Subject Area: Inventory Goal Setting
The Problem with Inventory Goal Setting
As I write this it is early January and my inbox is awash with advice on goal setting.
There are articles, podcasts and webinars all aiming to tell me how to set attainable goals for the year. Unfortunately, most of this advice misses out on the two issues that are required for goal setting to actually achieve something.
Most goal setting advice follows, in one way or another, the well known SMART formula. That is, that goals need to be Specific, Measurable, Attainable, Relevant, and Time-related. All good stuff.
But let’s ask ourselves why goals are not achieved.
Why is it that millions of people around the world won’t lose weight, get fit or give up smoking? Its not that their goals aren’t SMART. Something else is missing.
Its the same with spare parts inventory management goals.
This year, companies all over the world will fail to optimize their inventory, improve their stock accuracy, reduce stock outs, or increase spare parts availability in a cost effective way. Just like personal goals, these goals can all be written in a S.M.A.R.T way but still are not achieved.
So what is missing?
The ‘why’ and the ‘how’.
Identify the Goal Setting ‘Why’
Let’s start with the ‘why’.
Tell most maintenance people that your goal is to optimize the spare parts inventory and you will be met with a response along the lines that this is purely a short-sighted accounting exercise aimed at cutting costs without understanding real world operational dynamics. (I bet everyone that just read that sentence is now smiling at the truth of it!)
But help them to see that past decisions have left the company with poorly defined criticality and a lack of planning/scheduling/spare parts/procurement integration that has led to downtime, maintenance frustration, excessive holdings of some items, and understocks of others, and you start to get their engagement.
And make no mistake, trying to optimize spare parts inventories without the input of the users is like trying to make ice cream without milk and cream. It might look similar but it doesn’t taste the same!
Next Determine the How
Of course, having an appropriate ‘why’ doesn’t overcome all objections but it is a start. Building trust takes time.
Part of that process involves knowing ‘how’ to achieve the goal. Without really understanding the ‘how’ of the goal, goal setting is more like an aspiration than a target to be achieved.
The problem is that the ‘how’ is situational, that is, it can vary depending on the situation and circumstance.
To explain the ‘how’ let’s go back to the generic ‘lose weight’ goal.
Everyone knows that to lose weight you need to eat/drink less and move more. Simple right?
But how that works for any two people might be different. You might like the gym and I might like to swim. You may already have a good diet that just needs tweaking and I might consume lots of junk food. You may be highly motivated by a health condition and I might need some motivational support from a personal trainer. You might need to start work early and then later in the day look after the kids, I might have a flexible timetable.
At a superficial level the solution for two people is the same – eat less, move more – but at a detailed level the actual actions required are very different.
In the world of spare parts management, it is exactly the same.
Companies get stuck with the generic, high level, superficial idea – such as using software to recalculate parts needs based on historic storeroom data – without really understanding the ‘how’ that is suitable for them.
By doing this they really are setting themselves up for failure.
Here’s an Example
Last year I completed an inventory reduction program across six sites within the one company. They all had the same types of equipment, the same types of parts, the same ERP, and the same accounting rules. Superficially, they were the same.
However, their teams had different skill sets, they had different levels of maintenance sophistication, different quality of data, different operational cultures, different strengths and weaknesses, and different site layouts.
So to help them achieve their inventory reduction goals we first conducted a review (using our Best Practice Matrix) to identify and help them to understand their strengths and weakness.
From that they were able to identify, understand and communicate their individual site ‘why’.
By seeing the truth of their situation against different levels of performance they began to understand that they really did have a problem that could be resolved.
Then we applied a spare parts review process that enabled them to address their spare parts holdings based on different but specific characteristics (the Inventory Cash Release Process).
We gave them a way to achieve their goal without being stuck in a ‘one size’ fits all solution. This was their ‘how’.
The result was that they achieved their initial two-year goal in nine months!
Knowing both ‘why’ and ‘how’ meant that they could actually identify and do the work required to achieve their goal.
Without that they could have started a process with a half-hearted effort (because they were told that they must start) and then produced mediocre results and eventually given up.
That is a story that I have seen with many companies (before they call me!).
Inventory Goal Achievement Requires Analysis and Resourcing
Identifying the right ‘why’ requires analysis and explanation.
Understanding the right ‘how’ involves resourcing, training and development.
For some that training might be reading the right book (such as Smart Inventory Solutions) and applying the lessons learned.
For others it might mean completing training programs, either in person or online, such as those at SparePartsKnowHow.com.
For still others it might mean engaging some support to help guide the team through the application of the right process (a personal trainer for your spare parts program!)
Of course, it all starts with goal setting and understanding what you want to achieve. But no amount of goal setting will help if you don’t also identify the ‘why’ and the ‘how’ of achieving those goals. A lack of understanding of the ‘why’ and ‘how’ is the reason that (most) goal setting doesn’t work.
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You might also be interested in a post on inventory management goals.