No review or study of spare parts inventory can be undertaken (or even commence) without having at least a basic understanding of the financial principles for spare parts management.
At first, this statement may appear to be redundant; after all, don’t people understand that spare parts cost money? Of course they do.
The problem is that the impact and accounting of this expense is seen differently when viewed from different management silos.
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For members at SparePartsKnowHow.com there are further resources explaining the financial principles for spare parts management. These include:
- An extended version of this article that expands on these principles and also addresses accruals
- An explanation of the 4 key financial reports that you need to understand
- A whitepaper discussing the choice of having cash or carrying inventory
- A calculator that helps you determine how much your company can save both directly and indirectly through a program of inventory reduction
These are located in the Resource Library in the section titled The Spare Parts Management System.
Author: Phillip Slater