Spares and Services

Spares & Services

Every business understands the importance of spares and after sale services. Product sale is a one-time activity, whereas spares and services are perennial repetitive business during the service life of the product. The margins during initial are lower in a competitive market, but the margins on spares are always higher. BHEL management had understood the importance of this business and a created a separate division named “Power Project Spares & Services” (PPS&S) division around 1975. Persons with maintenance experience were recruited to man the servicing function. 

Spares in a Capital Goods industry are categorised as 

• Vital 

• Essential 

• Desirable

They are also identified as

• Capital

• Insurance

• High cost

• Overhaul 

• Wear and Tear 

During the contract stage every bidder specifies spares as

• Commissioning spares

• Essential spares

• Recommended spares

Commissioning spares are part of original supply and order for essential spares is placed along with original order. In the early days the commissioning spares were supplied as part of main supply. Many times, these were consumed by sites during erection and during commissioning problems were faced. Later manufacturing units started keeping these spares in works and supply as and when demanded. BHEL sites used to take unused commissioning spares to the next sites, however customers who were aware argued that they had already paid for the same and it was their property. Segregation of essential spares that came with sub-deliveries and handing them over to customer. Many times, the O&M staff of customer was not posted and stores was not ready. This necessitated holding these spares for a long time.

BHEL started codifying the spares during late 1970s and preparing and maintaining a Spares catalogue was a continuous activity. Customers were provided with the spares catalogue and advised to refer to spares code while asking for a quotation and placing orders.

Spares management by the customers has evolved and many customers use now various ERP solutions available in the market. Spares codification process is a complex one for the customers as they have to capture data from hundreds of vendors.

Though the S&S division was created, the importance given to it was always varying. BHEL Corporate Management Services (CMS) created a COBOL based Spares monitoring system. Essentially it catered to only Thermal utility sets. It created site codes for various projects to monitor customer wise project wise orders. 

BHEL Construction Management HQ was using a Human Resource system developed in BASIC by PPWR Baroda. It was called Personnel Information System (PIS). This system was part of Corporate Human Resource Information System (CHRIS). Ms Sally Masters of HR department was responsible for issuing site codes for the use in the system. The site codes used in PIS had no corelation to site codes used in Spares system.

BHEL manufacturing units always struggled to meet the contract schedules of the main supply orders. The out turn in the units was measured in physical parameters  like tonnage and not on financial value of the production. Most of OEMs manufacture the potential spare parts themselves inside their facilities. They enter into legal agreements with vendors so that the parts manufactured at Vendor’s work cannot be sold outside. Multinational Companies like Combustion Engineering (CE) used to mention the Vendor’s name and part number in the CE assembly drawings. Even BHEL could not get a quote from these vendors directly. BHEL had to contact collaborator for the spare part for such vendor supplied parts. In a PSU such practice was not feasible. Every time BHEL had to get quotes. BHEL did not enter into any Non-Disclosure Agreement (NDA) or exclusivity agreement with the suppliers. With a lax implementation of Copyrights, it was difficult to prevent vendors/ subcontractors from using BHEL drawings and selling the spare parts directly to customers. All the potential spare parts were of less weight and involved lot of manhours/ machine hours. Naturally many of these were outsourced, resulting in development of competitors at BHEL’s expense. As priority was not given to spares manufacture in the shops, many orders were pending for 7 to 10 years. Customers could not wait indefinitely and they started cajoling the suppliers to directly manufacture spare parts for customers at better payment terms. This affected BHEL’s business prospects adversely.

In 1990 Power sector regions were formed. The S&S responsibility was transferred to regions from New Delhi. The dealing executives of Spares Commercial were transferred to the regions. To handle the servicing part, Regional Service Centres were formed catering to nearby customers. The RSCs were headed by Regional Service Manager. On region formation, these RSCs were also transferred to the regions. These RSCs dealt with Thermal power stations. Their contracts did not take any responsibility for supply of spares and customers were expected to ensure availability of spares before shutdown. Customers did not engage BHEL for Boiler related servicing as they felt confident to manage most of the servicing requirements in Boiler area. Hydro groups of Haridwar and Bhopal handled their product servicing and Hyderabad handled servicing small turbines and pumps. With region formation Hydro business was also transferred to regions. Dealing executives of Hydro were transferred to the regions.

Amalgamation with the regions had impact on the working of RSCs. Earlier the RSMs were like Kings and enjoyed additional financial powers. The staff of RSCs had very little work at RSC and they would vanish after lunchtime. It was an accepted practice and nobody questioned them. Many SAS employees ran taxi service at servicing sites. As a first change, RSMs were asked to report to GM at regional headquarters and get his approval for award of works. Executives from RSCs were transferred to erection sites. This was not liked by some RSMs and people resigned from BHEL and joined other companies/ formed their own agencies.