An important part of any strategy, including your spare parts inventory management strategy, is to know what not to do.
By understanding which inventory management techniques you should not apply to your spare parts management (and why) you might just save your company a bundle of money (and yourself a lot of heartache).
Spare parts inventory is the inventory that you hold for equipment repairs and support, as opposed to the inventory that is used in production for conversion to finished goods.
This distinction is important because spare parts inventory has characteristics that set it apart from other inventory types – as this review of common techniques will reveal.
Here are four techniques that you should not use for spare parts management.
1. Materials Resource Planning (MRP) – a production planning technique that aims to coordinate
assembly operations by ensuring that the required components are available in the right mix and at the right time in the assembly process flow. Spare parts are not used for assembly and
running a re-order report is not the same as MRP.
2. Just-In-Time (JIT) – a production management philosophy that aims to eliminate wasted time on
a production line. It is not a management technique for non-production items such as spare parts. Work instead on improving spare parts planning and coordination.
3. Economic Order Quantity (EOQ): applying an economic order quantity sounds very attractive. The problem here is that there are too many variables in the actual calculation for the results to be reliable. For example, what if more than one item is on the purchase order, does that split the order cost? My advice: apply the logic but don’t bother with the calculation.
4. Service Level – a measure of the number of times that a request for an item is filled in the
acceptable time frame. With spare parts, if you don’t have the right part available 5% of the time your production might stop and then nobody will thank you for achieving a 95% service level.
Putting aside all the technical reasons why these techniques don’t work there is one very good reason why you should not try to apply these techniques: employee confidence.
Attempts to apply these techniques will cost you time, effort, and money and because they don’t work effectively with spare parts they will also cost you the trust that your spare parts management system can deliver the parts required, when needed.
And that might just be the greatest cost of all.
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