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UNITS OF MEASURE
As you might imagine, the misuse of units of measure, at its worst, can create life-threatening problems. Suppose a Canadian airplane was refueled at a U.S. airport. The pilot asked for a certain number of kilograms of fuel but was given that number instead in pounds of fuel. That substitution could have been catastrophic. Generally, mistakes in unit of measure are embarrassing and sometimes expensive, but luckily not often catastrophic.
Common Unit of Measure
When stocking spare parts, the default unit of measure is the individual unit (or “each”). Products may be ordered and received in cases — for example, light bulbs — but they are stocked as individual units.
Unit of Issue
The unit of issue is a measure generally used to issue (or give out) an SKU (see below). For example, you might order and receive a case of bulbs, but the unit of issue would be each individual bulb. A challenge arises when you issue parts such as pipe, wire conduit, and steel plate, where the unit of issue is by itself not usually a problem, but maintaining the proper inventory count is. You store and issue light bulbs as complete units. No one requests half a bulb. However, with parts such as pipes, you may store them as complete sticks, but issue them in portions — 1/2 a stick of pipe or 1/4 sheet of steel plate.
When measuring your inventory, do not count partial quantities below the common unit of measure. For example, pipe is sold and issued in full lengths, so only count full lengths. It is likely that you have several short pieces; these are generally not counted. For other hard-to-count items, you should approximate (for example, lengths of wire, coiled tubing).
Stock Keeping Unit (SKU)
The stock keeping unit determines the base unit of measure. In the SAP system, which helps companies with inventory management, the term “base unit of measure” is more commonly used. For our purpose, the SKU is a single part number. If you have 200 SKUs, you have 200 different parts. However, you could have 20 of each part, or 4000 total parts.
Other Alternative Units of Measure
Alternative units of measure can also be defined to identify packages or larger containers for smaller units of measure such as cartons, boxes, bottles, barrels, pallets (storage unit types), and so on. The unit of measure has to be chosen for each item carried. Generally, the part master file in your Computerized Maintenance Management System (CMMS) or your enterprise resource planning (ERP) system carries a unit of issue and the unit purchased.
PREFACE
The entire maintenance spare parts business is in turmoil. There have been fundamental changes in the sale, distribution, and storage of spare parts needed to maintain machinery and other physical assets. In part, these changes have been caused by globalization with its increased competition. At the same time, the Internet has led to the disintermediation of parts distribution. Furthermore, advancements in technology in general have contributed to the rapid obsolescence of machinery, increasing the numbers of spare parts needed.
One factor that should be explained further is the process of disintermediation. In short, it cuts out the middlemen so that you or your purchasing department can order directly from the manufacturer. This disintermediation has been facilitated by the Internet.
Without the Internet, it didn’t make financial sense for companies to sell or buy directly. But with the Internet enabling customers to shop for parts directly, the OEMs (original equipment manufacturers) receive and enjoy the middleman margin, and customers can benefit from the efficiencies of direct ordering and delivery. However, we also lose something by getting rid of our intermediaries—it was their inventory that buffered the supply chain against variations in supply from the OEMs. We also have lost much of the detailed knowledge formerly provided by the dealer’s inside sales staff.
Traditionally, parts were bought from dealers or distributers. These independent companies kept an inventory of spares, often for several OEM lines, and maintained relatively close relationships with the end customer. Many of these dealers had knowledgeable employees who got to know each customer’s needs intimately. In some cases, they had a better grasp of those needs than the customer themselves.
As an example, Motion Industries had a branch near a large smelter and metal processor in Alabama. A new engineer sent them a BOM (Bill of Material) for a large maintenance job. The inside sales person, Eleanor, had been providing that plant with sales support for 30 years; she informed the engineer that there were some mistakes in the BOM. The engineer insisted that he wanted exactly what was on the BOM. Eleanor sighed (she had had this argument before) and then told the engineer that she was shipping both what he asked for and what he actually needed; he could return the surplus.
An additional aspect to the spare parts crisis is a byproduct of the increased efficiency of the supply chain. This optimization has lowered stock levels at every level in the supply chain. Unfortunately, machines don’t read the statistical literature. They occasionally break down outside the parameters set up by optimization algorithms. Of course, that is not a problem if the consequence is a lost sale of a sweater or a lawn mower. But if the consequence is death or millions of dollars in downtime losses, then the optimization looks somewhat shortsighted.
Lower transaction costs also have allowed a variety of new models of distribution and sales. As we can attest, however, not all of the problems in these new models have been ironed out.
To practitioners in the field, it may seem like no one in the corporation leadership is listening. It also may seem that bad decisions are being made out of ignorance of the current facts of life for maintenance spare parts.
Surviving the Spare Parts Crisis: Maintenance Storeroom and Inventory Control blends knowledge I have gained while training people in 25 countries for over 30 years who are facing similar problems with regard to their spare parts inventory. This text is the only one available that not only covers the conventional wisdom, but also deals with the new realities of the market space. In some cases, the conventional wisdom has to be turned upside down in order to ensure uptime of critical equipment.
This book is specifically designed to give maintenance professionals four essential tools:
1) The knowledge of what leadership sees (and other functions too) when they look at the inventory
2) Models and explanations that can be used to penetrate and rethink the conventional wisdom
3) Specific tools to reduce inventory levels, improve service levels, improve flow, optimize space usage, and plan daily work
4) Strategies, actions, and tools to use to effectively implement change
The book is divided into sections. Those newer to the maintenance part industry could start at the beginning to see the whole story. More advanced readers can use the assessments to understand and compare their operation to other industry leaders. One goal of this work is to explain the warehouse to outsiders within the company. In addition to the context chapters, a quick read of the first several chapters would be useful. Finally, people wanting to design, set up, or revise their warehouse could focus on the middle third of the book, which covers all the steps to set up the physical and economic issues.
Here is a brief rundown of how this work addresses the key concerns of the different maintenance warehouse stakeholders:
