2006 - 0227 - WP For Spares MGNT Planning 11i10

Spares Management
11.5.10
Inventory Planning and
Replenishment
An Oracle White Paper
June 2005
Spares Management Business Processes
Table of Contents
Overview .…………..……………………………………………………. 1
Introduction to Planning ………………………………………………… 2
Planning the Field Technician Inventory ……………………………… 4

Details on Min-Max Calculations ………………………………………. 17
Planning the Field Service Warehouse Inventory …………………… 20
Planning with Supersession Impact …..………………………..……… 29

Replenish the Field Service Warehouse ……………………………… 36
Replenish the Field Service Technician ………………………………. 41
ii
Spares Management Business Processes
OVERVIEW
The purpose of this white paper is to describe the inventory planning process in
Spares Management 11.5.10.
Spares Management is positioned in the Field Service solution as a product

providing both the logistics and planning functionality needed to manage a
service parts inventory. The product uses core ERP foundation
functionality from Oracle Inventory, Order Management, Purchasing and
ATP extending those products where necessary with additional
functionality to satisfy unique field service business requirements. The
product also has extensive integration with Oracle Field Service including
the Dispatch Center, Scheduler, Field Service Debrief and Field Service
Mobile products.
From a supply chain perspective, Spares Management covers all of the

essential business processes required to operate the field service supply
chain.
Field Service Supply Chain
New-buy
Supplier
Replenishment Flow
Central Intermediate Field

Warehouse Warehouse Technicians
Usable Usable Usable
Inventory Inventory Inventory
Excess Returns
Repair Service
Supplier Customer
Defective Returns

Usable Defective Defective
Business Processes
• Plan technician Inventory • Process excess returns
• Plan Warehouse Inventory • Priority orders for the technician
• Replenish technician inventory • Recover and consolidate defectives
• Replenish warehouse inventory • Repair defective returns
Spares Management Business Processes 1

This white paper will describe the planning for both technician and warehouse
inventory. The logistics processes will be covered in another white paper.
INTRODUCTION TO PLANNING
With the potential for a large number of field technicians and/or warehouses to
plan, an automated process to create stocking level recommendations is very
important. Stocking levels also need to be updated frequently to include the latest
usage trends and supersession activity.
The planning functionality in Spares Management will automatically

recommend optimum stocking levels for the field service technician or
warehouse. These stocking levels are produced from usage history, planning
parameters and a planning method. The installed base population and failure
rates can also be used depending on the planning method employed by the
user.
The functionality includes features to handle planning scenarios unique to the

field service operation:
• New technicians who would not have any usage history
• Transferred technicians with usage history from the old assignment that
is not applicable to the new assignment
• Technicians who have been temporarily involved in activities other than
normal field service work.
• New product introductions or changes to product populations
The Spares Management planning also incorporates advanced supersession

functionality to minimize obsolete inventories caused by supersession activity.
This functionality coordinates min-max levels and supply chain inventories to
insure maximum utilization of inventory on superseded parts.
Supersessions occur when one part has been replaced by another. In
manufacturing, a supersession can usually be fully implemented in a few days or
weeks at most. In a field service scenario that same supersession can often take
years to work completely through the installed base.
Business rules are also available to automate the planning process. The rules
can be used to analyze the change between current and recommended stocking
levels. The rules can be used to automate the routine changes.

Modeling Technicians and Warehouses
Technicians and warehouses that require planning need to be added to the Tree
in the Planners Desktop can accommodate sub-inventories, inventory orgns
and whatever artificial nodes are required for presentation.
Technicians should be modeled as sub-inventorie(s) in the field service supply
chain. If the technician is involved in the recovery of defective parts, a second
defective sub-inventory would be used. Spares Management provides
functionality to flag a sub-inventory as either “usable or defective” and typically
a technician would require both.
Warehouses of any significant size need to be setup as inventory organizations.
Sub-inventories, however, could be used in the case where there are a large
number of relatively small metropolitan warehouses.
The following sections will describe in detail how planning works for the field
service technician and warehouses.

PLANNING THE FIELD TECHNICIAN INVENTORY
This section will describe how to produce and maintain min-max levels for the
field service technicians using Spares Management functionality. With the
potential for hundreds or maybe even thousands of technician inventories to
plan and manage, an automated process to create and maintain min-max levels
is a key need. Also, technician stocking levels should be updated frequently to
reflect the latest usage trends and supersession activity.
This same basic process can be used to plan stocking levels for the warehouse
inventories, but there are some differences in terms of methodology and
emphasis. So planning warehouse inventories is covered in a later section of
this white paper.
There are three basic planning methods provided in Spares Management:

• Personal Usage
• Territory Norm
• Product Norm
All three can be used to plan the technician inventory.
Personal Usage and Territory Norm follow a similar flow and are covered
together. Combination methods are also available that provide a blend between
Personal Usage and Territory Norm or Product Norm.
The Personal Usage method in combination with product population changes

can also be used to plan technician inventories. But this approach is more
commonly employed in planning stocking levels at the warehouse so it will be
covered in that section of the white paper.
Planning the technician inventory with Personal Usage or Territory Norm

Personal Usage and Territory Norm are Planning Methods used to create and
maintain min-max levels for the technicians. Product Norm is also a
recommendation method that can be used to plan technician inventories but
this method follows a different flow so it’s covered separately in a different
section.
Personal Usage Method
With this method the “technician’s usage history” is used for planning the
technician’s inventory. The usage history is associated with the sub-inventory
assigned to the technician and is acquired primarily through the debrief process
when the technician reports parts used on a task. Usage history can also be
acquired through Miscellaneous Transactions entered directly into Oracle
Inventory.
This method would be employed when the technician is in a reasonably stable

working situation doing similar tasks on a regular basis. In this scenario, recent

usage history would provide a reasonably good indication of what the
technician would likely be needing in the immediate future.
Territory Norm Method
Territory Norm defines parts usage that is average or typical for a group of
technicians assigned to a node in the planning tree. This method can be used in
the scenario of a new technician who does not have usage history or a
transferred technician who has usage history that is not applicable to the new
assignment.
Care must be taken to avoid using this planning method where the technicians
in the group are individually doing unique tasks.
Personal Usage in combination with Territory Norm
Territory Norm can be used in combination with Personal Usage. Weighting

factors are provided to define the percentages to use for blending of the two
methods.
This blended method might be used in the scenario where a technician had
been off the normal field service routine for a period of time due to training,
special assignment etc. In this situation, recent usage history would be
understated due to the absence from normal tasks and usage reporting routines.
Personal Usage, which is understated in this scenario, would be supplemented
with Territory Norm.

Technician Planning Process Using Personal Usage and Territory Norm
The process for creating min-max levels using the Personal Usage or Territory
Norm planning methods is covered in the following section. Additional details
on the min-max calculations are included at the end of the section.
Table 1.0
Process for creating and maintaining min-max levels for the technicians
Step Description Comments
1.0 Enter planning parameters for the Use Planning Parameters tab as shown above.
technician being planned. Planning parameters entered at a higher level
node will default down the tree unless
otherwise overridden at the technician.
Forecast Rule Defines number of history periods, forecast

periods, size of each period, forecast method,
Tracking Signal Cycle and other forecast
parameters.
The Tracking Signal Cycle is used to
determine the number of Forecast Periods to
use in calculating the Tracking Signal.
Tracking Signal Periods = Tracking Signal
Cycle * Forecast Period
Forecast Rules are setup in:
Spares Management >> Setup >> Business
Rules >> Forecast Rules
In Territory Norm the Forecast Rule is used
to define the number of history periods to use
in the Territory Norm calculations for average
usage across a group of technicians.
Service Level Planned level of service for the technician.

The service level defines the percent of times
the technician should have the part on-hand
when needed.
Service level is used to determine safety stock
in the Personal Usage method.
The Territory Norm method does not use
safety stock.
EDQ Factor This is a combination of carrying cost and

ordering cost in the Economic Delivery
Quantity calculation.
EDQ is a function of the value of the annual
usage.
The EDQ is used to determine Max levels.
As a general rule, the EDQ factor would be

set between 5 and 15. The user would
observe results and make adjustments until
seeing min-max recommendations that were
sensible for that user.
Authorized for ASL When the parameter is set to NO, the ASL
will be recommended for viewing but it
cannot be accepted.
Use safety stock If the parameter is set to NO, safety stock will
not be used in the min quantity calculation.
Step 1.0 and 2.0
Planners Desktop with Planning Parameters tab
2.0 Select Planning Method Personal Usage or Territory Norm

Planning Method tab Or Personal Usage and Territory Norm
When Personal Usage and Territory Norm
are selected weighting factors are used to
define how to blend the two methods.
The weighting factor, expressed as a decimal,
less than one, defines how much weight to
give personal usage. Example = 0.6. In this
example the weight for Territory Norm would
be 1 - 0.6 = 0.4.
3.0 Define Recommendation Rules Navigator >> Setup >> Business Rules
>> Recommendation Rules Tab

Automates Min-Max Recommendations • Value Change
• Value Change %
• Quantity Change
• Quantity Change %
• Tracking Signal Min
• Tracking Signal Max
The Min-Max Recommendation would
“pass” for automation if the Quantity or
Value change or % was less than the entered
value.
The tracking signal measures cumulative
forecast error relative to standard deviation.
When the Tracking Signal is negative, for
example -5.0, actual usage on a cumulative
basis is running greater than forecast.
When the Tracking Signal is Positive, for
example 5.0, actual usage on a cumulative
basis is running less than forecast.
The Min-Max Recommendation would
“pass” for automation if the actual Tracking
Signal was:
> TS Min and < TS Max

Step 3.0
Recommendation Rules
4.0 Create Min-Max Recommendations. Navigator >> Reports and Programs

Run concurrent program: Create Usage for
Recommendations.
This program needs to be run only if usage or
the supply chain has changed.
Run Concurrent Program: Create Usage
Rollup if the planning tree in the desktop has
changed.
Run concurrent program: Create ASL
Recommendations.
This program can also be run from the
planning tree node.
Min = Reorder Point = usage during lead
time + safety stock
Max = Min + EDQ
Additional details on Min-Max

calculations are described below
5.0 View and review min-max Spread-table in recommendations tab as seen

recommendations below shows:
• Delta Cost between current max and
recommended max
• Actual cost of current max
• Actual cost of recommended max

• Delta min between current min
recommended min and
• Delta max between current max and
recommended max
Usage history and forecast can be viewed in

the lower tabs
6.0 Change Min-Max recommendations as Change Service Level and/or EDQ Factor in
required Planning Parameters tab and save.
Recommendations are automatically changed
in Recommendations tab.
It is not necessary to rerun concurrent
program.
7.0 Accept or reject recommendations Use Accept or Reject button.

Accept button will cause new min-max values
to be implemented.
Accepted recommendations automatically
update Oracle Inventory table for min-max
values
The Stock List tab in the Desktop is also
updated
Reject button will cause recommendation to
be deleted from the spreadtable
Steps 5.0 – 7.0
Planner’s Desktop with Recommendations tab
From the Recommendations tab the planner can accept or reject the
recommendations.

8.0 Add new min-max recommendation or Based on review of min-max
change current min max recommendation planner may want to:
recommendation.
Make a change to an existing min-max level
that is different than the recommendation.
Use Stock List tab as shown below to
change a current min-max.
Or create a new min-max level for a part.
Use Add button to create a new min-max
level for a part that does not currently have
one.
Step 8.0
Planner can enter min– max levels different than the recommendation in the
lower Stock List tab.

Planning the technician inventory with Product Norm Method
Product Norm is another planning method that can be used to create and
maintain min-max levels for the technician. The Product Norm method in
Spares Management uses product populations and failure rates to plan the
technician inventory.
Product Norm
Product Norm is a recommendation method that uses product populations and
failure rates to plan min-max levels for the technician. The Product Norm is
used in the scenario where a technician’s installed base is well defined and
failure rates are known or can be calculated from historical usage associated
with the product. Spares Management provides functionality to calculate failure
rates if they are not otherwise known.
When using the product norm, failure rates are defined at a higher level node in
the Spares Planning Tree. Failure rates are calculated from product population
and usage transactions collected from the field service debrief process where
the part used can be related back to the product through the service request.
Failure rates in Spares Management are expressed in terms of usage per product
per week.
Product Norm can also be used in combination with personal usage and
weighting factors are provided in the Spares Management functionality to
handle this blended approach.
Technician planning process using Product Norm

This process is very similar to Personal Usage and Territory Norm as described
above except for the additional step required to calculate failure rates.
Table 2.0
Creating and maintaining min-max levels using Product Norm
1.0 Enter planning parameters for the Planning parameters entered at a higher level node will
technician or node being planned. default down the tree unless otherwise overridden at a
lower node, technician or warehouse.
Forecast Rule Defines number of history periods for accumulating

usage in the failure rate calculation.
Forecast Rules are not used at the node being planned for the
recommendation method Product Norm.
Service Level Planned level of service for the technician or warehouse

Service Level is not used in the Min level for Product Norm

EDQ Factor This is a combination of carrying cost and ordering cost
in the Economic Delivery Quantity.
Authorized for ASL When the parameter is set to NO, the ASL will be
recommended for viewing but it cannot be accepted.
Use safety stock If the parameter is set to NO then safety stock will not
be used in the Minimum quantity.
Safety Stock is not used in the Min level for
Product Norm
2.0 Enter Planning Method Product Norm

Or Personal Usage and Product Norm
When Personal Usage and Product Norm is selected,
weighting factors are used to define how the two
methods are blended.
The weighting factor expressed as a decimal, less than one, defines
how much weight to give personal usage. Example = 0.6. In
this example the weight for Product Norm would be 1 - 0.6 =
0.4.
3.0 Enter planning parameters for the

Planning Tree node where the
failure rates are being calculated.
Calculate Failure Rates checkbox Check this box when failure rates are calculated for the
node.
Forecast rules Defines number of history periods for accumulating

4.0 Enter product and population for See Planner’s Desktop below with Failure Rate tab
the node where failure rates are active.
being calculated. In this example a Product = AS54888 and a Population
= 500 was entered for Node = Territory 01
5.0 Calculate failure rates Navigator >> Reports and Programs >> Calculate
Failure Rates
Run concurrent program: Create Failure Rates. This
program can be run from the planning tree node.
Parts and failure rates can also be entered manually if
known. For example, as in the case of a new product.
The manual rate will override if there is also a calculated
failure rate for the same Item.

Step 4.0
Planner’s Desktop with Failure Rates tab active at node where failure rates are being
calculated
Failure rates are calculated for the product and population at a node on the
planning tree. Failure rates can also be entered manually if known.

EXAMPLE OF CALCULATING AND USING FAILURE RATES
Failure Rates are expressed in terms of: usage per product per week. Failure
rates are calculated at a higher level node and used for planning at a lower level
node.
Calculating the failure rate
Product A at the Field Service node has a population of 1000 machines

The Forecast Rule has History Periods = 10
The Forecast Rule Period Size = 7 days or 1 week
The usage reported for Part B over the 10 week period when Product A was
being serviced = 125
Note: This usage would include all usage for the part -product reported in a
sub-inventory attached to the Field Service node or a node underneath it.
Failure Rate = Usage / Population / Weeks in history periods
Failure Rate for Part B used on Product A = 125 / 1000 / 10 = .0125
The failure rate is expressed in terms of usage per machine per week
So it’s .0125 pieces (usage) per machine per week
Sometimes failure rates are expressed in pieces per 1000 machines per week
So, in this case it would be 125 pieces per M machines per week
Using the failure rate in Planning
The failure rate is used to calculate the Average Weekly Usage or AWU
For example at a technician’s truck the impact on Part B using a population
of 2500 machines would be:
AWU impact for Part B = Population * Failure Rate
AWU impact for Part B = 2500 * .0125 = 31.25 pieces per week
New AWU = Current AWU + AWU impact from Product Norm
If the current AWU = 0 as in the case of a new product scenario
Then new AWU = 0 + 31.25 = 31.25
If the current AWU = 10.00 as in the case of a population increase

Then new AWU = 10.00 + 31.25 = 41.25 pieces per week

Step 6.0
Planner’s Desktop with Failure Rates tab active for node being planned
6.0 Enter product and population or Failure rates will be populated from the first
population change for the node higher level node in the tree that has the Calculate
being planned Failure Rates checkbox checked.
7.0 Create min-max recommendations. Same as described above for Personal Usage and
Territory Norm.
8.0 View and review min-max Same as described above for Personal Usage and
recommendations Territory Norm.
8.0 Accept or reject recommendations Same as described above for Personal Usage and
Territory Norm.
9.0 Add new min-max recommendation Same as described above for Personal Usage and
or change current min max Territory Norm.
recommendation.

Details on the Min-Max levels
Table 3.0, as shown below, describes in detail how the min-max levels are
calculated. The details are the essentially the same no matter which Planning
Method is used. The different Planning Methods provide different ways of
getting to the AWU or Average Weekly Usage.
Table 3.0
Additional details describing the min-max calculation
1.0 Enter planning parameters in the • Forecast Rule

Planner’s desktop.
• Service Level
• EDQ Factor
2.0 Generate usage transactions • From Field Service debrief or

• Field Service Usage transactions
3.0 Calculate Average Weekly Usage or For Personal Usage

AWU
Using the Forecast Rule
AWU = (Sum of forecast quantity) / (Number
of weeks included in the forecast)
Where: Weeks included in the forecast =
(Forecast Periods ) * ( days per period ) / 7
Example: Forecast is created using weekly
buckets
Forecast is created for 13 weeks
Sum of forecast quantity for the 13 weeks = 130
AWU = 130 / 13 = 10
For Territory Norm
Using the Forecast Rule
AWU is calculated at a node in the Planning Tree
AWU = (Sum of the usage within the history
periods for all technicians attached to the node) /
(Number of weeks included in the history period)
Where: Weeks included in the history =
(History Periods ) * ( days per period ) / 7
4.0 Calculate usage during lead time UDLT = AWU * Leadtime in Weeks
Lead time is from Oracle Inventory as defined at
the organization, sub-inventory, or Item level
when the supplier is a vendor.
When the supplier is an organization the leadtime
comes from shipping networks

5.0 Calculate Safety Stock Safety Stock = (Safety Factor) * (Standard
Deviation)
Where: Standard Deviation = sqrt [ sum ( Xi
- Aver) 2 ] / ( n - 1)
Where: X i = usage history for the period
and Aver = the average of the usage history over
the specified period
The safety factor is taken from a table, which is
relates safety factors to both EDQ or exposures
and desired service level.
The Safety Factors Table is shown below.
6.0 Calculate the Minimum level For Personal Usage

Min = UDLT + Safety Stock
For Territory Norm
Min = UDLT
Since Territory Norm is by definition an
aggregation of usage from multiple technicians,
safety stock is not used with this method.
Safety Stock is also not used when the Planning
Method is Product Norm.
7.0 Calculate the Economic Delivery EDQ in units = ( EDQ factor ) * sqrt [ 52 *
Quantity or EDQ AWU * Cost ] / Cost
The EDQ is a function of the annual value of
usage.
If the part does not have a Cost then Min-Max
levels will not be calculated
8.0 Calculate the Max level Max = Min + EDQ
The Safety Factors Table shown below in abbreviated version is used to

determine safety factors for exposures (across the top) and desired service level
(down the left side). As the exposures or deliveries per year increases so does
the safety stock required for a given level of service. If the exposure per year is
18 (meaning 18 deliveries per year based on EDQ and annual usage) and the
desired service level is 94%, then the safety factor is 0.96. For the exposure rate
of 17 per year the service level will be 85% with no safety stock at all.
The service level is equated to stockouts per year (down the left side).

Safety Factors Table
SO/ year SL% 17 18 19 20 21 22 23 24
1 98 1.56 1.60 1.62 1.63 1.64 1.65 1.70 1.75

2 96 1.19 1.25 1.28 1.30 1.32 1.35 1.37 1.39
3 94 0.92 0.96 1.00 1.04 1.10 1.12 1.14 1.19
4 92 0.70 0.76 0.79 0.84 0.88 0.92 0.96 0.97
5 90 0.56 0.59 0.64 0.67 0.70 0.73 0.76 0.79
6 88 0.40 0.46 0.48 0.54 0.56 0.62 0.64 0.67
7 87 0.24 0.30 0.35 0.40 0.46 0.48 0.54 0.56
8 85 0.00 0.16 0.21 0.27 0.32 0.38 0.40 0.46
9 83 0.00 0.00 0.00 0.13 0.19 0.24 0.29 0.63
10 81 0.00 0.00 0.00 0.00 0.00 0.13 0.19 0.35
11 79 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.11
12 77 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00
The service level in this safety stock model is derived from both operating
inventory (EDQ) and safety stock. With this approach the user can take
advantage of the significant contribution to service from operating inventory.

PLANNING THE FIELD SERVICE WAREHOUSE INVENTORY
This section will describe how to produce and maintain stocking levels for the
Field Service warehouse using Spares Management functionality. With the
potential for many warehouse inventories to plan and manage, an automated
process to create and maintain min-max levels is an important requirement.
This same basic process as was described above for the technician is used to
plan stocking levels for the warehouse with some minor differences. For
example, the Territory Norm Method is not used for planning inventory at the
warehouse. That Planning Method is used exclusively to plan technician
stocking levels.
Both the Personal Usage and Product Norm methods would be used to plan
warehouse inventories. The combination methods using a blend of Personal
usage and Product Norm are also available for planning the field service
warehouse.
Another scenario for planning the warehouse inventory involves planning for
product population changes, either up or down. In this situation the planner
uses personal usage as the base planning method but can include changes in
product populations to adjust the final result. This approach can also be
employed in planning the technician inventory but it is more often employed in
warehouse planning.
Planning warehouse stocking levels also uses the advanced supersession

functionality from Spares Management. Min-max levels at the central
warehouse will always be positioned at the top part in the supersession chain
unless there are defective parts available with need that cannot be repaired to
the top part. For the intermediate warehouses, min-max levels will be
coordinated with the supersession parameters and supply chain inventories.
Optimizing the Warehouse Inventory

The Spares Management approach to optimizing the warehouse inventory is
limited to optimization at the individual warehouse. Optimization across
multiple warehouses, which may be needed for the larger, more complex supply
chains, is beyond the scope of the product.
For an individual warehouse, however, Spares Management uses a very
advanced approach to inventory optimization using algorithms that synchronize
safety stock and lot size to insure optimum inventory levels consistent with
service level requirements.
Planning the warehouse inventory with the Personal Usage Method

Personal Usage is a planning method that can be used to create and maintain
min-max levels for the field service warehouse. The usage for planning the
warehouse is based on a summary of usage transactions rolled-up from
technicians tiering into the warehouse through the supply chain structure.

Field Service Supply Chain
New-buy
Supplier

Warehouse Warehouses Technicians
Usable Usable Usable
Planning at the warehouse based on a sum of

Repair • Usage at that warehouse Service
Supplier • Usage at all technicians and warehouses rolling into the warehouse through Customer
the supply chain structure

Usable Defective Defective
In this example, the usage for planning at the central warehouse would be based
on the total of: usage at the central warehouse, usage at the intermediate
warehouse(s) tiering into the central warehouse, and usage at the technicians
tiering into the intermediate warehouses that tier into the central warehouse.
The process for planning the warehouse using the Personal Usage planning
Method would be the same as described above for the technician.
Planning the warehouse inventory with Product Norm

The Product Norm method also provides functionality for planning warehouse
inventories. Product Norm is a planning method that uses product populations
and failure rates to plan min-max levels for the warehouse. This method would be
used when the product populations supported by the warehouse are known and
failure rates can be calculated from history or are otherwise known.
When using the product norm, failure rates are typically calculated at a higher
level node in the Spares Planning Tree. Failure rates are calculated from
product population and usage transactions collected from the field service
debrief process where the part used can be related to the product through the
service request. Failure rates in Spares Management are expressed in terms of
usage per product per week.
Product Norm can also be used in combination with personal usage and
weighting factors are provided in the Spares Management functionality to
handle this blended approach.
The process for planning the warehouse using Product Norm would be the
same as described above for the technician.

Planning the warehouse inventory for product population changes
Spares Management also provides powerful functionality for planning warehouse
inventories in the scenario where there is a significant change to current product
population. Used in combination with the Personal Usage planning method, the
warehouse inventory can be planned or re-planned based on a known increased (or
decrease) in product population. The stocking levels for the parts affected by the
population change would be incrementally increased or decreased based on the
magnitude of change in population.
This method can be used, for example, when a third party service provider gains or
loses a contract that has a significant impact on product population being serviced.
It could also be used in the scenario where a new product is being introduced or
extended into a new area.
Process for planning the warehouse using product population changes

The following process describes the step-by-step flow used to plan warehouse
inventories using product population changes.
Step 1.0
Planners Desktop with Planning Parameters tab

Table 4.0
Process for creating and maintaining min-max levels for the warehouse using product
population changes
1.0 Enter planning parameters for the Planning parameters entered at a higher level node
technician or node being planned. will default down the tree unless otherwise
overridden at a lower node, technician or warehouse.
Planning Parameters tab
Forecast Rule Defines number of history periods for accumulating

Service Level Planned level of service for the technician or

warehouse
EDQ Factor This is a combination of carrying cost and ordering

cost in the Economic Delivery Quantity.
Authorized for ASL When the parameter is set to NO, the ASL will be
recommended for viewing but it cannot be accepted.
Use safety stock If the parameter is set to NO, then safety stock will
not be used in the Minimum quantity.
2.0 Enter Planning Method Personal Usage

Planning Method tab

Step 2
Planners Desktop with Planning Method tab active
3.0 Enter planning parameters for the

Planning Tree node where the
failure rates are being calculated.
Calculate Failure Rates checkbox Check this box when failure rates are calculated for
the node.
Forecast rules Used to define the number of history periods for

accumulating usage in the failure rate calculation.

Step 3.0
Planners Desktop with Planning Parameters tab active
4.0 Enter product and population for See Planner’s Desktop below with Failure Rate tab
the node where failure rates are active.
being calculated. In this example a Product = AS54888 and a
Population = 1000 was entered for Node = Spares
Planning
5.0 Calculate failure rates Navigator >> Reports and Programs >> Calculate
Failure Rates
Run concurrent program: Create Failure Rates. This
program can also be run from the planning tree node.
Parts and failure rates can also be entered manually if
known. For example, as in the case of a new
product.
The manual rate will override if there is also a
calculated failure rate for the same Item.

Step 4.0
Planners Desktop with Failure Rate tab active for node where failure rates
are being calculated
6.0 Enter product and population or Failure rates will be populated from the first
population change for the node higher level node in the tree that has the Calculate
being planned Failure Rates checkbox checked.
7.0 Create min-max recommendations. Same as described above for Personal Usage and
Territory Norm.

Step 6.0
Planners Desktop with Failure Rate tab active for node where failure rates will
be used for planning
recommendations Territory Norm for technician planning.
Territory Norm for technician planning.
or change current min max Territory Norm for technician planning.
recommendation.

Step 8.0 – 10.0
From the Recommendations tab the Planner can accept or reject the
recommendations.

Planning the Technician or Warehouse Inventory with Supersessions
The supersession represents a supplier or engineering driven business situation

where one part has been replaced by another part. The supplier typically
notifies the customer that a part has been replaced and is no longer available.
Notification of the supersession can also come from engineering. New orders
would be placed for the superceding part. In some cases the supplier will also
dictate that existing orders should be converted to the superceding part.
Multiple supersessions can result in the so-called supersession chain, for

example where Part A is replaced by Part B which is replaced by Part C etc.
Supersessions have a major impact on inventory planning and the time frame
over which this impact occurs can be quite long. Unlike manufacturing, when a
supersession impact can cycle through very quickly, the supersession in Field
Service, depending on the size of the Installed Base, could take a long time to
completely implement. Ideally, when a supersession occurs, the min-max levels
would be positioned on the top part in the supersession chain. But in the
scenario where significant inventory is still available on the superceded part, the
best inventory utilization strategy would keep the min-max levels positioned on
the superceded part, whenever possible, until the inventory is exhausted in the
supply chain or supply chain segment.
This strategy will drive parts out to the technicians where the parts can be used
and the inventory depleted in an orderly process. The positioning of Min-Max
levels within the supersession chain will be determined by whether inventory is
still available for the part that has been replaced.
This strategy assumes, of course, that the supersession has a “use to depletion”
Disposition Option as defined in the supersession details. If the supersession
has a “scrap” Disposition Option then the Min-Max levels would be positioned
immediately on the superseding part and any inventories on the replaced part
would need to be scrapped or otherwise purged from inventory.
Definition of a Supersession and Parameters
Supersession definition: Part A is replaced by Part B

• Supersession Type: Unilateral or Bilateral
Bilateral is the scenario where an order for Part B, the higher level part, can
be filled by either Part A or Part B.
In the Unilateral scenario, an order for Part B can only be filled by Part B.
The lower level Part A cannot be used to fill an order for Part B. However,
if Part A is ordered, Part A could be supplied consistent with Disposition
Rules.
• Disposition: “Use to Depletion” or “Scrap”.
Defines how the disposition of existing inventory needs to be handled on
the lower level part.

A disposition of Scrap would indicate that inventory on the lower level part
cannot be used and should be scrapped or purged from inventory. This
disposition would cause the Min-Max levels to immediately go to the
superseding part.
Use to Depletion indicates that inventory for the lower level part can be
used consistent with the rules defined by supersession type. This
disposition would cause the Min-Max levels to transfer to the superseding
part when the inventory had been exhausted.
• Repair To:
Defines the highest level in the supersession chain that the lower level part
can be repaired to. Ideally, the lower level part could be repaired to the top
part in the supersession chain. But this is not always technically or
economically possible so the “Repair To” could be the same part or
another part less than the top part in the chain..
For example, Part A has been superseded by Part B but Part A cannot be
repaired to Part B. In this scenario the Repair-to part for Part A would be
Part A. If Part A could not be repaired to Part A, the Repair-To would be
left blank.
Supersessions and Substitutes

Supersessions should not be confused with substitutes. In the substitution
scenario Part B can be substituted for Part A. Part A is considered to be a
suitable substitute for Part B but Part A and Part B are both independent items
that are procurable.
Supersession Strategy
In Spares Management, the supersession strategy will minimize obsolescence by
positioning the Min-Max levels on the lower level part so long as inventory for
the lower level is available in the supply chain. This approach will drive parts
out to the “point of use” where usage can occur and lower level inventories can
be depleted. When inventory in the supply chain is used up for the superceded
part the min-max levels will move up the supersession chain to the next level
that has inventory available.
Planning with Supersessions

The following section describes how the supersession impact is integrated into
the planning process.

Table 5.0
Planning process with supersessions
1.0 Create the supersession Navigator >> Setup >> Define

Supersessions
Supersession Parameters:
• Replaced Item
• Superceding Item
• Repair-To Item
• Reciprocal
• Disposition
The Reciprocal can be defined as either

Bilateral or Unilateral.
The Reciprocal parameter defines which
items can be used in order processing.
Unilateral means that if an order is received
for the superseding part then the replaced
part can not be used to fill the order.
Bilateral means that if an order is received
for the superseding part then either the
replaced or superseding part can be used.
The Disposition has two options:
• Use to Depletion
• Scrap
If the “Use to Depletion” option is used the
“Stockable” Flag in Inventory will be
checked.
If the “Scrap” option is used the
“Stockable” Flag in Inventory will be un-
checked.

Step 1.0
Define the Supersession
3.0 Create supply chain At the item-organization level:

Inventory >> Organization Items >> General
Planning tab
Enter sourcing
Or at the item-sub-inventory level enter sourcing
Or at the organization or sub-inventory
Step 3.0
Enter sourcing to create the supply chain

Step 50 and 6.0
4.0 Create min-max recommendations Spares Management >> Reports and Programs
Run concurrent program in the following sequence:
1. Create Usage for Recommendations if usage or
supply chain has changed
2. Create usage rollup if Planning tree has changed.
3. Process Superseded Items if supersessions are
involved
4. Create ASL recommendations
The programs need to be run in the sequence indicate
above.
recommendations Territory Norm for technician planning.
Territory Norm for technician planning.
or change current min max Territory Norm for technician planning.
recommendation.

Supersession Impact on Min-Max Recommendations
Spares Management will automatically position the min-max levels for the
part(s) in the supersession chain to achieve maximum utilization of available
inventory. The approach is explained in the following scenarios.
Scenario 1.
Supersession: Part A replaced by Part B
Type: Unilateral
Disposition: Use to Depletion
On-hand available at central warehouse = 500 when the supersession was
entered
Min level at Central Warehouse = 50
The central warehouse is the source for the technician org
In this scenario Spares Management would recognize the need to utilize the 500
pieces of inventory under the Use to Depletion disposition option.
The min-max levels for the technicians would stay at Part A until the inventory
at the central warehouse dropped below min level or reorder point (ROP).
This would pull the parts out of the central warehouse to the technicians where
usage could occur and inventory depleted.
During the transition while inventory on Part A is being depleted, Min-Max
levels would also be planned for Part B for the technician if there were usage
history for Part B.
When the central warehouse inventory dropped below min level, the technician
min-max levels at Part A would shift to Part B and be calculated based on the
combined usage for both Part A and Part B.
Min-Max levels for the Central Warehouse would shift to Part B when the
supersession was entered and calculated based on the combined usage for both
Part A and Part B.
Scenario 2.
Type: Unilateral
Disposition: Use to Depletion
On-hand available at central warehouse = 50 when the supersession was
entered
The central warehouse is the source for the technician org
In this scenario Spares Management would recognize that the on-hand available
at the central warehouse was below the min level or ROP and that no
significant level of inventory was available to utilize to deplete.
The min-max levels for the technicians would shift to Part B when the
supersession was entered and calculated based on the combined usage for both
Part A and Part B.

Scenario 3.

Type: Unilateral
Disposition: Scrap
On-hand at the Central Warehouse = 500 when the supersession was entered
In this scenario Spares Management would recognize that the inventory for
Part A at the Central Warehouse is not usable.
The Min-Max levels for the technicians would shift to Part B and calculated
based on the combined usage for both Part A and Part B.
Min-Max levels for the Central Warehouse would shift to Part B when the
supersession was entered.

REPLENISHING THE FIELD SERVICE WAREHOUSE
Standard Min-Max Planning from Oracle Inventory works reasonably well in

“warehouse to warehouse” or “warehouse to technician” replenishment
scenario where all replenishment is being shipped from another warehouse.
But this functionality falls significantly short of what is needed to handle the
more complex warehouse planning environment in Field Service where parts
are being procured dynamically from external suppliers, internal suppliers,
repair suppliers and other warehouses where excess utilization is required.
The “dynamic replenishment” from repair suppliers and excess warehouses is

contingent upon defective or excess parts being available at the point in time
when replenishment action needs to be taken.
The economics of “dynamic replenishment” dictate that replenishment

decisions are made based on options available at the time the replenishment
action needs to be taken. Excess utilization is typically the first procurement
priority and would be the option of choice whenever excess is available. The
second option is normally repair. When requirements still exist after utilizing all
excess, then repair would be used when defectives are available. And finally,
when requirements still exist after utilizing both excess and repair, then new-
buy would be considered as a final replenishment option.
In the Spares Management supply chain, any warehouse in the chain could
potentially have replenishment options that include excess utilization and repair
as well as new-buy. But it is the central warehouse, at the top of the supply
chain, where these activities will almost always be found.
Integration with Repair and Excess Utilization execution
The potential for large volumes of replenishment actions for excess utilization
and repair makes integration with the execution process key to a smooth
flowing replenishment planning process. The planner wants to be able to easily
review the replenishment plan, make changes as necessary, and then launch the
individual orders for excess and repair. From the perspective of the planner,
the flow from replenishment planning to replenishment execution should be a
fully integrated process.
In 11.5.10 Spares Management includes full integration for excess utilization and
integration with repair when the supplier is an internal depot.
Automation for Warehouse Replenishment Notifications
The potential for large volumes of replenishment activity suggests that

automation can play a key role in the replenishment process for Field Service
warehouses . The number of replenishment actions required to sustain the
Field Service supply chain is determined by the number of warehouses and
parts to manage. It is also important for the warehouse be frequently

replenished against the latest stocking levels to insure that inventories are
maintained at levels needed to support service level requirements.
Warehouse Replenishment Notifications in Spares Management
The following section describes how the Warehouse Replenishment

Notifications work in Spares Management.
Table 6.0
Creating and processing Warehouse Replenishment Notifications
1.0 Update Min-Max Levels Min-Max levels need to be current with the latest
2.0 Review and update Warehouse Navigator >> Spares Management >> Planner’s
Parameters in the Planner’s Desktop >> Warehouse Parameters tab
Desktop
• EDQ Multiple
Used to define Excess On-order
Excess Limit = ROP + EDQ * Multiple
Excess On-Order = OnHand Available +
OnOrder - Excess Limit
• Minimum Value
Used to filter Excess On-order
Excess OnOrder Notification > Minimum
Value
• Assignment Usable
Used along with the Sourcing Rule to define
the designated warehouse(s) where excess
needs to be utilized in replenishment
• Assignment Defective
the designated warehouse(s) where defective
parts are located that when repaired can be
used to replenish the Field Service
warehouse.
• Depot Repair Suppliers
the designated warehouses where defective
parts are located and that when repaired can
be used to replenish
• Notification Rule
Used to automate the Notifications

Step 2
Planners Desktop with Warehouse Parameters tab
3.0 Update Notification Rules The Notification Rule is used to automate the New-
buy Notification. Depending on sourcing and Make
or Buy parameters, the Newbuy can be:
• Internal Order.
Source is another warehouse (org)
• Requisition
Source is an external supplier
• Wip Order
Source is another org (manufacturing)
For each of the new-buy types, parameters can be set
to control automation for that type:
• Excess Value
Value of the excess quantity shown in the
Notification
• Repair Value
Value of the excess quantity shown in the
Notification
• Notification Value
Value of the Notification quantity
For automation of the Newbuy to be approved, the
actual values on the Notification must all be less than
the business rule parameters entered.

Step 3.0
Notification Rule
4.0 Run Concurrent program to Navigator >> Spares Management >> Reports and
generate Warehouse Programs >> Warehouse Notifications
Replenishment Notifications
5.0 View and review Notifications
6.0 Execute Notifications Execute Notification in Lower tab:
• Wip Order
Requisition
Internal Order
Excess
Enter order quantity if different than
Available Quantity and click on Order
button.
Appropriate document will be created to
execute process.
• Depot Repair
Enter order quantity if different than
Available Quantity and click on Order
button
Depot Repair Order is created. Also internal order
to ship defectives to Depot and internal order to
receive from Depot to Field Service Warehouse is
created

Step 5.0 and 6.0
Planners Desktop with Notifications tab

REPLENISHING THE FIELD SERVICE TECHNICIAN
Standard Min-Max Planning from Oracle Inventory works well in Technician

replenishment where the technician is typically replenished exclusively from a
Field Service warehouse. The technician is typically not directly involved in
repair and excess utilization activities.
Integration of Technician Replenishment into the Planner’s Desktop
In Spares Management the standard Inventory Min-Max Planning functionality

is integrated into the Planner’s Desktop.
Technician Replenishment in Spares Management

The following section describes how the Warehouse Replenishment
Notifications work in Spares Management.
Table 7.0
Technician replenishment
1.0 Update Min-Max Levels Min-Max levels need to be current with the latest
2.0 Launch Min-Max Planning to Navigator >> Spares Management >> Planner’s
replenish the technician Desktop
inventoryReview and update
Warehouse Parameters in the • Highlight technician being replenished
Planner’s Desktop • Right click to bring up menu
• Select Min-Max Planning
The “Restock” option Yes/No can be used to
automate the creation of the replenishment orders or
requisitions.
Yes = Automate No = Report to review
Also the Min-Max report can be launched from any
node on the tree. Min-Max report will be launched
for all technicians under the node.

Step 2.0
Launch Min-Max Planning from the Planner’s Desktop

Spares Management Inventory Planning
June 2005
Author: John Moore
650.607.2694
john.moore@oracle.com
Oracle Corporation
World Headquarters
500 Oracle Parkway
Redwood Shores, CA 94065
U.S.A.
Worldwide Inquiries:
Phone: +1.650.506.7000
Fax: +1.650.506.7200
www.oracle.com
Oracle Corporation provides the software

that powers the Internet.
Oracle is a registered trademark of Oracle Corporation. Various

product and service names referenced herein may be trademarks
of Oracle Corporation. All other product and service names
mentioned may be trademarks of their respective owners.
Copyright © 2002 Oracle Corporation

All rights reserved.

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Spares Management

Planning the Field Technician Inventory ……………………………… 4

Planning with Supersession Impact …..………………………..……… 29

Spares Management is positioned in the Field Service solution as a product

From a supply chain perspective, Spares Management covers all of the

Field Service Supply Chain

Central Intermediate Field

Central Intermediate Field

Spares Management Business Processes 1

The planning functionality in Spares Management will automatically

The functionality includes features to handle planning scenarios unique to the

The Spares Management planning also incorporates advanced supersession

Spares Management Business Processes 2

Spares Management Business Processes 3

There are three basic planning methods provided in Spares Management:

All three can be used to plan the technician inventory.

The Personal Usage method in combination with product population changes

Planning the technician inventory with Personal Usage or Territory Norm

Personal Usage Method

This method would be employed when the technician is in a reasonably stable

Spares Management Business Processes 4

Territory Norm Method

Personal Usage in combination with Territory Norm

Territory Norm can be used in combination with Personal Usage. Weighting

Spares Management Business Processes 5

Step Description Comments

Forecast Rule Defines number of history periods, forecast

Service Level Planned level of service for the technician.

EDQ Factor This is a combination of carrying cost and

Spares Management Business Processes 6

Step 1.0 and 2.0

Planners Desktop with Planning Parameters tab

2.0 Select Planning Method Personal Usage or Territory Norm

Spares Management Business Processes 7

Spares Management Business Processes 8

4.0 Create Min-Max Recommendations. Navigator >> Reports and Programs

Additional details on Min-Max

5.0 View and review min-max Spread-table in recommendations tab as seen

Spares Management Business Processes 9

Usage history and forecast can be viewed in

7.0 Accept or reject recommendations Use Accept or Reject button.

Steps 5.0 – 7.0

Planner’s Desktop with Recommendations tab

Spares Management Business Processes 10

Planner’s Desktop with Recommendations tab

Spares Management Business Processes 11

Technician planning process using Product Norm

Step Description Comments

Forecast Rule Defines number of history periods for accumulating

Service Level Planned level of service for the technician or warehouse

Spares Management Business Processes 12

2.0 Enter Planning Method Product Norm

3.0 Enter planning parameters for the

Forecast rules Defines number of history periods for accumulating

Spares Management Business Processes 13

Spares Management Business Processes 14

Calculating the failure rate

Product A at the Field Service node has a population of 1000 machines

Using the failure rate in Planning

If the current AWU = 10.00 as in the case of a population increase

Spares Management Business Processes 15

Spares Management Business Processes 16