Parts Inventory Strategies That Support Maintenance Efficiency
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. During a time when the skill trades gap continues to grow, it is imperative that these valuable technical resources focus on critical plant value streams and not on MRO processes.
As just about anyone in manufacturing knows, technical talent is at a premium. When maintenance technicians are delayed due to hard-to-find or unavailable replacement parts, this limited human resource is rendered less effective. Storeroom operations are negatively impacted as well through 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 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; after all, why waste the time and training of a highly educated, expert physician with tasks that don’t require that person’s expertise?
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 impacted 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, four inventory management practices have been developed:
In the maintenance realm, some inventory items are easy to plan for. Consumables such as lubricants and fluids, for example, are purchased as a function of use over time. Other items are not so easy. What about expensive, yet infrequently used parts that tie up working capital? And which parts can have the greatest impact on operations if they’re not immediately available?
Two techniques are useful in making decisions that ensure both efficient use of capital and maximum uptime. The first, pareto analysis, identifies the 20% of parts that drive 80% of business risk; i.e., those which have the greatest potential to impact 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 analysis after failure. Oftentimes, 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 also an 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, and thereby minimize carrying costs.
It’s important to note that results will vary according to a company’s operating and financial priorities. Some manufacturing operations run 24/7—in these cases, downtime costs can run into tens of thousands of dollars, and 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 companies are willing to take on the risk associated with lower-volume inventories.
Just as important as which parts to keep onsite, is where they should be stored. In some factories, 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 a great deal of money 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, too much capital and storeroom real estate is consumed by slow-moving and obsolete (SLOB) parts. Ridding the 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 times capturing some value for the plant.
A sometimes-overlooked inventory management strategy is making full use of 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. Wirelessly connected, 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.
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 failure root cause analyses to Six Sigma programs, all supporting cost reduction programs.
The primary tool for analyzing parts data is a computerized maintenance management system (CMMS). 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 into the CMMS, the system can automatically generate reports on parts usage and deployment, making management decisions much easier.
Because inventory strategy is a specialized discipline, many companies choose to work with an MRO service partner. These partners can immediately apply best practices to the inventory challenge using well-established parts naming conventions, warranty tracking and vendor management techniques, and much more. The best firms offer repair depots with full root cause analytics capabilities, along with engineers who can upgrade and customize critical parts to operate more reliably and extend their useful life.
In the end, 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. Technology continues to evolve as well.
Like bullets for soldiers on the front lines, it’s impossible for technicians to perform their duties without a ready supply of parts. When those 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.
Brad McCully is an Account Executive for Advanced Technology Services, Inc.