Why sustainable Spare Parts Management ?
NVDO | Trade magazine Asset Management | Issue: November 2022 | Published date: 29 November 2022
“Why should we pay attention to our inventory management of spare parts? After all, we never have standstills and the stock that is in our warehouse costs nothing and no longer yields any liquidities. Our technicians do complain about too many stockouts in the warehouse, but this does not lead to critical system failure or higher costs”. That says Jürgen Donders, partner at Gordian Logistic Expert and teacher at the Dutch and Belgium Maintenance Associations.
When our stocks are not dealt with in a sustainable way, Donders sees negative developments such as delays and rescheduling of work orders, besides permanent dissatisfaction among maintenance professionals and many internal discussions. “Think of an increasing shortage of warehouse space and a continuously rising stock value. Just to keep silent about an increasingly obsolete stock”.
Determine the goal first
Such a situation doesn’t seem sustainable to Donders: “Sustainable spare parts management starts with the question of what needs to be achieved. Based on the desired maximum system availability as the highest priority, the goal is minimizing waiting times for parts for preventive and corrective maintenance. Of course, we want to achieve this goal with minimal investments in stock of spare parts and efficient business processes. This can be achieved by changing operational habits such as separating plannable and unplannable requirements.
All required parts that are known on beforehand can be ordered in advance (for example in the case of preventive maintenance). Donders: “For example think of time-based replacements”. This can easily be done with the current ERP and MMS systems by including the necessary materials for maintenance and inspection on the maintenance tasks as well as scheduling these tasks as early as possible in the system. The automated system will ensure the timely procurement of these materials without the need of keeping stock on a structural basis in the warehouse”.
The difference between relatively inexpensive fast-moving items compared to expensive slow-moving items
Stock is thus only required in the case of corrective (unplanned) maintenance, to be available and delivered to avoid downtime of assets or delays of work orders. “Therefore, materials shouldn’t be treated or handled in the same manner” says Donders. He mentions several features of supplying relatively inexpensive fast-moving items.
To be out-of-stock is unacceptable and since these stocks aren’t that expensive, it’s OK to have sufficient in stock. And you don’t want inventory planners or operational buyers spend much time on these items. The replenishment of stock is preferably fully automated. By means of a simple two-bin system these stocks can be replenished from bulk stock available in the warehouse.
The stock of relatively expensive and slow-moving items
For these kind of items, it is the challenge to arrange availability without having high stocks. For these items, maybe future demands can be planned earlier in time, stocks can be held at the supplier or available stocks can be shared (pooled) among multiple sites. For these items, planners do invest a lot of time to create the most efficient though effective way to guarantee availability when required.
Donders; “Perhaps the supplier can keep stock with a guaranteed short delivery leadtime (after all, he has a larger scale and therefore runs less (obsolescence-)risk). And what about cooperation with other locations within the own company or even collaboration with colleagues? There is a lot to gain here.”
“Inventory planners should/may spend a lot of their time on this,” thinks Donders. “This means that a future failure can be detected sooner, and maintenance can be planned. However, how much time do we have to organize availability? What options do we have for guaranteed timely availability should the defective item be replacement the following day? Talk with purchasing departments, colleagues from other locations and even competitors. Why should local tram or subway operators not be able to work together in this challenge”?
The repair of parts is sustainable at its core
“As far as the repairability of components is concerned, we see two opposing movements: on the one hand, electronic components are becoming increasingly cheaper, which makes it more efficient to replace these items instead of repairing them.
On the other hand, more and more components can be repaired technically while economically feasible. The trend of Corporate Social Responsibility also plays a role in this. And if repairing the components is not possible, is it then possible to reuse the defective item/part?
Keep the assortment and the warehouse tidy
“In most of the inventory analysis we do, it is shown that the largest number of items is in the “cheap and non-moving” quadrant (not any issue in the last 5 years). Admittedly, there isn’t much financial value here, but these items unnecessarily occupy many inventory locations/space in the warehouse.
The disposal of these components/parts is often not possible because no financial provision has been made for these obsolete stocks, causing unplanned costs that has a big impact on the annual Profit and Loss Statement. And financial managers don’t like that”. It is advisable in such cases to have a piggy bank (a financial provision) so that obsolete stock can be disposed without the unwanted and unplanned negative hits on the income statement.
Place economically feasible purchase orders – low stock, however, can be very expensive
“When we buy something, we buy only in small quantities to keep our stock low.” Donders: “We see and hear this so often. But have you ever wondered what costs are associated with 1 purchase order line? Just think of order follow-up, small order costs, transport costs, arrival and intake checks in the warehouse and the invoice.
Therefore, it is better to order 1000 screws directly instead of 20 times 50 screws.” Because it can become very expensive screws according to Donders. So, the widely acclaimed ‘Formula van Camp’ is indeed wise.
All in all, sufficient options for effective, efficient, and sustainable stock management. And not only does it have a positive effect on costs, balance sheet value and Corporate Social Responsibility, but certainly and above all also better availability and therefore fewer delays, standstills, grumbling and grinding and time and attention of executives. “It seems so obvious, but we rarely see these good habits in daily maintenance operations”.
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