Spare Parts Inventory: An Exercise in Risk Management, Part 1

Just like your car insurance is a way to minimize the financial consequence of a car crash and backing up your files is a way to minimize the consequence of a computer crash, spare parts inventory is a way to minimize the consequence of an equipment crash.

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What do your car insurance, backups of your computer files, and spare parts inventory have in common? They are each an example of risk management. According to Wikipedia, risk management is: the identification, assessment, and prioritization of risks followed by coordinated and economical application of resources to minimize, monitor, and control the probability and/or impact of events.

So just like your car insurance is a way to minimize the financial consequence of a car crash and backing up your files is a way to minimize the consequence of a computer crash, spare parts inventory is a way to minimize the consequence of an equipment crash. It’s all about risk management.

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