Spare Parts Management Part 2 – Arriving in the 21st century

How can inventory levels be reduced by 60 – 70% and material cost in selected product groups generate savings of up to 20% while maintaining availability at the same time? The solution sounds quite simple at first. The hurdles only become apparent in the implementation of the individual steps below. This requires not only profound technical knowledge but also in-depth technological know-how in order to develop pragmatic and individual solutions.

Strategy development and definition of targets

The development of one shared spare parts strategy is an important step to clearly define the target state and the detailed way to get there. The roadmap should always be developed in cross-functional workshops (warehouse, maintenance, purchasing, finance), which breaks down silo thinking of individual departments and allows common goals to be pursued. Common goals could be to reduce inventories, increase availability, or reduce complexity and parts diversity through standardization. With the continuation of the project, the participants of the workshops should – in addition to implementing – also work on acceptance in the company as a whole and thus increase their likelihood of implementation.

Improve data quality and enrich master data

“Data is the gold of the 21st century” – This or something similar is often said. The quality of the data has a major influence on the findings and actions that can be derived from this data. Due to specific aspects (type designations, dimensions, article codes…) and their susceptibility to errors, in the spare parts area there are often duplicates of the same items, which often differ in the system only by individual letters, numbers or symbols. The solution is to use algorithms to identify and clean up such duplicates. This also includes consolidation across different languages. At the same time, incomplete master data should be enriched with additional information (so-called attributes, e.g. layer thickness, material, composition, hazard class, …). This information is also essential in procurement in order to identify the right articles in catalogs and price lists and ultimately find suitable suppliers and thus to purchase correctly.

Create transparency and use existing information

The next essential step to achieve measurable results is to structure and analyze the existing information. Essential for this are the actual consumption and inventories in order not to treat all spare parts the same. Taking actual consumption into account helps to avoid losing focus and to derive material-specific consumption ratios. After the derivation of consumption key figures (=”VBK”), the individual optimization of the respective category takes place.

For materials with small consumption KPIs, a frequently pursued approach could be to automate procurement and logistics processes as far as possible and to transfer them to a vendor-managed warehouse. The positive consequence for the people involved is that more time is left for tactical activities.

“Quick wins” can be achieved through internal stock transfers by moving items with a high “VBK” to where they are needed. It is not uncommon to see immediate savings of more than 100 TEUR in our projects. Spare parts that were previously available elsewhere in the company (without the knowledge of the person that needed it) can be used, and do not have to be purchased again or disposed of later at high cost. These are just two examples that show the immediate added value of the structured usage of existing information.

Ensure continuous improvement and process stability

After generating initial savings, it must be ensured that the new processes are adhered to and that no unnecessary inventory is added. In order to achieve this, every process participant and every hierarchical level must be provided with the information they need. To ensure that spare parts management permanently stays in the 21st century and that the changes and improvements achieved are maintained and not gradually reversed by day-to-day business, regular monitoring/reviews should take place and existing information and key figures – presented transparently – should form the basis for future management activities. In addition, management routines should be developed to ensure sustainable embedding and stabilization of the new processes among all those involved in the process.

If all of the above steps are carried out correctly with the necessary knowledge and understanding of the people, processes and technologies involved, contradictory goals such as low inventories combined with high availability and low procurement costs can be achieved sustainably. Many success stories in the industrial landscape and our project experience prove this and show that investments in specialist consulting and IT tools pay off and sustainable savings can be achieved through the realization of quick wins, particularly in the spare parts sector.