In any activity is important to know what to do (of course!) but equally important is knowing what not to do.
Spare parts inventory management is no different.
By understanding which common inventory management techniques do not work with spare parts inventory (and why) you might just save your company a bundle of money (and yourself a lot of heartache).
I am thinking here of the inventory that you hold for equipment repairs and support, as opposed to the inventory that is held for sale or used as raw material for production activities.
This distinction is important because spare parts inventory has characteristics that set it apart from other inventory types.
Here are three techniques that do not work with spare parts inventory management.
- Just-In-Time (JIT) - aside from the reality that JIT is a production planning technique, spare parts have two characteristics that mean you can’t apply JIT techniques. First, most of the demand is unplanned and unpredictable (think random failure). Second, many parts have very long and uncertain lead times. Forget JIT and work instead on improving spare parts decision-making.
- Economic Order Quantity (EOQ) - applying an economic order quantity sounds very attractive but the problem here is that there are too many variables in the actual calculation for the results to be reliable. For example, what if more than one item is on the purchase order, does that split the order cost? My advice: apply a logical and real-world framework and don’t bother with the calculation.
- Service Level (SL) - SL is a measure of the number of times that a request for an item is filled in an acceptable time frame. With spare parts, if you don’t have the right part available 5% of the time your production might stop and then nobody will thank you for achieving a 95% service level. Forget that approach and learn how to make better stocking decisions.
Attempts to apply these techniques will cost you time, effort, and money and because they don’t work effectively with spare parts, they will also cost you the trust that your spare parts management system can deliver the parts required, when needed.
And that might just be the greatest cost of all.
