Subject Area: Spare Parts Management Progress
What is holding back your spare parts management progress? It could be PCB. This article explains what that is and what you can do about it.
Why is it that good companies continue to do bad things with regards to spare parts management?
I don’t mean bad as in evil or illegal, I mean bad as in defective or deficient.
Companies that deal in sophisticated technologies and/or that have sophisticated and well documented management systems. Companies that have to comply with detailed regulation. Companies that are conservative in their financial management and as a result are highly profitable.
Why is it that these companies can be so negligent with their spare parts inventory management?
It is More Than Organizational Inertia
Most people are familiar with the concept of organizational inertia. Inertia can be simply explained as a resistance to change. Organizational inertia therefore describes an organizational resistance to change. That is, a tendency to keep on doing what they have always been doing.
In almost everything they do companies struggle to change course. There is a strong bias towards the status quo.
But if that were the answer, companies wouldn’t make progress in any area of management. And yet they do. Spare parts management, it seems, is the forgotten investment that, despite the high stakes at risk, doesn’t get the attention it requires.
Therefore, the simple idea of resistance to change doesn’t quite explain what is going on here.
Plan Continuation Bias
Perhaps a better explanation is what is known as Plan Continuation Bias or PCB.
PCB is the tendency for people to continue with a plan, even if that planning is failing them.
In shipping and aviation circles this is known as get-there-itis. This is where a captain or pilot ‘stays the course’, rather than admit an error or incurring the cost of a delay.
With spare parts inventory management, even with ‘good’ companies, there can be repeated incidences of system failures that lead to excessive costs, both in working capital and production losses, and yet the decision is to ‘stay the course’ of the management system in place.
This is not to suggest that the plan was always wrong. People make decisions based on the information available at the time (even if it is no information). The issue is that circumstances change, information gets updated, perhaps a lack of skill or capability becomes exposed.
The problem arises when companies become fixated on executing the current plan, even when it is demonstrably a stupid plan!
Why Do Smart People Stick with a Stupid Plan?
Why would they do this? Typical explanations include being overly optimistic, being unwilling to admit any failure, and even being captured by group think.
- Optimism arises because the ‘system’ may deliver what is required (say) 80% of the time and people can point to that as proof of success. Unfortunately, with spare parts management it is the 20% of systems failures (over and under stocking) that lead to 100% of problems.
- Being unwilling to admit failure is, for many people, really just part of the human condition. I am sure that you know someone like this.
- Group think comes about when people seek conformity or don’t want to ‘rock the boat’. People don’t want to be outliers, so they revert to the norm. In some ways this is a close relation of being unwilling to admit failure, as nobody will want to admit, for example, that an expensive investment has not delivered as expected.
A further explanation might be the failure to recognize the sunk costs. A sunk cost is a cost that has already been incurred and that cannot be recovered. This might include investments in modules of an ERP or past consulting or training investments.
All of these things contribute to PCB limiting spare parts management progress and they stop companies from making the changes they need to achieve the results they desire.
Incremental Change is Probably Not the Answer
Even when companies do recognize that something needs to change there is a tendency to then just make incremental changes. People will tell themselves that the plan is essentially OK but that it just needs a few little ‘tweaks’.
More often than not this is just an extension of the PCB.
‘Tweaking’ and incremental change helps us feel like we nearly got it right, that we were on the right path, and even that we are flexible enough to let the plan evolve. All positive ideas. But they may also be wrong.
And too often, ‘tweaking’ results in adding unnecessary complexity or bureaucracy. The tweak may be well-intended, but it makes the process harder or longer. Like when a change is made to have an additional person approve a decision. A technique that rarely adds any quality to the decision being made.
Another issue is when companies try to implement someone else’s solution into their own environment without truly considering how they might be different. Every company has its own culture and ‘personality’ (often driven by issues as simple as location or local management) and so you can’t just ‘bolt on’ someone else’s solution.
For Spare Parts Management Progress The Harsh Reality is That Something Must Change
The harsh reality is that sometimes you need to do something entirely different. Sometimes you need to accept that the sunk cost cannot be recovered and move on. Sometimes you need to start afresh. Not always but sometimes.
If you find yourself in a situation where you are in danger of exhibiting PCB then you first must admit (fearlessly) that what you are doing is not going to deliver the results you want. For many companies this is a big step.
Then you need to try and understand why your current approach does not deliver and work on identifying alternatives that will work for your organization. This may require an investment in training because (think about this) if your team knew what to do then maybe they would already be doing it!
Once you have identified what you are going to change then tell the people involved. Tell them why you are changing. Engage them in developing the changes needed. And train them.
Plan Continuation Bias is mostly talked about in aviation and shipping however that really needs to change as the impact of not recognizing this phenomenon in spare parts inventory management can be very costly in terms of working capital and production losses.
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You might also be interested in this recent post: Spare Parts Management Education: Are You a Goldfish?
Author: Phillip Slater