As discussed in other articles in this series, there are essentially two actions that you can take to reduce spare parts inventory: remove existing inventory or reduce the amount of inventory going in. We call this the bathtub principle because it is similar to pulling the plug in a bathtub to let water out or closing the faucet to reduce the amount going in. Just as long as the net result is less in and more out you will reduce spare parts inventory.
Actions 1, 2 and 3 in this series of articles dealt with removing inventory items: Action #5 is the second of the actions relating to ‘put fewer items in.’
We saw with Action #4 that the safety stock level has a major impact on stock holdings. However, this is only part of the equation. The other key factor is the reorder quantity.
In the classic saw tooth representation, the average quantity of stock held across a period of time is a function of both the safety stock level and the reorder quantity. Action #5 focuses on reducing the reorder quantity to reduce the average stock holding.
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