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Understanding the Spare Parts Inventory Management Life Cycle

June 20 spkhadmin

The spare parts inventory management life cycle is complex.

It is also long.

Does success require the input of an ‘invisible hand’?
 


The Invisible Hand of Spare Parts Inventory Management


Spare parts inventory management life cycleIn December 1958, a writer named Leonard Read published an essay titled, ‘I, Pencil: My Family Tree as Told to Leonard E Read‘. This essay was written from the point of view of the pencil and details the complexity and range of functions and processes required to create this seemingly simple object.

These functions and processes start with the growing and harvesting of the wood and the development of the ‘lead’ (which is actually a complex process involving graphite, clay, water, and other elements). They include the logistics and planning to bring everything together and then deliver the pencil to the user.

The essay talks about the absence of any single mastermind, ‘forcibly dictating those countless actions’. Yet the pencil comes into being and pencils have been used for hundreds of years!

The concept of the ‘invisible hand’ (or lack thereof) could be applied to almost any modern item but let’s think about spare parts inventory management.

Even the simplest of spare parts, say an ‘O’ ring, has come to the possession of its end user through an extraordinary and complex chain of people and processes. The nitrile rubber that is used for some types of ‘O’ rings is a synthetic compound manufactured from a base of propylene (derived from petroleum or natural gas) as a copolymer. The process includes a range of additives and catalysts. The appropriate form of nitrile is later manufactured into ‘O’ rings through a process of extrusion, injection moulding, pressure moulding, or transfer moulding. The ‘O’ ring is then packaged, handled, shipped, stored, distributed, ordered, shipped again, processed into a storeroom, stored again, requested, issued, transported, and finally used.


No One Person Has All The Know-How


Supporting this activity is most likely a mind-boggling number of people, applying a range of computer software, and using internal company policies and processes at potentially dozens of different companies along the way. In addition, there are supporting activities from managing, controlling, directing and even cleaning the container ships on which the product at its various stages is moved, through to the work of accountants issuing and processing invoices and paying wages.

As with the premise of the the essay ‘I: Pencil’, it is impossible to believe that any one person has all the insight or know-how required to control or manage the entire process involved in the life cycle of an ‘O’ ring.

Even With A Shorter Time Horizon Spare Parts Management is Complex

But what if we shorten the horizon and only consider the processes and management required to get from the wholesale distributer to a company through to application, and finally end-of-life disposal? Surely a much shorter spare parts inventory management life cycle would be simpler?

Simpler, yes, but, except in the most rudimentary of organizations, still too complex for any one person to know or understand all of the steps and processes involved. This shortened horizon in the life of a spare part still includes:

  • Identifying the need for the part
  • Deciding whether or not to stock it in the company inventory
  • Deciding how many to stock
  • Creating the software to manage and control the procurement and inventory
  • Entering the details into that software
  • Placing an order
  • Organizing the logistics
  • Receipting delivery
  • Entering the item into the storeroom system
  • Correctly storing the item
  • Processing the documentation and paying for the part
  • Planning and scheduling its use
  • Arranging and executing the logistics to get the part into the hands of the right person at the right time
  • Installation into the equipment
  • Monitoring the physical condition over time
  • Repairing when appropriate (and managing that process)
  • Determining when it is beyond its functional life or otherwise obsolete
  • Removing the part from service
  • Responsible disposal of the part
  • Recording the disposal as required

In an organization of any reasonable size and complexity this list of activities will involve a wide range of personnel over a long period of time.

Many of these people will never know each other. Even those who work at the same company at the same time may never meet. They will never discuss their actions relating to a spare part and their role in its journey.

And so this seemingly simple task of procuring and managing a spare part is not only more complex than many people realize, it also involves the coordination of the decision making and actions of people who will never meet.


There is No Spare Parts Management Life Cycle Mastermind


As with ‘I: Pencil’ there is no mastermind that oversees the entire spare parts inventory management life cycle.

So perhaps this is not only why the process fails so often but also why those failures are not so readily recognized by those involved in the system. For example, here are just a few of the common ways in which the system fails:

  • Not recognizing the need to stock an item until it is too late
  • Not planning for the use of a part
  • Purchasing more than really required
  • Purchasing sooner or later than required
  • Storing in a manner that reduces the item’s functional life
  • Not disposing of items when no longer required
  • Not controlling and recording movements so that records are correct
  • Using software that drives inappropriate decisions

Each of these failures will be noticed at some point in time by somebody that is part of the process but often not before the failure becomes an additional expense for the company. Even rarer, because of the ‘silo’ approach of spare parts management, will any one person see the pattern of these failures and understand the cumulative effect on a company.
 
 
 


For information on our spare parts management online training please visit our Pro Level page.


 
You might also be interested in this article, The 9 Symptoms of Poor Spare Parts Inventory Health (and How To Avoid Them)
 
 

Filed Under: Inventory Management

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