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Spare Parts Control System: Inventory Management Best Practices

Spare Parts Control System: Inventory Management Best Practices

How to Optimize Your Spare Parts Control System

One of the more neglected parts in the operations of most retail businesses is spare parts inventory management. When not tended to, this can lead to higher storage costs, inefficient operations, and an inability to serve customers on time. That’s a lot of money that you potentially leave on the table.

If you haven’t spent much time thinking about your spare parts control system yet, now would be a good time to start! Here are some spare parts inventory management best practices that you can implement in your organization to help you out.

Consolidate all spare parts in one location

Having scattered spare parts is inefficient. A better option is to place all of them in a centralized warehouse, and then have a spares inventory management system in place to monitor the parts and supplies.

Having all of your items in one place makes it much easier to monitor, count, and secure them. You can also share spare parts across different departments in your organization, which is cheaper than having to buy multiple copies of the same part.

Limit who can access spare parts

It’s a good practice to designate certain staff members to handle your small parts inventory management. The reason here is simple: if everyone can freely take spare parts from the inventory, it will be much more challenging to track it. That will lead to inaccuracies in counting.

What’s more, having a single point person can increase security and discourage theft. If something is missing or the count is not tallying, then you know who to hold accountable.

You may also want to consider adding other security measures, like installing cameras in key areas of the spare parts inventory room. Also, have key staff members physically count spare parts by using counters to keep track of which ones leave the room.

Have spare parts ready for new equipment

Most operations managers will tell you that it’s a waste of money to stock spare parts for new equipment. The logic behind this philosophy is sound since newly installed machines are less likely to break down.

However, we live in an imperfect world. Manufacturers sometimes make errors, and the breakdown of new equipment can happen. As a precautionary measure, it’s wise to stock spare parts with your machine purchase. You can ask the manufacturer to give you a list of critical parts you will need to buy along with the new equipment.

If you’re the owner or operations manager, you can also make it a policy to buy extra parts when acquiring new equipment. Doing so will make you ready for breakdowns, and you’ll suffer less downtime.

Have a stringent work order process in place

Work orders are a great way to create a paper trail for your inventory maintenance system. It’s basically a written request for spare parts that will be used in a specific maintenance task. Every time a spare part is taken from management, a corresponding work order is issued. This makes it incredibly easy to track who requested each order, and for what purpose.

It’s a good idea to be strict with your work orders. However, don’t make it too complicated. If your system is difficult to comply with, your employees will definitely find an excuse not to follow it, and your efforts will be wasted. 

To minimize downtime, encourage your staff to place work order requests in advance, not when they have an immediate need.

Use a robust inventory system to track spare parts

Having maintenance spare parts inventory management is crucial if you want to be able to accurately monitor the movement of your spare parts. This is especially important if these parts move around your organization often. Manually tracking in these situations is challenging indeed.

You can utilize a computerized maintenance management system (CMMS) to efficiently track your spare parts inventory. For smaller companies, this can be cost-prohibitive. But for larger operations, an inventory management system or enterprise POS system with inventory capabilities is an excellent option.

To improve your counting efficiency, you can consider using barcode scanners with your inventory system. That way, you can simply scan items as they go in and out of your spare parts inventory. This is way better and less error-prone than manually counting inventory by hand.

Have a spare parts location system in place—and stick with it

If your spare parts inventory is particularly large, it can be a challenge to locate items. 

To make it easier for you and your staff, you need to have a system on where you store each spare part, down to the bin number. Stick to that notation, and use it when labeling your spare parts in your inventory management system. 

Never have a bin with multiple spare parts in it, no matter how tempting it might be to save space. This can create confusion that will be difficult to trace and rectify.

Once you have that in place, you then need to train your staff to know and follow the notation you set. This allows them to know the exact location of a spare part simply by checking the entry in your inventory management system.

Teach your employees to do inventory cycle counts

Relying on your spare parts inventory management system might be the way to go, but you need to check your system accuracy as well. You do this with an inventory cycle count. Employees will do a physical count of your inventory, then compare that with the entries in your management system and see if they match.

It’s best to do cycle counts in regular weekly or monthly intervals, rather than at the end of the year as most companies do. It’s much more efficient that way. You won’t get overwhelmed with too much inventory to count, plus you don’t need to wait at year-end to catch any discrepancies.

Calculate the risk on your equipment

One way to optimize your spare parts inventory is to determine the risk level of each equipment. Critical machinery—those that will cripple your operations if they fail—can be tagged as high risk. You need to have spare parts ready at all times for risky equipment to ensure you can quickly respond to repairs and minimize downtime.

Calculating an equipment’s risk is straightforward. You need to compute how much money you’ll lose for every hour that the machine is down. If it’s critical, you then need to plan spare parts purchases. You can also consider if older (and cheaper) spare parts will do, or if you need to get new parts for every repair (as is the case of reusables like filters).

Know each spare part’s lead time

Most spare parts have a lead time, which is the time it takes to acquire that part. Knowing this is important because it can significantly impact your spare parts inventory management system.

A lot of items like filters or bulbs can be bought off the shelf or even delivered. For such items that are easier to buy, you can afford to be a little more lax with stocking them. 

However, some spare parts are made to order and can take days or even months for the manufacturer to produce. For these kinds of items, it’s better to set higher limits. It might be wise to stock an extra part or two to compensate for the longer lead time.

Use ABC and XYZ Analysis

ABD and XYZ analysis are useful tools to determine which spare parts are critical to your operations. This method prioritizes items using the famous 80/20 principle

The theory is that only 20 percent of spare parts contribute to almost 80 percent of all maintenance tasks. It then makes sense to replenish stock levels of these 20 percent much more often. 

The ABC and XYZ analysis is used to determine that 20 percent, categorizing them from A to C in order of importance. XYZ analysis is similar but focuses on costs instead.

Use a Sawtooth Diagram

A sawtooth diagram is an approach to determine the best time to reorder spare parts. It’s named because the graph it produces has a sawtooth-like pattern.

This approach tells you the best time to reorder spare parts (called the reorder point) based on the item’s lead time. The idea is to replenish early enough that your stock levels never reach minimum inventory levels.

However, you should balance it out by setting maximum inventory levels, so you know how much to replenish. Having excessive stock levels is not good since it ties up your funds into inventory.

Inventory Management With Revel

Are you planning to improve your spare parts control system? Revel’s innovative iPad POS system allows you to accurately monitor and forecast your spare parts stock, so you’ll always be on top of it. Contact us today to schedule a free demo and see how our innovative system can help improve the bottom line of your business.