6
CONCLUSION
The conventional wisdom of having two months’ worth of
drill bit safety stock is not a good rule of thumb. Even with
the benefits of a VMI, changes in drilling conditions drive
a very high variability from one month to the next. The
monthly standard deviations of 42% only falls to 29% on
a three-month sliding average. In practice, this means that
there is a risk of tools outages even with the safety stock.
Low volume bits have much higher variability than
high volume bits. An improved rule of thumb is therefore
to limit high volume bits to one month of safety stock,
while simultaneously increasing the safety stock of low
volume bits to three months. Boart Longyear’s data indi-
cates that this balance will reduce the risk of outages while
simultaneously reduce the inventory. A practical implica-
tion is to standardize on as few SKUs as possible.
This new model should be adapted for the more vari-
able or consistent conditions in each mine. The suggested
cutoffs of 50 bits and 200 bits between low, medium, and
high volume bits can also be changed. Bits for longhole
drilling may require less safety stock and bits for develop-
ment may need more safety stock.
It may be possible to replace the backward looking
model with a simple forecast based on the mine plan. The
data indicates that a forecasting model could be as simple
as planning three months ahead and tweak the expected
consumption by ±30% to account for ground conditions
and ±30% for changes in drill meters.