as part of an ABC analysis), criticality (from a VED analysis), function, or relationship to other components. It also includes naming conventions, a factor often overlooked by on-the-ground operational teams. 

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The goal of spare parts classification is to create a structured system for identifying and managing the diverse range of spare parts an operation needs to keep on hand.

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What are the benefits to companies in using a classification system for spare parts? 

Though it requires thought and strategy to set up, spare parts classification is a critical (and highly impactful) step in any manufacturing operation. Classification systems help organizations build efficient workflows for inventory management by grouping items for similar processing. For example, review the value of all “A” parts once per year.

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A well-thought-out spare parts classification system makes it easier for everyone in your organization to understand what each part is, where it belongs, and its function. This uniformity is vital in reducing errors, simplifying training, and improving inventory tracking and ordering processes as part of your spare parts management.

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By implementing a robust classification system, manufacturers can optimize inventory levels, reduce carrying and procurement costs, improve service levels, and ultimately enhance overall operational efficiency.

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How do you set up a spare parts classification system?

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Define internal objectives

Before you can effectively classify their spare parts inventory, you need to have a clear understanding of why you are implementing such a system, what you hope to achieve, and how you will use this system within your spare parts management. This goal setting lays the foundation for the spare parts classification process by giving it focus and direction. 

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A manufacturer's spare parts needs and priorities will be unique to their operations, equipment, and industry. By defining internal goals upfront, the classification system can be tailored to support the company's unique maintenance requirements and business objectives.

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Internal objectives also enable firms to evaluate whether the spare parts classification is successful and delivering the desired benefits for their inventory management. These objectives could include targets around inventory reduction, improved availability of critical parts, streamlined procurement, or more efficient maintenance planning.

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Choose a classification system 

In this article, we’ll discuss the standardized product classification systems. 

There are three main types of systems used in manufacturing operations:

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1. Open Classification Systems

Open classification systems (e.g. eCl@ss) are standardized, off-the-shelf frameworks developed by industry experts or organizations. They are widely adopted across different sectors, and offer a universal approach to classify many components and products, among which spare parts. These systems enjoy the benefit of having a community, proven use cases, literature and service providers who can help with implementation. 

Key features of open classification systems include:

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• Standardized nomenclature and coding
• A set of characteristics per class
• Predefined hierarchy
• Regular updates to reflect industry changes
• Ease of implementation in spare parts management due to readily available documentation and support
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Examples of open classification systems include ETIM and the United Nations Standard Products and Services Code (UNSPSC).

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2. Proprietary Classification Systems

Proprietary classification systems are custom frameworks developed by companies or software vendors. These systems are often tailored to meet the unique needs of a particular industry or organization.

Here are some advantages of using a proprietary classification system:

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• Customized to fit specific industry needs
• Integration with proprietary software and systems
• Potential for competitive advantage through unique optimization
• Greater control over system updates and modifications
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For example, at Sparrow we created a customized classification system that we believe works best for spare parts users.

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3. Homemade Classification Systems

As the name suggests, homemade classification systems are developed in-house by organizations to address their specific requirements. These systems are often created when existing open or closed systems do not fully meet an organization's needs.

Characteristics of homemade classification systems:

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• Highly customized to the organization's unique processes and terminology
• Flexible and easily modifiable as needs change
• Potentially more intuitive for internal users familiar with company-specific spare parts management practices 
• May require significant resources to develop and maintain
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While homemade systems offer maximum customization, they can also present challenges in terms of standardization and inter-organizational communication. They can also be labor- and time-intensive, and if the team working on classification isn’t so experienced, the end result may be weaker than an off-the-shelf solution. 

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Implementing classes on your data

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If you have chosen to go with an open or a proprietary classification system, implementation will be much easier–as long as you have a trusted partner (like Sparrow!) to help you. If you choose to define your own classification system, here is a high-level guide for implementing a homemade system: 

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1. Start with broad categories

First, begin by identifying the key characteristics that should define each class of spare parts. These should be broad groups based on their general function or the equipment they belong to. For example, categories like "Electrical," "Mechanical," "Hydraulic," or "Pneumatic" offer a clear, high-level distinction. Other broad categories could be usage frequency, criticality, or cost.

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2. Drill down into subcategories

Within each broad category, establish subcategories. If you’re classifying broadly by part type, for instance, you may include "Motors," "Sensors," or "Cables" under the larger “Electrical” category. This step helps further refine the sorting process, making it easier to locate and manage parts.

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3. Continue adding subcategories as needed

Add continually more specific subcategories as needed. Depending on the search function of your spare parts management solution, it may be advantageous to add many relevant subcategories to a single product, so that it can be located regardless of the search query.

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Integrate your chosen system into your work flows

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With a detailed spare parts classification system and strategy in place, the next step is integrating these structures into the day-to-day operations.

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1. Identify Touchpoints

Map out how the new spare parts classification system integrates with the broader maintenance and inventory management processes. Align these integration points with the relevant stakeholders to ensure everyone is on the same page.

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2. Ensure Visibility

Ensure that part class information is visible to all relevant stakeholders, particularly across functions like procurement, operations, and finance. This is something that a spare parts management solution can help with, so long as all necessary parties have access.

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3. Documentation and Training

Make sure that the new classification system is comprehensively documented, and that this documentation is accessible by all the necessary stakeholders. Following this, train staff on how to properly identify, requisition, and manage parts within the classification system.

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4. Monitoring and Iteration

Most inventories and objectives aren’t completely static, so a spare parts classification system shouldn’t be either. Continuously monitor the effectiveness of the part classes and adjust as business needs evolve.

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Conclusion

Operations change, and so should your spare parts classification system. Sparrow will help ensure that your system is regularly updated to keep it relevant and effective. Implementing a standardized classification system for spare parts in your inventory goes beyond just being organized. By clearly classifying parts, you enhance communication, reduce errors, and streamline inventory management processes. The key is to start with broad categories, move to specific subcategories, and set realistic class parameters, all supported by robust documentation and training. With these practices in place, managing your spare parts ecosystem becomes much easier, less costly, and more effective.

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