Spare Parts Management Indicators

Share on linkedin
Share on twitter
Share on facebook
Share on email

There is a saying: “What you can’t measure, you can’t improve”. The saying are not necessarily always true, but it is interesting, because I think a derivative of the saying is true: “What you measure, is usually what you get.”

Reducing Inventory Value

It is common for plants to have a lot of focus on reducing inventory value. Inventory value is one of those numbers that acts like salt in a wound for corporate accountants. No, it doesn’t matter if it’s high or low, it always hurt to look at the number. Most of the time we don’t know if the number is too high or too low, we just know we want the number to be lower.

Cost of Keeping Spare Parts and Materials

The cost for keeping inventory is usually an estimated number, often called “inventory interest” (or similar), that varies from 10-40% depending on company accounting rules. The cost included storeroom, storeroom personnel, depreciation, etc. If you have a spare parts and materials inventory value of 10 Million, it costs the company 1-4 Millions (10-40%) a year to keep that spare parts and materials inventory.

The Problem

Since it is common that inventory value is the only number the plant really cares about, it tends to get reduced. But, anyone can reduce inventory value very easily, IF it’s the only thing that matters. I can tell you to scrap all spare parts right now bringing your spare parts and materials inventory to zero. But the consequences will be devastating to production since we don’t have any spare parts.

Measure a “Counterweight”

Spare parts inventory value is important, but to effectively reduce spare parts inventory value, the “counterweight” has to be measured as well. The counterweight to inventory value can be “stock-outs” for example (times we get the spare part needed divided by total request for spare parts). When stock outs go over around 4-5%, you will start seeing signs of people not trusting the store room. These signs are spare parts in supervisors office, satellite stores, spare parts in crafts peoples toolboxes etc.

Other Indicators

Other indicators that may be valuable for store room control are:

  • IRA – Inventory Record Accuracy
  • Turnover rate by Part
  • Number of Returned Parts to Stores
  • Service Level (inverse of stock out)
  • Critical Spares stock out

At IDCON, we understand the pressure you face trying to build a reliable plant.
We provide side-by-side reliability and maintenance consulting and training designed to keep your equipment running.

For over 45 years, we’ve partnered with 100s of manufacturing plants around the world to eliminate the costs and the pressure caused by unreliable equipment. And we’d love to do the same for you.

Contact us today to see how we can help you keep your plant running.

Related Articles

Spare Parts Kit Age

Kitting and staging parts sounds good but… It is a good idea to check the aging of these staged kits on a regular basis. It is common to see parts

Read More »
spare-parts-classifcation

Spare Parts Classification

The definition of Spare Parts Classification can fluctuate depending on the vision and/or focus assumed at any given moment. Some examples of definitions:

Read More »
Torbjörn Idhammar

Torbjörn Idhammar

President & CEO, IDCON Inc. Reliability and Maintenance Consultant

Want weekly Reliability & Maintenance Tips?

Best practices. Common sense. Pratical tips.
All designed to help you and your team keep your plant running

IDCON © 2020 All rights reserved

Free Download & Video

8 Steps to Successfully Implement Preventive Maintenance

Reduce your costs with an effective PM program