Advance the Foundation of YOUR Effective Storeroom
Last month we discussed the processes and practices that are necessary for a storeroom to be effective at a very ‘foundational’ level. Those specific activities are important as they are the building blocks of a world class MRO inventory process. From here, we build upon the groundwork just laid and grow to an intermediate level of effectiveness, while continuing to develop processes that lead us to higher performance.
After the Intermediate-Effective processes, we’ll continue to build our practices until we are performing at or near a world class level. Let me provide an early glimpse of all that goes into controlling maintenance inventory:
Table 1: Effective and Efficient Processes and Practices
We touched on the Foundational-Effective activities in January., This month we’ll move through Table 1, above, to the Intermediate-Effective work, graphically shown in Figure 1, below:
Figure 1: Intermediate-Effective
I would like to knock out Emergency Procurement, right away. Let’s be honest: emergency procurement is always going to be a part of doing business. I just suggest it not be our default process. I want an emergency procurement process to be easy enough to accomplish in a pinch, but so painful that we never want to do it.
Everyone reading this blog has a personal story to tell about having to rush a part across the U.S. to keep the plant running. The P-card, it seems, was invented for this very purpose. Skirting the formal requisition process is serious business. Often, in an emergency, we don’t even have a work order. In a crisis, we don’t do our best work, but instead we do our most creative work. I recommend that emergency purchases have plant manager approval. Making the process somewhat painful (yet doable) helps to tamp down the number of emergency purchases that are made.
A Return to Stock transaction occurs when a previously issued part is ‘returned’ to the storeroom for restocking. There are a few cardinal rules regarding this process; they are simple, yet very vital. The part being returned must have first been issued out of the storeroom through a valid work order and must actually be an item that is normally held as ‘on-hand’ inventory.
Simply do not accept for restock any item that was not actually issued out of the storeroom, and do not restock any item that does not already exist as ‘on-hand’ stock.
Having this work order information allows storeroom personnel to apply a credit when the item is restocked. This will help to ensure that the cost of the job is accurate. Only complete, clean, and fully serviceable items will be returned to stock.
The Return to Supplier process serves a great value in helping to recoup costs associated with inventory that no longer provides a value to the organization. These could be obsolete, excess, or even salvaged items.
Returning parts to the supplier is often accompanied by a restocking fee. I have found that if we have been good customers, and easy to do business with, our best vendors will defer this restocking fee. Again, like the return to stock rules, items that are being returned to the supplier must be in acceptable condition and serviceable.
ABC Classification and Cycle Counting go pretty much hand-in-hand. In most facilities, there is typically a group or grouping of equipment types, with functions that have a recognizable and agreeable level of criticality or importance. Likewise, the components and items in the storeroom have similar levels of importance. ABC Classification gives us an indication of ‘how much we care’ about the item. I don’t mean to be cavalier about the value of parts in the storeroom, but there really is a degree to which we ensure stock is available.
There are many schools of thought on how to break out the ABC classification:
- by criticality of the equipment the part is assigned to
- by the dollar value of the part
- by the number of times the part issues from the storeroom
If you have a CMMS that defaults to an ABC classification, use it. First, understand how the default is determined, and make sure that you agree with it. Also, make sure you know how to manipulate the algebra that is used to determine the classification, so you can alter it to meet your objectives.
I personally like to use a combination of the number of times the part issues and the part’s cost. There are CMMSs that use this approach as well.
I’d recommend a breakout, or goal, similar to this:
- 15% of your SKUs are ‘A’ items
- 35% of your SKUs are ‘B’ items
- 50% of your SKUs are ‘C’ items
Once you’ve segregated your parts into classifications, cycle counting will become that much easier. Counting your entire inventory twice per year is ideal. Counting ALL your inventory twice per year can be accomplished when you count a little bit every day.
- count A items once every 30 days
- count B items once every 90 days
- count C items once every 180 days
- count critical spare items once every week
Hopefully you see the value in having a few ‘A’ items, and a few more ‘B’ items, etc.
Here’s a helpful example of how cycle counting works, and how you can get through your entire inventory at least twice per year:
Scenario: A storeroom has 1,000 items in its inventory
All items counted have part numbers and have a regular, on-hand inventory requirement
Of those 1,000 items, 150 are A items, 350 are B items, 490 are C items, and 10 are critical spare items
All C items are counted within 180 days, which is twice a year
All B items are counted every 90 days, which is four times per year
All A items are counted every 30 days, which is monthly
Based on those calculations, the daily cycle count requirement would be to count 12 items per day
Once a week, always on the same day, the storeroom also counts all 10 critical spare items. As much as is possible, store critical spares in the same location to facilitate this cycle count.
This installment and this section are rounded out with a brief discussion on our first two metrics, or Key Performance Indicators. Inventory Accuracy and Inventory Service Level were discussed in great detail in our January 2015 blog. I would like to direct you to that edition to understand what these Key Performance Indicators mean, and how to calculate them.
Please join me again next month for a discussion on how to begin making your storeroom more EFFICIENT.