Surviving the Spare Parts Crisis. Joel Levitt
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is the process of disintermediation. In short, it cuts out the middlemen so that you or your purchasing department can order directly from the manufacturer. This disintermediation has been facilitated by the Internet.
Without the Internet, it didn’t make financial sense for companies to sell or buy directly. But with the Internet enabling customers to shop for parts directly, the OEMs (original equipment manufacturers) receive and enjoy the middleman margin, and customers can benefit from the efficiencies of direct ordering and delivery. However, we also lose something by getting rid of our intermediaries—it was their inventory that buffered the supply chain against variations in supply from the OEMs. We also have lost much of the detailed knowledge formerly provided by the dealer’s inside sales staff.
Traditionally, parts were bought from dealers or distributers. These independent companies kept an inventory of spares, often for several OEM lines, and maintained relatively close relationships with the end customer. Many of these dealers had knowledgeable employees who got to know each customer’s needs intimately. In some cases, they had a better grasp of those needs than the customer themselves.
As an example, Motion Industries had a branch near a large smelter and metal processor in Alabama. A new engineer sent them a BOM (Bill of Material) for a large maintenance job. The inside sales person, Eleanor, had been providing that plant with sales support for 30 years; she informed the engineer that there were some mistakes in the BOM. The engineer insisted that he wanted exactly what was on the BOM. Eleanor sighed (she had had this argument before) and then told the engineer that she was shipping both what he asked for and what he actually needed; he could return the surplus.
An additional aspect to the spare parts crisis is a byproduct of the increased efficiency of the supply chain. This optimization has lowered stock levels at every level in the supply chain. Unfortunately, machines don’t read the statistical literature. They occasionally break down outside the parameters set up by optimization algorithms. Of course, that is not a problem if the consequence is a lost sale of a sweater or a lawn mower. But if the consequence is death or millions of dollars in downtime losses, then the optimization looks somewhat shortsighted.
Lower transaction costs also have allowed a variety of new models of distribution and sales. As we can attest, however, not all of the problems in these new models have been ironed out.
To practitioners in the field, it may seem like no one in the corporation leadership is listening. It also may seem that bad decisions are being made out of ignorance of the current facts of life for maintenance spare parts.
Surviving the Spare Parts Crisis: Maintenance Storeroom and Inventory Control blends knowledge I have gained while training people in 25 countries for over 30 years who are facing similar problems with regard to their spare parts inventory. This text is the only one available that not only covers the conventional wisdom, but also deals with the new realities of the market space. In some cases, the conventional wisdom has to be turned upside down in order to ensure uptime of critical equipment.
This book is specifically designed to give maintenance professionals four essential tools:
1) The knowledge of what leadership sees (and other functions too) when they look at the inventory
2) Models and explanations that can be used to penetrate and rethink the conventional wisdom
3) Specific tools to reduce inventory levels, improve service levels, improve flow, optimize space usage, and plan daily work
4) Strategies, actions, and tools to use to effectively implement change
The book is divided into sections. Those newer to the maintenance part industry could start at the beginning to see the whole story. More advanced readers can use the assessments to understand and compare their operation to other industry leaders. One goal of this work is to explain the warehouse to outsiders within the company. In addition to the context chapters, a quick read of the first several chapters would be useful. Finally, people wanting to design, set up, or revise their warehouse could focus on the middle third of the book, which covers all the steps to set up the physical and economic issues.
Here is a brief rundown of how this work addresses the key concerns of the different maintenance warehouse stakeholders:
Chapters 1–4 and 6 describe the origin and the current state of the parts industry. In short, they describe the crisis, including how it came to be and what shifts in thinking will be needed to fix it.
Chapter 5 provides a series of assessments of all aspects of the storeroom. People new to the operation could start with one of these assessments to better understand the issues.
Chapters 7 and 8 put the warehouse into context within the company. The warehouse is a supplier to maintenance and answers to purchasing or finance. Understanding these linkages is important if you ever want to improve the operation and have the changes be sustainable.
Chapters 9, 11, 12, and 14 move from the corporate offices to the trenches by looking at the storeroom from the point of view of economics, physical layout, processes, and procedures. These chapters include recommendations for organization, improvement, and understanding.
Chapters 10 (Computerization) and 13 (SIC) outline control mechanisms and controls for the inventory. It is particularly true with maintenance inventories that to control the whole you must control the parts.
Chapter 17 gives the reader ways of looking at the data and developing measures to evaluate the qualities of the effort.
Finally, Chapters 15, 16, and 18 focus on specialized issues and opportunities facing the maintenance storeroom.
We’ve come a long way from the first maintenance storerooms. They were stuffed into any space available (even above the compressor room at a company where I once worked). Now, large storerooms are million-dollar investments, many with automated and sophisticated processes — the whole segment is getting more high-level attention. This book strives to fill the gap between the inventory world and the maintenance world. Thank you for reading!
ACKNOWLEDGMENTS
There are two big channels of knowledge in my maintenance management consulting career. One major channel is the hundreds of discussions with the thousands of maintenance and storeroom professionals who have attended my classes. I have heard their triumphs and felt their pain. Thank you all for that generous sharing.
The second channel comes from the other consultants who have trained me to look at the world in specific and useful ways.
A big shout out to my Life Cycle Engineering colleagues, particularly Wally Wilson, from whom I have learned a great deal. LCE is one of the giants of the field and I’m very happy to have been associated with them. A shout-out to Terrence O’Hanlon, whose Uptime Elements gives a structure for reliability leadership.
Denny Hydrick, past president of the Association for Facilities Engineering (AFE) and retired maintenance manager at Lockheed, read the manuscript and made many useful suggestions. John from Australia, who remains anonymous, helped me by reading the manuscript and discussing real life parts and inventory issues.
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