Your maintenance and reliability team will know better than anyone the impact a spare-parts shortage has on the business. No spare often equals no production, so there is sometimes an attitude of “the more the merrier.”
But what about working capital? Companies often have far too much money tied up in their spare parts inventory. This expenditure may not provide any real value to the company if many of the parts purchased become obsolete before they can be used. That is not to say they don’t need the spares, but maybe they don’t need as many as they stock.
These dynamics result in significant tension in the management of spare-parts inventory. Typically, the maintenance and reliability people want more stock on hand and the accountants want to minimize the investment.
Maintenance crews will see the accountants as shortsighted, aiming to save a dollar today in a way that costs $5 tomorrow. From the other side, accountants may see the maintenance and reliability team as profligate spenders with little or no accountability.
Spare-parts management can be driven by the silos.
One of the reasons this divide occurs is because spare-parts inventory management can sometimes be driven by the silos of the organizational structure.
This results in the goals of the people managing the spare parts not being aligned with the goals of those using the spare parts, while also not aligning with the company’s cash management goals.
The reality is that spare-parts management requires a simultaneous understanding of the engineering and maintenance requirements, supply-chain management, commercial negotiation and financial investment. That is, successful spare-parts inventory management requires input from people in different departments of an organization.
When spare parts are managed from the perspective of just one of these functional silos, the level of inventory held is almost always a function of the perspective of that silo.
Here are some examples that may be familiar:
- Procurement will typically focus on lowest unit cost and economic order quantities;
- maintenance and reliability will typically focus on the instant availability of every possible spare;
- supply-chain management will typically focus on slicing and dicing data;
- financial management will typically focus on minimal investment.
Leaders in each area can make valid arguments for their perspective, but the best results are achieved with balance.
The motivation to take a particular perspective or point of view is not driven by any malice or poor intent. It is driven by the basic human nature that seeks to maximize our personally measured outcomes. Engineers responsible for keeping a factory producing are unlikely to reduce inventory if they are not accountable for the dollar value held. Similarly, an accounting-only approach can result in removing slow-moving items that, from an engineering perspective, are still required and are held as insurance spares.
If you really want to achieve improved spare-parts management results, you really do need to get above the silos. NP