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The Value Of A Well Managed Spare Parts Inventory Environment

Most of us would not allow our doctor to conduct surgery on us without having a complete diagnosis of our physical condition and having a clear understanding of what the surgeon intends to accomplish in the operation room.  In the business environment, unfortunately, all too many choose to invest significant time and money to fix problems that they have not adequately defined or quantified.  To put it in medical terms, they choose to start with an axe instead of a scalpel.  In business, as in healthcare, taking this kind of risk can be catastrophic. Understanding your current inventory management strategy (Total Cost of Inventory Management) is paramount to enable your company to weigh strategic options and accurately measure return on investment moving forward. At Professional Materials Management (PM2), we recommend measuring three key cost factors prior to the launch of any significant materials management strategy initiative.  Here they are:

  1. Inventory Cost
  2. Process Cost
  3. Procurement Cost

I will cover the details of how to measure each of these three critical cost factors in upcoming installments.  But for now, I will conclude by encouraging you to begin to think of your total cost of inventory management as the very cornerstone of developing an effective inventory management strategy. In the meantime, if you have questions about how PM2 can help you measure your total cost of inventory management, please contact us.

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