Spare Parts: By design or evolution?
Are your management systems deliberately designed or evolving randomly?
It doesn’t really matter which part of your business you work in — there will be a system for addressing the key things that need to be done. In production planning, there will be a way that needs and capacity are identified, prioritized and scheduled. In spare parts management, there will be a way that decisions are made on what to stock and how many to stock. We all know this to be true because these tasks are completed on an almost daily basis.
What is less certain is whether the system in use is the most effective and efficient way to get the job done. This is because the systems that are in place today are either deliberately designed or they have evolved randomly. Of course not all “designed systems” are perfect or even fully effective, but there is a reasonably good chance that a designed system will outperform a random system every day of the week.
This raises the question of who would allow a system to evolve randomly?
Unfortunately, too many companies do. In our research and regular surveys, almost exactly 50 percent of companies score their development of spare parts management policies as either “No defined, formal inventory policies” or “Broad-based corporate level policy.” With either response, those companies are saying they have no specific set of policies that have been designed for day-to-day application in helping them manage their spare parts inventory. Wow!
But it doesn’t stop there. When we dig down to ask about the development and implementation of a specific spare parts stocking policy, that is, a policy to guide the decisions on whether or not to stock an item and then how to decide how many to stock, the number of respondents that have nothing in place jumps to a massive 75 percent.
Is it any wonder then that companies find themselves so massively overstocked with spare parts and MRO inventory while at the same time having low levels of trust that they hold the items that they really need? Of course not, once we understand that their decision-making system has evolved randomly and so delivers random results.
So what about those companies that actually have taken the time and effort to design a system for spare parts decision-making? In our research we segmented the respondents based on their scores in terms of spare parts inventory management results. (Top performers having steady or decreasing inventory levels, high stock turns, and a low number of stock outs). We found that 75 percent of the top quintile in terms of results achieved had designed and implemented a spare parts management policy. However, we also found that 86 percent of the bottom quintile had not.
The difference in performance between the top and bottom performers is quite stark, in terms of key spare parts management metrics, and so is the approach they have taken for developing their spare parts inventory management systems. The top performers overwhelmingly design their systems while the bottom performers have allowed theirs to evolve randomly.
Stop for a moment now and think about which path your company has chosen. NP