Spare parts inventory reduction has been a major focus of supply chain improvement initiatives for many years and success requires the application of both inventory fundamentals and good practice process.
However, it is the encouragement of appropriate spare parts management behaviors that delivers truly sustainable results. And it is in the area of appropriate behaviors, and the beliefs that drive them, in which there is usually the most hurdles to overcome.
These beliefs prevent companies from taking action to genuinely improve and so they limit their progress in the achievement of their spare parts inventory goals.
The beliefs are often based on ‘one-off’ experiences or implicit assumptions.
Sometimes they come from taking a limited perspective on business costs or not understanding the difference between cash and profit.
We have identified five common spare parts management beliefs that we call the Five Myths of Inventory Reduction.
To successfully effect an inventory reduction these myths need to be recognized and confronted. Only then can they be dealt with every time they are raised, in order to avoid them being the reason for inaction or lack of progress.
The Five Myths of Inventory Reduction are:
1. Economic quantities save money
2. Risk must be reevaluated to reduce inventory
3. Consignment stocks must cost more
4. Software will solve the problem
5. Putting items into inventory shares the cost
These myths are explained in the ebook 5 Myths of Inventory Reduction – available as part of the Practitioner Playbook.
Posted by: Phillip Slater