In today’s economic environment, it’s a pretty safe bet that your company is looking to find and exploit every cost cutting and cost saving measure that can be identified. In fact, I would be surprised if you haven’t been doing this for quite some time and are now beginning to run out of places to look. The fat has been trimmed and many companies are now faced with cutting into the muscle, however there is one place that may have been skimmed over or not explored at all, and that is the maintenance, repair and operating (MRO) inventory. Often ignored until something fails, the MRO inventory now has the chance to be the “hero” in this new economic scenario.
So, how can managing your MRO inventory help you survive? You have to look at this inventory in a new way; see dollar signs on every spare part and piece of equipment. Take a walk through your tool crib or storage facility with this new view and you will see your inventory in a whole new light. If you knew the value of those twelve parts sitting on the shelf covered with dust was $90 a piece, would you want to find out the value of the twenty pieces of another item sitting next to them on the shelf?
- How did this happen?
- How much money do you have tied up in excess inventory?
- How can it be fixed?
- How can you make “lemonade” out of this “lemon” of a situation?
As you can imagine, we at PM2 can tell you a lot about managing your MRO inventory while addressing each of these questions in the next few blogs. To begin, let’s explore how this happened.
How did this happen?
Don’t feel like you are alone out there. This is more common than not. Here are some very common situations we see every day that answer this question.
- Bought it in case quantities – It came in a case of 12, you used 2 and have 10 left. They have been there for a year.
- “Hidey holes” – Your workers know this item is often out of stock, so they keep 2-3 on hand, just in case. Multiply this by several workers and 5-10 items (or more) and you have an inventory problem.
- “Project dumps” – Parts get checked out (again, just in case they need it – and it is so much easier to check it all out at one time) but not all of it is used on the project. When the project is completed, they either dump it in an “excess/overstock” warehouse or a closet (“hidey hole”). That is so much easier and less time consuming than checking it back in.
- “Graveyards” – These products are broken, have been replaced, or outgrown their usefulness in your company. Someone has decided to keep them so they can be raided for parts, because didn’t know what to do with it, or, again, “just in case”.
- Bought it on Sale – Yes, we have all fallen for this one at some time. Summer is on the way and you know you are going to need air conditioner filters. If you buy 4 cases of them now, you can save 10%. Who knew that every building needed a different sized filter? Five years later, you still have 3 cases of air conditioner filters for each building.
- Didn’t know you had it – Because it is hidden in the “hidey holes” or dumped on the wrong location on the shelves, you didn’t know you had it, so you just kept ordering more. Now you have a lot of it in multiple locations.
- Didn’t know you had it – Part II – You had it in the Tulsa location but you didn’t know it. The inventories aren’t on an enterprise system so you can’t see what the other plant has and you buy it again.
- Didn’t know you had it – Part III – You have a system where you can check inventory at all of your locations. You searched for “1/4 HP Motor” and found nothing. Little did you know they had it entered as “motor, single phase, 1/4 hp”. They had 20 of them and you ordered 4 more because they are often out of stock and are on sale today.
- Backordered/Slow to ship/receive – For three week when out of stocks are reported, you are told that you are out of “150 AMP S Time delay fuse holder code 1-13/16 FUSE DIA”, so for three weeks, you order more. They all arrive at the same time, a month later.
If you recognize any of these scenarios, don’t despair. It can be fixed. In fact, you can turn this into an opportunity to provide real savings directly to your company’s bottom line. Keep watching for the next blog to find out how to make this happen!
If you need help sooner than that, PM2 is always ready to assist with the solutions to these or any of your inventory issues. We are just an e-mail (email@example.com) or a phone call away. (813) 249-0834. Or visit us at www.pm2online.com