Why is spare parts management often treated like an orphan by the company and managed like in the 80s?

Inventory costs are too high, storage space is scarce and at the same time the required spare part is still not in stock – or just cannot be found? Every facility manager or warehouse manager is familiar with one or a combination of these problems and solving it at the same time takes up a large part of the daily working time.

But why are these problems more standard rather than the exception, especially in the MRO area (maintenance, repair and operations)? And what is the way out of this dilemma? In practice, we repeatedly observe the same reasons that lead to the situation described:

  1. The development of the MRO area is not a priority for the company.
  2. Great heterogeneity and large number of different materials
  3. Bad data quality
  4. Silo thinking
  5. Underestimated damage and overestimated effort for a solution

The complexity in spare parts management can be solved – usually greater savings are achieved than expected.

Christopher Zimmermann, Supply Chain Partners

The development of the MRO area is not a priority for the company

One of the main reasons why the MRO area is often managed like in the 80s is simply the inadequate priority with which this area has been further developed in the past. In addition, this area only makes up a small part of the total purchasing volume and the focus is usually on the direct spend. Is there a company-wide strategy for storing and purchasing of spare parts? Have projects for digitization in the MRO area been actively promoted? If the answers are no, “trouble-shooting” still predominates in daily work and there is and will not be time for improvements.

Great heterogeneity and large number of different materials

Another cause is the sheer number of different articles and suppliers in the spare parts area. The large number of variants of the required materials makes a structured overview and transparency of stocks and consumption difficult. A cross-company or cross-location classification of consumption is time-consuming, technically complex and requires the support of intelligent IT solutions. The lack of transparency then inevitably leads to smaller warehouses “for security reasons” at the place of consumption and articles in the central warehouse are not consumed and gather dust.

Insufficient data quality

Insufficient data quality is problematic in many areas of the company. This applies in particular to the MRO area and makes a high level of transparency much more difficult. Duplicates in the master data and inadequate article information make purchasing and inventory planning in line with real consumption more difficult and further increases the number of different articles “virtually”.

Little coordination and silo thinking

The fourth cause relates to the number of different internal or external interfaces and stakeholders who interact with the MRO area. In addition, the stakeholders involved mostly pursue opposing goals. While finance is interested in keeping stocks as low as possible for reasons of cost, purchasing wants to generate the lowest possible material costs (e.g. by ordering larger quantities), maintenance must at the same time ensure high availability, taking into account the available space. As a result, the common goal is missing, and everyone optimizes their own sphere of influence without questioning how their own actions influence the goals of other stakeholders or make their work more difficult.

Underestimated damage and overestimated effort for a solution

Ultimately, the damage caused by suboptimal spare parts management is often underestimated. The actual damage results, among other things, in excessively high stock levels (physical), high devaluation and disposal costs, and less measurable: the manual effort of “fire fighting”, often the only remaining task of the employee concerned. This effort is underestimated because it is often compared to the serious event of a production stop due to unavailable materials. Conversely, the necessary “tidying up” and the introduction of clean, transparent, and stable processes are perceived as much too time-consuming. The reason for this is that such projects require special skills and tools that are not always and everywhere available or known.

The way out of this dilemma

Luckily, there are solutions for the causes mentioned above. Our projects show that stock levels can be reduced by up to 60%, while at the same time ensuring high availability. As a “side effect”, this optimization saves additional time for tactical, strategic work and accelerates the company-wide exchange of spare parts and knowledge. In addition, material costs can be reduced by up to 20% through consolidation. The result is a positive ROI (Return of Investment) in each of these projects.

The next article will be devoted to the topic of how these results can be achieved and which solution strategies are available.