Q: One thing I’d be interested in knowing more about is rationalizing inventory. To elaborate, what I’m interested in knowing more about is how companies that have multiple locations in a region are able to take spares that are carried at each location and rationalize (or store at one location) to share amongst all the locations who share that common part. Do you know of any companies that have been able to successfully do this? What key things are needed to be able to do this successfully? Is there a certain level of maintenance maturity that should be obtained before looking at doing this?
A: Rationalization is a big issue!
Companies are always looking at the idea of rationalizing storage locations but there are some issues and it is not always the great opportunity that it might immediately seem to be. Here are some considerations:
- The key issue that I see is one of trust. It seems that if people hold something in a store that they control then they feel that they are less likely to be let down. I have seen this with companies that hold their stock onsite and those that have separate overflow areas (for large items) that are off site. The offsite example makes less sense as they can’t even see the items – but they can see when they move. Which brings up issue 2…
- Visibility is key. If site 2 has an item that may need at short notice at site 1, then the people at site 1 almost always say, ‘how can we be sure that they will have it when we need it?’ or ‘how do we know that they won’t reset the value’ or ‘how do we know that they will release the item when we need it?’ I think that the people at site 1 (in this example) need to know that there are controls in place to ensure that the holding levels are correct for the group of plants AND that they will be notified if the item moves AND that they will get the item in a timely manner when needed. As you can see, I really believe that this is largely an issue of managing people’s belief about what will happen when a change is made.
- The saving is in the safety stock holding rather than any operating stock so items that move regularly with little or no safety stock may not present much of an opportunity. This approach is usually used to target slower moving items with little or no safety stock – say with a 1-0 holding.
- Conceptually, this is just like holding central stock at one very large site – you just need to make sure that the holding levels are set for the number of units in service. If the plants are geographically not too far apart then the location is really of little concern.
No, I do not see companies that are doing this very successfully. Usually, the central storage location gets treated as a ‘dumping ground’ for the items that people don’t want on their own site. They see this as a way of reducing their own inventory levels while not letting go of anything that they really feel are important.
Yes, this does need a level of maturity in maintenance but no more really than that needed to get the spares right on any one site. The obvious claim from maintenance will be ‘if you decide how many to hold, don’t blame me for any outages that result from not having stock’ – fair enough really. So, involve the maintenance people from all sites and have them agree on the right ROP. This is probably the hardest part of the whole project!