9 keys to maximizing profits and equipment uptime through inventory management for maintenance parts

PROCUREMENT 9 Keys to Maximizing Profits and Equipment

Uptime through Inventory Management for

Maintenance Parts

MEMO 2011 Conference in Saskatoon Gallery C

November 7th, 2011

By Robert Lamarre, B.B.A., M.A.Sc.

President of IMAFS inc. & GCRL inc.

Robert Lamarre - All rights reserved

1. Parts classification

2. Managing service

3. Managing demand

4. Forecasting demand

5. Managing lead times

6. Optimizing inventory parameters

7. A good inventory optimization system

8. Clarifying roles and responsibilities

9. Policies, procedures and key performance indicators

2 Robert Lamarre - All rights reserved

True or false: all parts are created equal ?

Classify the parts in relation to both their relative

importance on operations (criticality) and

frequency of usage

Classify the parts taking into account inventory

strategies

Pareto on hits and value


4

Identify product family and demand stream

Critical or

not

Stock or

non stock

New

Inactives (no usage for X

months)

A B C D Based on Hits or

usage value

Updated Annually Monthly Manual

Reparable or

not

Obsolete or

not

Cla

sse

s

Robert Lamarre - All rights reserved

The reason we keep inventory

Analyzing our performance is important

Ability to supply the parts when needed

Estimate parts availability

Service goals to be determined for each product class,

each product family and each warehouse

The system has to adjust Min-Max to service goals

80 – 20 Rule -> Focus on important items



Measures existing levels

Allows service goals on part’ criticality level

Allows service goals by class, by family, by warehouse

Safety stock set in line with service goals

Simulations to measure impact of service goals variations

Dashboard to track service results

Tools to take corrective actions

Historical Information

More data = more accurate you can be

Demand flows regular, project, planned maintenance

Demand patterns: planned or emergencies

Regular demand or intermittent demand

Manage on demand data; not shipping



Better data for accurate forecasts

Forecasting: Prediction or science ?

Human, machine or both ?

Sales & Operations Planning (S&OP)



Good solid statistical forecasts

Forecasting methods that account for

demand trends, seasonality and

intermittence

Best fit by item

Possibility of manual

adjustments

Filters & alerts

Can integrate maintenance planning data

Better forecasts = better service + less stock

What is a lead time ?

Lead times are often long and variable

Reality versus promises

Measure and manage the various elements of lead

times



Bad lead time information result in stock outs or surplus stock

Can run simulations to analyse impact of changes

Tools to take corrective actions

Lead time

Dynamic calculation

By vendor and transport mode

Cleansing of extreme delays

Internal lead time managed by components

Possibility of manual control

Compare real lead time with

vendor promises

What is a Min ?

What is a Max ?

Min-Max variations

Safety stock provide the service level goals

Demand variability and forecasts



$

Ordering Stocking

costs costs

DATA BASE ERP or CMMS

Calculation

SS Lead time Min Max Forecasting

Lot sizes

Service objectives per class /

family/ warehouse

Adjustments Simulation

Look for inventory management system specially designed for

spare parts. They should account for:

Parts criticality

Service goals per product class and product criticality

Erratic demand forecasting

Planned demand

Lead time management

Dynamic inventory parameters optimization

Allow simulations

Surplus stock identification, prevention and disposition

A complete set of KPIs and exception reports

Data mining



Inventory analysis reports gives full picture of inventory

management results with pointers on necessary corrective

actions with drill down possibilities

Overall results that can be drilled down

Clarifying roles and responsibilities

Who is responsible for inventory ?

What are the roles of Supply Chain Management ?

What are the roles of Maintenance ?

Change management is very important


Service goals

Policies determine roles and responsibilities

Key performance indicators

Benchmark


Inventory Management can be passionate and exciting

Yes eliminating 25% or 40% of equipment downtime due

to lack of parts brings a smile to operations manager

Eliminating 80% of stock-outs at the store has a major

impact on maintenance efficiency

When you can reduce total inventory by more than 25%

while improving service, you are freeing up capital

money and space that are always badly needed



Thank you

Questions?

9 keys to maximizing profits and equipment uptime through inventory management for maintenance parts

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