If you spend time reading the social media profiles of maintenance storeroom managers, you soon learn that reducing storeroom inventory is a popular goal. The fact that it is an often-used KPI suggests the importance of reducing inventory. We couldn’t agree more. It’s important to reduce the dollar value and number of SKUs in the storeroom.
This post will address how reducing storeroom inventory can actually improve overall performance. But first, a word about inventory.
What is storeroom inventory?
In some organizations, if you ask about their inventory of parts in the storeroom you get some funny looks. For many organizations, inventory is defined as components or spare parts needed to keep critical plant equipment and systems operational. Many of these items are seldom used, but when they are needed there is little time to wait. So, they are kept in the storeroom, or nearby. This procedure varies from company to company. Larger companies may have centrally held components, or critical spares as they are sometimes called. Others keep critical spares in the storeroom.
For purposes of this post, inventory can be anything held in the maintenance storeroom. From high turnover items like wiring devices and fuses to critical spares like motors, valves and pumps. In practice, there are many categories of items included in a typical maintenance storeroom.
Inventory items typically have a higher value than non-inventory items and are carried on the facility inventory list. Non-inventory items are expense items, typically valued at less than $100 each. They are consumed and not carried on the inventory. Depending on facility procedures, expense items are ‘free-issue’ from the storeroom with costs allocated by department, or some other chargeback scheme. The following list is a typical storeroom classification system.
- Spare equipment or capital spares – are typically few in number with long turnover times of up to two years or more. In some cases these may be direct replacements for plant equipment. Items in this class are often added to plant inventory and then depreciated as part of capital equipment.¹
- Spare parts, which may include critical spares – more in number than spare equipment, these will see regular usage with turnover rates of about once a year.
- Other parts or general inventory – are often high turnover items with two or more turns a year. They may be supplied through a VMI arrangement with one or more vendors.
- Supplies – are typically consumable items such as electrical tape, cable ties, wiring terminations and connectors.
- Non-stock items – are often items that have short lead times, or are not important to continued plant operations. Many are Order-As-Needed (OAN) items.
- Other categories can include surplus, scrap and obsolete items, tools, and controlled tools that are managed through the storeroom.
Tips for reducing costs
Every facility storeroom is unique. One thing that is pretty common however, is the value of keeping a clean, uncluttered storeroom. Items that are correctly labeled and stored according to a defined parts system lead to better performing maintenance storerooms.
- More important perhaps is to seek the minimum inventory level required for each part as noted by Michael V. Brown in Managing Maintenance Storerooms.¹ “Companies that undertake a stores improvement program have reported an average of 23% reduction in maintenance material costs after the first year of implementation.”
- Another area of cost reduction is minimizing emergency purchases. The benefits of eliminating air freight and expediting charges from the supplier plus the hassle of dropping everything to find the emergency item are obvious. From Michael Brown’s excellent book, Managing Maintenance Storerooms again. “…companies report an average reduction in downtime of 7 percent “.
There are of course many strategies to reduce storeroom inventory levels while improving performance of the facility. If you are unsure where to start, see our post on where to start a storeroom optimization project. Managing storeroom cost reduction requires a planned approach.
¹ Brown, Michael V., Managing Maintenance Storerooms, Indianapolis, IN, Wiley Publishing Inc., 2004.
If you want to learn more about storeroom inventory reduction contact us at 800.993.3326 or email at ISTeam@EECO-net.com