Last week we launched, on Reliability Web, a new tutorial titled The Optimization Trap. Since then I have received many messages from people describing their frustration at the optimization traps that they find in their organizations.

This post is being started to provide a place for people to discuss their views on The Optimization Trap.

What is the trap? Here is my definition:
Taking actions that, without you realizing it, limit both your opportunities and your results.

This means that we sometimes, unknowingly, go down a path that we think will lead to optimization but which, in reality, does not.
We end up in a situation that is sub optimized but don’t realize it.

What do you think? Does the optimization trap exist in your company?

Phillip, may be its not a trap. Well it is in my opinion.

My company dislikes new items into into catalogue and encourages indigenisation. The local items are orderd in more than required qty for making economic order. The result is build up of inventory that is dead from day one. We call it dead if idle for 10 years.

This message has been edited. Last edited by: yahoo,

Yahoo,
You are absolutley right, sometimes economic order quantities are a trap. As you say, dead from day one!
If you haven't already checkout the 5 Myths of Inventory Reduction at http://www.initiateaction.com/5_Myths.htm. One of the myths is that economic quantities are always economic.

What other optimization traps have you seen?

Phillip you did not comment on dead inventory decalartion time.

10 years is ok or it should be less?

My answer is in two parts.
First, stock codes or items where there is no usage at all. In this case the entire holding of that item is idle. In my opinion it is dangerous to classify thsi type of inventory based on time. My reasoning is that often plants have old equipment and that genuinely critical spares may not have moved but still be needed.

For example, when I was working as a maintenace engineer in the plastics industry we had some equipment that was 10, 15 and even 20 years old. Some spares, such as tie rods for injection molding, didn't move but were still needed as a critical spare. On one occasion, after having to justify the holding once again to the accountants, we broke a tie rod and used the spare. If the spare was not available the lead time for a repalcement was six months.
In thsi case base your decisions on need not time.

The second part concerns spares where there is usage but there is always a signifcant quantity in stock. For example, assume a holding of max 10 min 5; then assume that after the min is reached the restock happens quickly and there are never fewer than 4 in stock. If this occurs consistently over a period of say 2 -3 years then I would define the last 4 as dead. It would seem that these are not going to be used at any time. In this example the stock holding could be reduced to say max 6 min 2, allowing an ongoing buffer of 1 rather than 4.
Many inventory management programs have the capability to run reports for this type of dead stock.

It would be great if we could just set a time limit on all stock but in my opinion that is not the best way to proceed.
By the way, have you reviewed the artciles suggested in the Fertilizer Plant thread?

Yahoo,

Look like your view is from the materials side. I think you should engage the user side eg maintenance.

Josh,
You are right. But what if the maintenance people want each and every thing in warehouse. e.g.; if as asbestos gasket, impeller wear ring etc could be made on as and when required basis, why should they be warehoused?

I am one of those maintenance people and as such I have been dragged kicking and screaming into this century. We have several differnet cataglories. If we look at an item that has been stocked without use for 3 years, it gets kicked out of the economic ordering que. It becomes an as needed item. We then gget a little realistic about these- do we really need 700 theromcouples when we only use 5 a year? Sometimes, the price break isnt worth it.
Often, we check delivery times and get a vendor to set up a consignment on our heavy use items and this has the effect of reducing our out of pocket expenses and keeps us maintenance folks happy too!

Yahoo, if you need a ladder for reaching spare parts in the high shelf, will yourself fabricate one or buy a ready-made one?

In my experience maintenance people are mostly concerned whether the item will be available when needed, they don't much care how you make it available.
So why don't you follow SDW's lead and set up some rules for when alternate options are explored.
You can also follow the actions set out in the thread Inventory Reduction at Fertilizer Plant.

The irony is that trying to optimize availability by holding everything is as much a trap as trying to optimize the dollars by holding nothing!
There is a middle ground you don't need to fall into the optimization trap. If you ahven't already, visit the tutorial on the Reliability Web website http://www.rcm-1.com/forms/ia_reg.htm.