Do you know what the problem is with spare parts inventory optimization?
Yes, spare parts inventory optimization is terrific.
It helps companies adjust their stock holding levels, reduce their working capital and reduce their procurement costs.
However, there is a problem – as Phillip Slater explains in this short video.
The Problem with Spare Parts Inventory Optimization
Video Transcript
Hi, my name is Phillip Slater, and for the next couple of minutes, I’d just like to give you something to think about.
Spare parts inventory optimization is terrific. It helps companies adjust their stock holding levels to ensure that they have sufficient in stock to meet their current and future needs.
As a result, they can reduce their working capital and their procurement costs.
So, as the saying goes, spare parts inventory optimization helps you put the right part in the right place.
But here’s the problem with optimization: it happens after the event.
That is, after you’ve already accrued excess parts.
So, you’ve already spent the money required to put all those parts on the shelf.
Wouldn’t it be a better idea if we were to focus on inventory prevention rather than optimization? That is, preventing the unnecessary accumulation of parts when we’re purchasing them.
One of the issues is that almost nobody talks about inventory prevention, except of course for me.
Inventory prevention starts at the beginning of the process. It starts when you buy the parts in the first place. And in order to ensure that you’ve got a good process you need to put in place the right policies and procedures to guide decision making.
That’s what helps ensure that you’re not buying too much to begin with.
That’s something the think about.
My name is Phillip Slater.
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Posted by: Phillip Slater