Should any spare parts management metric be treated as a spare parts management KPI?
Does your company suffer from the spare parts management KPI delusion?
There is an old saying that ‘what is measured, matters’ and while there are some companies that don’t actually measure their performance through spare parts KPIs (yes, really) the vast majority do have in place at least some metrics that provide insight into the effectiveness of their management techniques.
Should Any Spare Parts Metric be a Spare Parts Management KPI?
As part of this some companies use software to measure lots of different metrics. They can ‘slice and dice’ all sorts of data. But are these really spare parts KPIs? Is a metric a key performance indicator (KPI) merely because you measure and report it? Or is a spare parts KPI something more specific?
Surely a spare parts KPI should be more specific than ‘anything we can measure’. My thesaurus provides the following as synonyms for the word ‘key’: important, main, crucial, significant, vital, and strategic. In this context the word ‘key’ does have real meaning and if we are collecting and reporting data for ‘key’ performance indicators we should be confident that they are not minor indicators.
Examples of What Not To Do
An example of a ‘spare parts KPI’ report that isn’t necessarily limited to key items is a matrix that I recently encountered that had 35 rows and 11 columns – that’s 385 data points – reported each and every month.
How many of those fit the synonyms for ‘key’ and how the team involved made any decisions based on this is anyone’s guess.
Perhaps worse that this are those companies that take a standard spare parts KPI but use, let’s say, a non-traditional means of calculation. Usually this results in their reported metric looking better than it would otherwise. Utilizing a metric that compares ‘apples with oranges’ and being satisfied with the result must almost fit the definition of self-delusion.
In my experience this happens most with the stock turn metric.
Fundamentally this is a simple spare parts KPI that indicates whether the inventory is being used and is based on the inventory that you hold for issue from your storeroom.
Some companies, however, will include the quantity from every purchase of an item that is held in inventory, whether the purpose is to replenish the inventory or not. Often the key criteria are: is the item held in inventory and did the purchase go through the storeroom along the way.
So, say they hold 1 of an item as a ‘just in case’ spare part but order 10 for a planned replacement task, measuring in this way would indicate that the item turned 10 times when in fact it may not have moved at all. Crazy.
Another area ripe for self-delusion is inventory accuracy.
Recently a stores person admitted to me that they ‘correct’ stock quantities before the official stock take so that they can report 100% accuracy.
Perhaps not so much self-delusion but misleading all the same.
In another case inaccuracy was not reported unless it resulted in a variation of more than $2,000 (although the necessary stock adjustments were made).
This approach completely ignores the reality that stocking out of a low value but critical part might cost a lot in terms of downtime.
At the heart of these spare parts KPI delusions there is probably some deep pop-psychology explanation but I am not the person to explore that. What I can explore is the idea that spare parts KPIs must be ‘key’, must be accurately measured, and must be fairly reported.
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