Spare parts: Understood Backward, planned forward?
Spare parts inventory must be understood backward, but it must be planned forward.
That is a rephrasing of a quote from Danish philosopher Soren Kierkegaard. The original quote is a reflection of life; however, by applying this thinking to spare parts management, we can identify some key aspects of the way spare parts inventories must be managed.
At the most obvious level, the usage data collected to evaluate spare parts holdings are all historic. That is, the events all happened in the past. This data is then used to predict future needs. This is how the process most usually works.
Why then do so many companies not work harder to ensure the accuracy of that data?
This may be the most puzzling and inconsistent aspect of spare parts management. Companies base the future of their business on the deductions made from this data. Yet they don’t spend the necessary time ensuring the data that feeds into the process is correct.
People often say they are pursuing “data cleansing” to address this but that is a solution to a different problem. What is needed here is data accuracy.
Data accuracy means ensuring the data reflects the events we think it does. We know, for example, that spare parts are used by team members to repair or maintain production equipment. We expect that the usage data collected represents the true demand for the spare parts, both in terms of time and quantity. Unfortunately, this is rarely true.
Some events that limit the veracity of the data relate to demand transaction management and include:
- Removing parts and not recording the transaction – that is, no record of the demand (the worst possible case).
- Removing parts from the storeroom and not using them in a timely manner (often hoarding the parts in workshops).
- Removing the parts and not using them.
- Delaying recording the transaction (which may have been correctly noted at the time it occurred).
In each case there is a system error in either the timing of the actual demand or the quantity required at that time.
The problem really is that the user is an intermediary between the storeroom and the production equipment, and this distorts the demand signal.
Therefore, with spare parts, planning (the future) is based on the needs of the equipment but the usage data (the past) is a reflection of the behavior of the user, not the equipment.
It is this disconnect that causes problems such as overstocking and unnecessary obsolescence. And it is a key difference between managing spare parts inventory and other inventories.
Sometimes people think this error can be corrected through cycle counts or stock takes, but this is really a correction that does not address the core problem.
The most important action a company can take for improved spare parts data accuracy is to close the gap between the user behavior and the equipment needs. This means taking better control of transactions, both in time and quantity.
Can spare parts inventory only be understood backwards? The unequivocal answer is no. But if you pause to reflect on what your data is really telling you and what you can do to ensure that it is more accurate, you can make a real and genuine difference to your future. NP