Provide up-to-date costs by part and by work order
Continuous Improvement
• Partners in finding opportunities for waste reduction
• Always looking at slow moving parts for obsolescence
• Always looking for better products, processes, and procedures for supply of parts
WHY BOTHER MANAGING THE STOREROOM?
The biggest reason for managing the storeroom is the high cost and dire consequence of downtime. Related — although the opposite reason — is the high cost of wasted money represented by the wrong maintenance inventory. Ideally, management balances downtime costs with the cost of the inventory. Inventory management means that the inventory level is just right: not too high and not too low. Management should revisit decisions to respond to real business conditions.
Warehouse management will help:
• Support the mission of your organization! From an organizational perspective, this aspect is the most important of all the reasons listed. A well-managed warehouse supports mission-critical activities.
• Your cost reduction program. The lowest cost operations over the long term are those that are well managed!
• Preserve the assets. PM systems detect when something is going to fail (before it does). Timely corrective action will preserve the function of the asset. Parts are needed for Corrective Maintenance.
• Increase the level of service or perceived service to your maintenance customers. Responsive warehousing that stays ahead of problems will have less trouble keeping and attracting good maintenance workers.
• You meet a competitive challenge. Effective warehousing and management of spare parts can be a competitive advantage
• Improve your quality of life. Dealing with problems (rather than letting them sneak up on you) can reduce your stress level. You provide an important service. Whatever segment of the market you serve, your quality of life and your good feelings about yourself can be enhanced by serving it well.
You Always Have Two Choices
You can manage the spare parts warehouse or it can manage you.
In either case, machines will break or need PM; they will need parts, supplies, and materials. When a part is needed and is not available (for any reason), who pays? Or who spends the time to find the part?
• Storekeeper. Sometimes storekeepers are not the best suited when the part is obsolete; the OEM is out of business, or significant engineering or other technical skills are needed. However, they are the best choice when the materials have been received and no one can find them.
• Purchasing Agent and Buyer. They can source and research parts, supplies, and materials, but tend to have little experience on viable substitutions. Also they are usually not engineers.
• Supervisor. They often spend time finding parts. But is this task a major portion of their day? When supervisors are finding parts, they are not supervising.
• Planner. Planners should focus on next week or next month. If they are pulled into today’s requirements, they can’t be addressing future events. That being said, some support from planners is expected.
• Craftsperson. In some maintenance shops, the trades people source their own materials. This approach does have some advantages, but is very time consuming. It asks people with no training in purchasing to negotiate with vendors.
• Manager. Occasionally managers should get involved. Typically, they will help “motivate” whoever is looking to source the material.
Benefits
If you do transform your storeroom, you can expect some of the following benefits, according to Michael Brown, President of New Standard Institute:
• Over-purchasing will be stopped, potentially leading to a 5–10% reduction inventory value.
• Overnight freight costs can be cut by 30%, on average, by moving to ground shipping.
• Downtime due to breakdowns can be reduced by 33%.
• Downtime while waiting for emergency delivery of parts can be eliminated.
REALITY CHECK ON THE NATURE OF OEMS AND THEIR PARTS BUSINESSES
We have created a monster and we have no one to blame but ourselves. The original equipment manufacturers (OEM) have been forced into a corner by our purchasing practices.
What happens when you want to buy a new pump?
• Create a requisition for a pump or any piece of equipment.
• First decide on a set of engineering specifications, capacities, materials, etc. This task is usually completed by an engineer or by using the last spec (replace like with like).
• Pass the specification to purchasing.
• Purchasing delivers this specification to a few pump vendors, who chose appropriate pumps based on the specs and then return prices and deliveries.
• Generally, the least expensive pump that meets all the specifications and timing is purchased.
You can specify a premium product, but you will have to write a convincing business case to get approval for spending the additional funds.
So far so good. The question is that if the OEM wants to make the sale, they will need a better price than the next guy. They are also not likely in business because of a love for pumps; they want to make a profit. But how can they make a profit if only the low bid gets the job? There are several strategies.
They could make a premium pump and hope to sell it for a premium price. Some major manufacturers have taken this tack to great effect — think of Caterpillar mining equipment or GE turbines. Both are premium product lines made available at premium prices. Both companies rely on the parts and service business to greatly enhance the profit picture.
If you read business news, you’ll see that Wall Street seems to like parts and service businesses because they produce profit with little capital investment. It is not costly to expand parts or service business (some training, tools, and small offices/warehouses). Compare that expense to expanding the fleet of haul trucks or adding jet engine assembly lines.
Outside of a few premium manufacturers, most OEMs take the easier route. By far, the most common strategy is to make the pump good enough and price it in order to win a chunk of the business. However, all the profit will then have to come through the parts counter or from the service business. This strategy is exactly the one used by most OEMs. You buy the pump on low bid and you now represent to the OEM a 15-year cash flow for spare parts.
Remember, those of us in maintenance and procurement created this environment and we feed it by buying on the lowest bid or price.
