part and the criticality of that function to the success of your organization. This distinction is often missed. Before we investigate the function of the part, let us look at mistakes being made in maintenance warehouses around the world.
Games
Suppose that in order to improve long term profitability and viability, we design some games to enhance the company’s performance. These games may have prizes or just bragging rights.
Finance’s game is to improve the company’s working capital and profit. Therefore, they cut unnecessary expenses and reduce all inventories they can find. Perhaps they encourage operations to institute JIT (Just-in-Time) into the manufacturing process. They find a good amount of money invested in maintenance inventory parts that apparently are never used. Working capital improves over the period measured; finance wins their game for making the company more efficient.
The maintenance department’s game is to increase uptime to X%. To achieve that level, the department implements improved PM (preventive maintenance), PdM (predictive maintenance), and PrM (proactive maintenance) practices. With these improvements, and the effective insurance policy of critical (though very slow moving) spares, they believe they will win their game too.
The details of the insurance policy will be discussed at length in Chapter 5. For now, the policy states that in spite of maintenance’s best efforts to keep running machines running, if a critical machine breaks, they (maintenance already has the expertise and tools) can fix it quickly because they have invested in the expensive, long lead time spare parts to make the repair. The investment in the parts is the premium of the policy; the reduced downtime in case of a catastrophic event is the payout.
Finance won their game partially by liquidating slow-moving, long lead time spare parts. The probability of a breakdown does not change with the reduced maintenance inventory. But if there is a breakdown, the likelihood of a long downtime event increases to a certainty the more that maintenance inventory is reduced. Long downtime events cause the maintenance department to lose their uptime game, causing the company to lose money, market share, and customers.
Misalignment of accountability is a condition where you winning your game causes another group to lose their game, while the company is no better off. How is it that finance wins their game and yet they do not bear the consequences of their strategy?
If maintenance is accountable for maintenance-related downtime, then it seems that the inventory should be in their control.
The misalignment of accountability (the problem) and the realignment of accountability (solution) are both concerned with how accountability is aligned with managerial power. It is important to align the accountabilities so that the people who are responsible for an outcome have the power, funding, and tools to carry out their job. If the alignment is correct, the organization maximizes the use of resources to achieve its production and financial goals. If it is not correct, the different factions fight to optimize their own games or area, with no care for anyone else!
Who is and who should be accountable for the maintenance inventory? Furthermore, who should approve adding SKUs or removing SKUs to the inventory? Who sets the ROP and EOQ? These are important questions.
The first step is to determine the mission of the maintenance inventory. The reasons we need an inventory of spare parts are discussed in length in Chapter 1.
For now, we can answer the question “Why do we have the inventory?” simply. The inventory is a tool to boost profit or enable profit at all. (During a breakdown, no part might mean no production until the part is received). In some cases, the inventory also supplies parts and consumables for safe operation or to avoid either safety or environmental issues.
ISO 55,000 helps organizations realign accountabilities by tying all decisions to the mission. Once the organization has a mission (and vision, values) then decisions can be examined for their alignment to that mission. Uptime Elements (Reliabilityweb.com) directly calls for leadership to make sure all decisions have a clear line of sight from the decision to the mission of the organization.
Service Level Agreement
The mission is determined by top management in consultation with maintenance and operations. The expression of the mission is the service level agreement between warehousing and maintenance.
Discussions should consider how critical this plant’s product is to downstream operations, whether it contributes greatly to the company’s success, and whether this is our only plant. Based on sound economic analysis, the leadership team chooses the risk they are willing to take.
This agreement includes performance levels by part critically. If we all agree on a 99.5% service level for critical parts, then SIC (statistical inventory control) calculations based on either data or our best estimate will regulate the overall inventory level on the shelf and that determines the dollar value of the aggregate inventory. Over time, as we collect more data the “guesses” will improve.
The service level agreement does not preclude creative ways of operation. The service level might be achieved by a variety of strategies. For major, expensive, and critical parts, the service level might be achieved by vendor stocking or by plants sharing the part, as well as by physical stocking.
As we demonstrated in the discussion about point of view, everyone has a “view,” an interest, a measurement, or a key performance indicator (KPI) that they are held to. The problem with these varying views is that the overall profit of the organization suffers from decision making that favors any one limited point of view.
Accountabilities
Let’s look at some of the accountabilities of people in the storeroom and in maintenance for spare parts.
The people responsible for uptime and maintenance (maintenance):
• The maintenance department sees inventory as one of the elements needed to efficiently repair the company’s assets; it needs PM parts to avoid the need for repair. If a machine breaks down and the part is not on the shelf and not available from a vendor, the maintenance department might have to improvise to keep the plant running.
The people responsible for the storeroom (stores or supply chain):
• Storekeepers see a lot of SKUs that they must receive, store, issue, count, care for, and requisition. They have to issue the correct parts and may also have to kit jobs ahead of time.
The people responsible for buying the parts (purchasing or supply chain):
• Purchasing sees the paperwork. They may never touch or even see the part. They must contend with a large numbers of suppliers, many emergencies, and a lot of hysteria that maintenance brings to bear.
The people responsible for the funding of the storeroom (finance):
• Finance sees money tied up that they believe could be used better elsewhere.
The battles to add new parts, to increase inventory value or warehouse size, and to optimize the inventory are being fought on a daily basis. As we’ve demonstrated, the complete picture is not flowing to the people making decisions. People who are ignorant of the consequences to the company may make decisions that are short sighted and actually ignore the bad effect on the business.
RACI charts are developed for each business
