Subject Area: Spare Parts Management Policies
You do not rise to the level of your goals. You fall to the level of your systems
James Clear, Atomic Habits
The cornerstone of a functional spare parts inventory management system is the development of an appropriate suite of policies.
These spare parts inventory management policies provide the framework within which all spare parts inventory management decisions are made.
They are not only the guidelines for spare parts inventory management but the mechanism through which the company communicates its intent, expectations, and requirements across the organization and over time.
A policy, developed and implemented today, will inform today’s personnel AND it will inform future staff when they join the company.
Correctly formulated, your spare parts inventory management policies will guide your organization for years to come, ensuring that your spare parts inventory is maintained at a level appropriate for both operational needs and financial constraints.
There are three key reasons why policies are important:
1. By communicating the requirements of management, policies free up people to get on with their jobs.
That is, by advising on what to do and how to do it, team members no longer need to spend their time working this out, thus freeing their time to do the job expected of them.
2. Policies provide the basis for consistent decision making.
One of the drivers of both efficiencies and effectiveness in an organization is consistency. When tasks are completed in a consistent manner, the results can be expected to be repeatable and to fall within a desired range.
Assuming that the approach is appropriate, then effectiveness is achieved. When there are many decisions to make on a regular basis, deferring these to senior management is inefficient, so communicating the approach and expectations drives organizational efficiency.
3. Policies provide a basis for continuous improvement.
Only by documenting the desired approach can the process be subject to continuous improvement. This can be through examination of results or through auditing application.
Spare parts inventory management policies are vital to any company seeking to achieve an effective and efficient approach to spare parts inventory expenditure.
A policy is a statement of intent that provides a guide of acceptable business practice.
This tells us that a policy provides the principles or rules to guide decision making.
In practical terms, the distinction between a policy and procedure is often blurred.
This is because a document that informs on what needs to be done but provides no guidance on how to do it can be of little practical use.
For example, a stocking policy that had the intent of providing guidance on stock-level decision making is of little use if all it says is “In determining the required stock holding the user must take into account the usage history, lead time, and expected future demand” without advising how to use the information.
Experience has shown that not including specific how-to details results in ad hoc decision making and effectively renders the policy pointless.
There are two major impediments to developing and implementing effective policies:
1. Knowing what to include
2. Training people on the content
If companies don’t train the key staff members on how to develop the right policies AND THEN also train everyone else on the content of the policies, then they will not rise to the level of their goals. They will fall to the level of their training*.
What we really know is that companies often expect people to perform at a level that is beyond what they have been trained to do. And to do things that their systems are not capable of doing.
To transform your spare parts inventory management and achieve results that you did not think were possible you MUST work on your policies – be clear about spare parts criticality, develop clear ROP and ROQ guidelines, eliminate squirrel stores, define your metrics, identify accountabilities, document the processes for obsolescence and disposal.
It is precisely because the issues are many and the nuances subtle that here at SparePartsKnowHow.com we have developed as a platform to access a wide range of resources relating to spare parts inventory management and optimization.
Author: Phillip Slater
*Footnote:
There is another (very) old quote like the one at the beginning of this article:
We don’t rise to the level of our expectations; we fall to the level of our training.
This attributed to Archilochus, a Greek poet who lived from 680 – 645 BC (I said that it was old).