Spare Parts & Warehouse Management Strategy

Spare Parts & Warehouse Management Strategy

Optimizing the physical, financial, process, and human resource management of spare parts

 

In times of narrowing margins, stretched budgets and rising operational costs one must find ways to maximize revenues and to reduce operating costs in order to meet profit goals. Equipment in asset intensive industries often requires frequent replacement of parts to assure continued and reliable operations. However, there is a substantial cost associated with carrying spare parts inventories, so what the plant keeps on hand and how much of it must be rationalized to ensure a favorable return on investment (ROI). Many operations might have updated the IT, but the strategy and logic for holding parts should reflect actual operating requirements, equipment condition and, just as importantly, access, disassembly and supplier lead-time performance. If the data, understanding and contractual agreements on these issues are substandard, there is much which can be done to save significant amounts and support more reliable.

Challenges

80-90%

of all inventory in a typical storeroom is rarely used

40-45%

of rarely-used inventory is tied up in overstocks or obsolete inventory

c

Typical carrying cost for inventory is 22% of the value per year

20-35%

can required stocks be cut by through sharing spares among plants

Strategy & Solutions

We have 25 years helping our clients achieve maximum operating reliability at minimum cost. Looking hard at how maintenance operations impact upon reliability has given us great insight into the real-world ways in which optimized inventory can not only substantially reduce costs but also support excellent performance. Clearly, we ensure our clients’ IT systems are working well, fully integrated and that the data is consistently cleansed, but holding costs are determined by much more than solid max-min levels and stock turn analyses. Years of outsourcing, changing core-competences, contractor and supplier performance capabilities mean that original assumptions may be outdated and a holistic understanding of how equipment needs to be looked after, by whom and when is more important than ever. Our consultants have access to best practices from around, but crucially they have the expertise and an in-built desire to train and coach for a sustainable improvement.


Our Service Offering

Inventory Turnover Analysis

Inventory carrying costs add up to about 22% of total inventory per year, which includes the cost of space, labor, insurance, taxes, systems, pilferage and obsolescence. T.A. Cook Consultants will evaluate your inventory to identify fast movers, slow movers and no movers to determine what and how much inventory you need to have on hand to assure equipment asset reliability, reduce clutter and inventory carrying costs and to minimize stock-outs and expedited shipments.


 

SAP Configuration for Spare Parts Management

Correct master data in SAP or her enterprise resource planning (ERP) systems is essential for effective spare parts management. T.A. Cook Consultants evaluate the accuracy of master data, ERP configuration, interfaces between the ERP and associated preventive maintenance or maintenance management model, proper definition of asset criticality, accuracy of bills of materials (BOMs), spare parts storage strategies, picking, kitting and staging strategies and decision criteria to determine if a planned job is indeed ready to schedule. Where performance gaps exist, our seasoned group of consultants will work with you to create and execute a plan to close the gaps and provide training, coaching and mentoring to enable your organization to achieve excellence.

 

Critical Spares Rationalization

One of the most difficult decisions in managing MRO (maintenance, repair and operations) inventory is whether or not to carry a critical spare because it is a very expensive part that you do not actually want to use. T.A. Cook Consultants employs a risk-based FMEA-type approach to determine which critical spares you need to keep on hand and how to properly store and care for the parts while in storage to avoid shelf-degradation and to assure that they are fit for service if and when they are required.

 

Maintenance Inventory Forecasting

It is generally accepted that inventory carrying costs equal about 22% of the inventory value each year, which includes the cost of money, space, systems, insurance, obsolescence, shelf-degradation and pilferage. Inventory forecasting is essential to optimizing inventory management practices. Forecasting inventory requirements must be demand driven based upon historical usage patterns and logic based forecasting of future requirements. T.A. Cook Consultants works with you to determine what and how much inventory to stock, to evaluate opportunities for standardization so as to reduce unnecessary replication. We employ economic order quantity (EOQ) and other reorder point models and methods to ensure that you minimize stockouts, minimize expedited inventory fees and minimize total cost of inventory management.

 

Inventory Management Processes

Ultimately, it’s your operational inventory management business processes that determine whether your MRO (maintenance, repairs and operations) inventory warehouse is an asset or a liability to your ultimate goal of equipment asset reliability. T.A. Cook Consultants will expertly evaluate your organization’s inventory check-in and check-out processes, parts picking, kitting and staging processes, inventory quality management processes, repairable spares management processes, physical inventory counting processes, etc.  We’ll support you to create effective processes and standard procedures and KPIs that measure your effectiveness. Most importantly, we will coach and mentor your team to ensure that MRO parts are an asset, not a liability in your pursuit of equipment asset reliability.


 

Capital Project Materials Management

Capital projects present a unique challenge for inventory management. Without standardization, capital projects can result in the addition of unnecessary variability in required parts if efforts to standardize on what is already in inventory. Additionally, it is necessary to create and manage laydown areas for capital project systems to avoid degradation while the materials are stored. T.A. Cook Consultants will help you navigate this process to standardize on materials and assure that they are in tip-top condition when it is time to put them into service.

 

Storeroom design

Proper storeroom design is essential for lean materials management. T.A. Cook will assist you to design a storeroom that ensures that high volume parts are easy to get to, parts that are commonly used together are within close proximity to one another, is designed with worker ergonomics in mind and protects stored parts from vibration, heat and contamination-induced failure.

 

Repair and rebuild management

Parts and materials management does not stop at the warehouse. It must be extended to include the processes for rebuilding parts and equipment (either internally or externally) and then returning those parts in top condition for redeployment. T.A. Cook will assist you in developing lean management process for failed parts handling, discarding failed parts where required, repair and/or rebuild practices and return to storage practices.

 

Contact

Please talk to our expert to find out how we can support you