How do you determine exactly what constitutes best practice spare parts inventory management?
One problem with ‘best practice’ is that while it may be possible to define a ‘best practice’ for almost everything that you do, implementing these practices may not actually make any difference to your overall results.
Another problem is that discussions on best practice are usually not objective – for many people best practice comes down to their own personal experience, even though that experience will, by definition, not be universal.
A third problem is that people like to identify numbers that are easy to calculate and compare.
Thus, for many people a ‘best practice’ comes down to a number or a ratio, such as inventory value as a percentage of the economic replacement value of the plant.
This metric is not only pointless, but also dangerous.
Pointless because it fails to consider the different circumstances of different plants. These range from location to maintenance maturity.
Dangerous because the focus on things that don’t influence the spare parts holding decisions (such as economic replacement value) don’t drive behaviours to ensure the correct level of inventory given the circumstances.
To overcome these problems, we developed an approach that identifies which actions make a difference with spare parts inventory management in terms of producing better inventory management outcomes.
This approach is based on reviews of hundreds of storerooms and correlating outcomes in terms of inventory levels, stock turns, and stock outs.
Through this lens we are able to gain unique insights into what works and what doesn’t work. Not just what some companies are doing better but what actually makes a difference.
Here is one major finding:
a strong focus on transaction control and physical infrastructure is a ‘necessary but not sufficient’ condition for achieving better inventory outcomes.
This may surprise those who think a best practice is all about a clean storeroom and transaction control.
It isn’t.
What is needed is both those things PLUS the disciplined execution of seven specific best practice spare parts management techniques.
How did we determine these techniques?
We researched more than 300 storerooms and identified those that performed well against specific criteria and those that didn’t. We then reviewed the practices of those best performers and compared those with the rest.
The patterns were clear. There are seven techniques that good performers do well that others don’t.
It may be no surprise that these practices relate to: measurement and reporting transparency, how to decide what to stock, how to decide how many to stock, avoiding ‘set and forget’, managing obsolescence, and controlling squirrel stores.
If you found this valuable and you want to dive deeper into this topic, our Foundations Playbook is now open.
The goal of this playbook is to teach you the absolute ‘must know’ information, tools, and techniques required for effective spare parts management.
These are simple, effective, step-by-step strategies and tools to help you make better decisions and generate improvements in spare parts management.
This course provides the fundamental know-how for people who are engaged in spare parts inventory management on a day-to-day basis.
You can read more HERE.
Posted by Phillip Slater