Here are my replies for clarification purposes:

What are your specific concerns/issues relating to setting up your inventory?
- How to avoid duplicate materials in being cataloged in CMMS?
- How to update existing stock levels when new equipment for new fields are installed? Do you do relevant calculations?
- What are criteria that qualify materials to be kept as stock, direct charge or capitalised/insurance spares?
- How many times do we need to review our inventory?

Do you have any type of spares systems now for cataloguing, controlling etc.?
- Yes but still improving

Is there a lot of spares? - Yes

Who is responsbile for the $ value of the inventory - maintenance or finance or someone else? - Maintenance & Materials

Josh,

I gather from your response that you have an existing inventory system and are looking at adding spares. Is that right?

If so here are some answers to your questions.

How to avoid duplicate materials - very difficult if the duplication isn't obvious and almost impossible if a list is imported without review. My view is that the intended $ value of the investment in that item should drive whether a further investigation is warranted. So, if you are buying a bearing that costs $200 you may not investigate unless you are buying 50 of them and spending $10,000. The appropriate cut off point will depend on your own circumstance.

Updating existing stock levels - I assume that you already have these items in stock and are installing extra equipment that uses the items. In this case the demand characteristics are changing so it makes sense to revisit the quantity held. Don't forget, however, that changed demand may also impact the ability to do a better supply deal so don't look at just one side of the equation.

Criteria for stock, capitalised/insurance or direct charge - there are lots of definitions for these, here are mine. Insurance spares are items that you don't intend to use but may need to hold due to long lead times of supply (this is genuine insurance). Stock is items that you intend to use. Direct charge really is an accounting issue but I would limit these to high usage items of little individual value where the cost of managing is far outweighed by the cost of usage (e.g nuts and bolts)

How often to reveiw your inventory - I beleive that you should review your top 80% of inventory investment (by value) every year. In most cases this means reveiwing the top 20% of items so is actually quite mangeable.

If your maintenace and materials department is responsible for the investment as well as the usage of inventory then you are in a great position to have a genuine impact on your inventory investment. Are there speciifc perfomance measures relating to the $ investment?


In my view the decisions that are made when an item is first added to inventory will impact your company for years after that decision is made. Parts are bought in (costing money) and then held (costing money) until someone then decides to change the holding or they are written off.

There is a paper on my website that might add to your thinking. It is called 'The Importance of Day One Decisions' and can be found at www.InitiateAction.com/articles.htm

Hope all this helps.

quote:

Are there speciifc perfomance measures relating to the $ investment?

One KPI that I remember well is %inventory cost over plant replacement cost = 1%.

Interesting paper, Phill, by the way, the picture of the checklist becomes unreadable with the save as action.

Phill my vacation will start next week , but I have done some work in this area.
1) I have made a lot of noise
2) Left copies of your free first chapter on strategic points
3) Elaborated a "discussion document" which starts with a Definition List of the most used (but never understood terms) thanks to "Week 1 Bonus"

In fact, when definitions are not written down and communicated, people will give their own interpretation to it, which can be right, wrong or somewhere between.

The term critical initiates colorful discusssions


My approach:
Where are the definitions?
Answer: Everbody knows them (wrong answer!)
Me:
Where did Mr. Everybody wrote them down?
Answer: ...

Appearantly Everybody died long time ago and was buried together with his documents

Now "everybody" wants to discuss, we have a document we can use as a basis for exchanging information.
Next thing I will try is to "make someone else pay" for a training or at least buy me the book "Sustainable Inventory Reduction"

Use a magnifying glass...

Steven,

Glad you enjoyed the article. I will have the download of the checklist looked at. Thanks for the feedback.

Josh,
I didn't get your comment on the magnifying glass...

With respect to the KPI, I find those 'absolute KPIs' interesting but not overly helpful. Here's why.
In the US in the major steel cities (like Pittsburgh) there are vendors set up to supply almost anything the industry wants either on consignment of at very short notice.
In Australia the situation is entirely different, fewer vendors, less competition. It is pointless for an Australian steel or rolling mill to compare itself to a 'best in class' benchmark if the benchamrk is (say) based on Pittsburgh. Plus, if for some reason you can achieve the benchmark this often results in not seeking to achieve an even better result.

Far better to set targets based on a review of your own situation. The real measures are $ held and stockturn. This enables us to measure improvement in how much we hold and whether that holding is being used in the business. You will note that I didn't mention availability. This is because the need to achieve availability will be set by other measures such as downtime and only really applies on an item by item basis. An overall measure of availability tells us nothing if the one thing that wasn't available was really important.

By the way did you read the article?

quote:

In Australia the situation is entirely different, fewer vendors, less competition.

Here it is even worse, no vendors, no competition all the industrial products come from "foreign" countries, and every "vendor" claims to be representative of something, and expect big money just by making phonecalls.

If the checklist is unreadable, try use a magnfying glass. (Supposed to be a joke)

Yes, I read the articles.

Guys,

Thanks for letting me know about that downlaod problem.
We have now put a PDF version of the checklist on the web, so if you want a copy follow this link.

http://www.InitiateAction.com/dayonedecisions.htm

The link to the PDF is just below the image of the checklist.

Cheers,