As a passionate football supporter, one question has been seriously bothering me the last couple of months: “Will the next European Championship finally be organized in the Netherlands again?” Especially as this season has been a dreadful one so far. Watching full games from the living room, looking at broadcasts of empty stadiums with simulated ‘fan-noise’ is quite a task, while quality of football has been equally limited. Some of the biggest players, who are normally the ones to watch for, have been suffering from long term injuries, while positive COVID tests have many times resulted in unexpected last minute squad changes. As clubs are struggling financially, possibilities for transfers of new players are limited, making it difficult for managers to decide who they put on the field and the bench.
All in all, COVID has certainly had its impact on football and has fundamentally changed the game and its rules, as in many other industries. Businesses are equally struggling with the question which spare parts they put ‘on the bench’, while revenues have been decreasing and possibilities for spare part investments have become extremely limited. In one of my first projects for Gordian, I was challenged to help one of our clients solving this puzzle.
Historic demand data is still valuable, but use with care
For many businesses the pandemic has resulted in a significant drop of product sales, which makes it difficult to decide which parts to put on stock. Does this mean that historic demand data has no value anymore? Definitely not! While for many parts total demand might have dropped, the demand pattern through time still provides important information for managing inventory. Additionally, some parts might see equal or even increased demand, as clients perform early modifications or expedite maintenance overhauls. For these parts, continuation of demand forecasting is paramount for successful Spare Parts Management.
Focus risk management on your star players
Still, there are many parts where existing forecasting methods are not effective anymore. Such as slow movers, where it is difficult to determine if and what the effect of the pandemic is on its demand. This introduces risks in the availability of your inventory and the economic uncertainty for the coming year is not helping. How can these risks be mitigated? It is recommended to continuously monitor these high risk parts. By including all associated disciplines, from sales to engineering, expected demand can be assessed. This should be done in a smart way, for example by classifying parts by the effect of COVID on its demand.
Outsmart, not outspend, your competition
Assessment of these parts might lead to the conclusion that existing stock levels are not sufficient, resulting in the advice to replenish additional parts. In those cases investments may still be necessary. Of course in the first place to prevent critical standstills in your operation, but in addition to keep a competitive edge when the end of the pandemic will finally arrive. Even in these type of circumstances, transfer window opportunities like Sebastièn Haller from West Ham to Ajax for €22,5 million, can be justified.