Leverage Parts Inventory Strategies That Work

Where parts are stored is just as critical as which parts are kept on hand. Place the most frequently used and critical parts close to their applicable machines. Less-important parts can be stored in a more remote location or even off site.

Like bullets for soldiers on the front lines, it’s impossible for technicians to perform their duties without a ready supply of parts.

In today’s manufacturing environments, indirect parts and material inventories are essential to a well-run manufacturing operation. That means smart inventory-management strategies are critical. When managed appropriately, the Maintenance Repair and Operations (MRO) process can operate with minimum waste while driving maintenance efficiencies. As the skilled-trades gap continues to grow, it’s imperative that valuable technical resources focus on critical plant value streams and not on MRO processes.

As most people in the manufacturing arena know, technical talent is at a premium. When maintenance personnel are delayed by hard-to-find or unavailable replacement parts, this limited human resource is rendered less effective. Storeroom operations are negatively affected as well by emergency purchasing, emergency shipping, and reactive delivery of materials to the factory floor for maintenance use.

The primary goal of inventory efficiency is to eliminate waste in all of its forms. Think of a doctor’s office: every person, whether nurse or doctor, is leveraged for his or her highest skill. There’s a reason the nurse takes your temperature and blood pressure before the doctor enters. Such tasks don’t require a physician’s expertise.

Some suppliers offer vending machines for common and/or routine parts. These machines make it possible for technicians to get parts faster and storeroom clerks to reduce their workloads.

While the overall objective of parts management is to reduce waste, the selection process has its own set of priorities. Many manufacturers base their inventory decisions on price alone—yet the actual metric should be Total Cost of Ownership (TCO). Total Cost of Ownership not only takes into account the price of parts and materials, but also the impact on plant performance, which can be measured by Overall Equipment Effectiveness (OEE), a fundamental measure of asset performance.

OEE, expressed by the formula Availability x Performance x Quality, is heavily affected by MRO inventories. When key replacement parts are on hand, equipment availability is increased through improved maintenance efficiencies. Performance and quality, the other two factors, are often enhanced as well—but from a maintenance perspective, good inventory decisions have the greatest effect on availability.

Parts management, then, is a delicate balance of budget, planning, and distribution. Location and quantity are critically important as well. To address these issues, the following four inventory-management practices have been developed.

Analytics. In the maintenance realm, it’s easy to plan for some inventory items. Consumables such as lubricants and fluids, for example, are purchased as a function of use over time. Other items, though, are not so easy. What about expensive, yet infrequently used parts that tie up working capital? Which parts can have the greatest impact on operations if they’re not immediately available?

Two techniques are helpful in making decisions that ensure efficient use of capital and maximum uptime. The first technique, Pareto analysis, identifies the 20% of parts that drive 80% of business risk, i.e., those that have the greatest potential impact on production output. Priority is also given to parts that are most difficult to replace, either because of rarity or long lead times.

Pareto analysis also creates a benefit of identifying high parts usage that may benefit from root-cause failure analysis. Often, such parts can be repaired or re-engineered to specifications that exceed OEM standards, making them better suited to the manufacturer’s unique environment. Improving part reliability reduces TCO.

The second technique, ABC analysis, is another important tool. ABC is about cycle-count control and use of working capital. “A” items (ideally, about 10% of the total) are business critical in nature, “B” items (about 20% of the total) are of moderate importance, and “C” items (about 70%) are relatively unimportant. Stratifying parts lists along these lines will help optimize cycle counts and re-order points, thereby minimizing carrying costs.

It’s important to note that results will vary according to a company’s operating and financial priorities. Countless manufacturing plants run 24/7. In such cases, where downtime costs can amount to many tens of thousands of dollars, the company will gladly pay carrying costs to support operations and lower risks. Other enterprises have extra production capacity and hoard their working capital. These operations are willing to take on the risk associated with lower-volume inventories.

Site Optimization. Just as important as “which” parts to keep onsite, is “where” those parts should be stored. In some operations, the parts storeroom is hundreds of yards away—or even outside the plant itself. It may not be practical to maintain a storeroom close to the action, but staff utilization is certainly something to consider.

Locating critical parts for quick access can save many dollars over the long run. Here again, the 80/20 rule is useful. Place the most frequently used and critical parts close to their applicable machines, securing them under lock and key if necessary. For less-important parts, it may be possible to store items offsite, especially if multiple plants operate the same pieces of equipment. Common naming conventions and parts numbers can help in this regard by enabling parts with similar uses to be located and delivered quickly. Such a practice supports continuous improvement and TCO analysis.

SLOB Inventory Disposition. In many facilities, substantial capital and valuable storeroom space are consumed by slow-moving and obsolete (SLOB) parts. Ridding a storeroom of SLOB inventory starts by looking at turns. If parts are slow moving, expensive, and not mission-critical, consider maintaining them at another plant or with the supplier.

When factory equipment is replaced or re-designed, MRO components can change and become obsolete. In these cases, resell, recycle, or scrap the orphan parts. Brokerages can help in many cases, by buying old parts and reselling them—often capturing some value for the plant.

Vendor-Managed Services. A sometimes-overlooked strategy is to fully leverage vendor services. Strong supply partners will often voluntarily stock inventories of parts with long lead-times. Making use of this service, as long as deliveries are quick, will reduce needless inventory “insurance investments.”

Asking suppliers to hold stock will also help keep parts from wearing out on the factory shelf. For example, motors that sit in the storeroom for months on end can develop flat spots in windings that will compromise performance. If such motors aren’t needed routinely, it’s better to allow vendors to hold the item where turnover is more frequent.

Some suppliers offer vending machines for common and/or routine parts. These machines issue parts by smart-card activation. By placing parts-vending machines throughout plants where they’re most needed, technicians get parts faster and storeroom clerks reduce their workload.

As the skilled-trades gap continues to grow, it’s imperative that valuable technical resources focus on critical plant value streams and not on MRO processes.

DATA ISSUES

In virtually all aspects of inventory management, the most important prerequisite is collecting high-quality internal data. With up-to-date information on performance, downtime, and parts consumption, it’s possible to better manage all kinds of initiatives from mean time between failure analysis (MTBF) and root-cause failure analyses to Six Sigma programs, all supporting cost-reduction programs.

A computerized maintenance-management system (CMMS) is the primary tool for analyzing parts data. CMMS software can track asset performance, schedule work orders, and help make reactive vs. preventive maintenance decisions. Some systems will interface with accounting/financial systems as well.

On the parts front, barcode and RFID readers can be used to scan parts as they make their way through the usage lifecycle; once tagged, information is uploaded to the CMMS, and the system can automatically generate reports on parts usage and deployment, making management decisions much easier.

BOTTOM LINE

It’s difficult to overemphasize the powerfully positive impact that inventory management can have on maintenance efficiency. Technician labor costs continue to rise; moreover, the lack of skilled talent is expected to last for at least another 15 years. While technology continues to evolve, technicians can’t be efficient without ready access to supplies of needed parts. Keep in mind that when parts are planned, purchased, and deployed with TCO in mind, the highest value is derived from equipment and personnel alike. Take the time to carefully consider inventory management. The benefits will accrue today—and well into the future. EP

This information was provided by Brad McCully, director of customer accounts for Advanced Technology Services Inc. (advancedtech.com, Peoria, IL). He can be reached at BMcCully@advancedtech.com.