The last great goldmine Is your maintenance storeroom worth its weight in gold or mold?  Create cost savings, order and customer satisfaction with this comprehensive plan! by Roland Newhouse A quality maintenance storeroom is a prerequisite for organizational success.  However, past neglect and a poor image stand in the way of achieving storeroom greatness. While all maintenance storerooms are unique, there are general principles to follow in order to hurdle such roadblocks. To get there, repeat after me.  The maintenance storeroom . . . -- will include proper inventory planning, managing and controlling procedures. -- will be the cornerstone of our maintenance department. -- will be clean and orderly with excellent security. -- will house the proper quantity of the proper items and have excellent inventory control. -- will be space efficient, labor efficient and responsive to customer needs. To meet these goals, implement the following storeroom strategies: Professionalism: The company must view the maintenance storeroom as an important activity, not a "necessary evil."  Both the dollars invested in maintenance storeroom materials and the impact of downtime highlight the need for a better approach to these storerooms. Customer awareness: Successful maintenance storerooms must have a high regard for the customer, know customer requirements and consistently meet those requirements.  The right materials are available at the right time, in the right quantity, at the right location. Measurement: Establish storeroom standards.  Performance is measured against these standards, and timely actions taken to overcome any problems.   Performance reports are distributed to management on a monthly basis. Operations planning: Create systems and procedures that allow the storeroom manager to proactively plan the storeroom operations as opposed to reactively respond to external circumstances. Materials planning: Create systems and procedures that assure the right materials are on hand in the right quantity at the right time.  This provides good inventory rotation, a minimum of stockouts, the elimination of obsolete materials and the addition of new items. Centralization: The trend is toward larger, centralized storerooms with responsive material delivery systems instead of smaller, decentralized sites where people travel to and wait for materials. Adaptability: Maintenance storeroom facilities, operations and personnel must be able to adapt.  The pace of the storeroom continues to increase.   Reduction of lead times, shorter equipment lives, increased inventory turns, more SKUs and more customer demands require the presence of storeroom adaptability to satisfy customers. Certainty: Minimize all uncertainty; base all interactions with the storeroom on meeting expectations. Integration: Integrate the activities within the maintenance storeroom (from storeroom item identification to item issue), and better integrate the storeroom with the overall organization. Material control: Design maintenance storeroom facilities, procedures and systems to provide for the control of all materials.  The importance and enforcement of storeroom security must be widely understood and accepted. Maintenance information: The maintenance information system must support exceeding customer expectations.  Include the maintenance catalog system and the management of inventory in the information system. Inventory accuracy: Use cycle counting to manage inventory accuracy.  Establish and enforce accuracy greater than 98 percent. Space utilization: Effectively and efficiently use available space. Housekeeping: This is a priority.  In order, there is efficiency. Human resources: Establish a positive culture and require training and education.  This is a priority to achieving quality maintenance. Teamwork: Integrate all associated with the maintenance storeroom function into a single service-providing activity. Inventory planning and control There is a difference between manufacturing inventory and maintenance inventory.   Manufacturing inventory is an asset that is directly converted to sales.  It consists of relatively large quantities of a small number of items.  Consumption is based on plant production rates. On the other hand, maintenance inventory does not directly produce a revenue.  It's also considered a liability.  It consists of a relatively small quantity of a large number of items, and consumption is based on facility and equipment conditions. It is fundamental to understand the nature of maintenance inventory items.  They include: Critical spares: Parts critical for the operation of specific equipment; items where spares are held for insurance. Standard spares: Parts used for many different pieces of equipment. Project materials: Inventory purchased for a specific maintenance project and not routinely held in stock. Hardware: Nuts, bolts, washers. Consumable supplies: General supplies used while performing maintenance and repair functions. These items aren't returned to the storeroom. Tools: Hand and power tools used while performing maintenance and repair functions and then returned to the storeroom. It's also important to establish an inventory planning methodology.  For this, you must determine what to stock, and how inventory will be policed and managed.  A bar-coding system might be the solution for improving accountability and accuracy.   This would be one part of a strategic plan to introduce many new technologies for a major storeroom upgrade. Here are some pointers for determining what to stock: -- Include critical spares and standard spares. -- Don't follow the manufacturer's recommendations. -- Check all items against existing standard spares. -- Don't store the same items by multiple vendors. -- Check with other companies who have used the equipment and understand spare history. -- Include project materials, hardware, consumables and tools. -- Use a formal procedure to analyze new items. -- Check all items against existing inventory.  Be sure equivalent items are used whenever possible. -- Require requester to define annual usage and why item is needed. For inventory policy, we must be aware of the economic order quantity (EOQ), where the cost of ordering an item is equal to the cost of carrying an item.  We must also know the reorder point (ROP) of the item.  To get this info, know the annual demand and unit cost of an item.  Also, know lead times and correct safety stock levels.   Position so a reorder is triggered when inventory drops to a certain level. Establish the inventory policy outlined below: A) Critical spares. B) Standard spares: May be broken into A-B-C: 1) Should be divided into A-B-C items: A represents 80 percent of inventory dollars but 20 percent of items; B represents 15 percent of dollars but 30 percent of items; and C represents 5 percent of dollars but 50 percent of items. 2) Use EOQ/ROP formulas for A and B items. 3) Use a two-bin system and floor issue of C items. C) Project materials: Not carried in inventory.  Store by project number. D) Hardware: Inexpensive.  Treat like standard spare C items. E) Consumable supplies: Divide into A-B-C and treat like standard spares. F) Tools: Track, but don't put on inventory.  Purchase as defined by maintenance management. Accuracy creates buy-in Inventory accuracy is a must for a maintenance storeroom.  It must be 98 percent accurate or better.  If it is not, craftspeople will bypass the storeroom and order a new part.  It is critical that they have confidence in the accuracy. In order to attain this level of accuracy, it is necessary to cycle count.  This means selecting a small representative sample of "A" (most popular) items and count each day.  Develop a plan for this. The major benefits of cycle counting are timely detection of errors and correction of causes, high inventory record accuracy, elimination of annual physical inventory, improved customer satisfaction, and lower investment in inventories. All storerooms must have a proper cataloguing system.  A proper maintenance storeroom cataloguing system is a permanent record of all storeroom items and is a tool for identifying and locating items. A good maintenance storeroom catalog: 1) Provides a cross-reference listing of parts by department, machine and commonality.   This cross-referencing is critical as: -- without cross-referencing by department, item identification may be slower; -- without cross-referencing by machine, item ID may be slower, and unneeded items may be kept when machines are retired. -- without cross-referencing by commonality, multiple items may be stocked that are actually the same. 2) Is very user-friendly 3) Is accurate and easily updated 4) Supports timely updates 5) Interfaces with the inventory control and management system Information requirements Catalogs need to include the following information: 1) Storeroom number:  A six- to eight-digit code divided into three groups that follow the framework of the company's commodity codes. 2) Part number: The number shown on a manufacturer's component, which is often stamped, printed or stenciled.  Use the same number when reordering. 3) Part description: A standard part nomenclature.  Use this description as a basis for keyword searches.  Therefore, use consistent terminology.  If possible, include a picture of the part. 4) Unit of measure for purchasing. 5) Unit of measure for storeroom issue. 6) General storage area: An identifier given to each type of location (rack, shelf, bin, drawer, etc.).  Not a specific location on the rack. 7) Similar or substitute stock by storeroom number. 8) Machines that use such items. 9) Departments where such machines are located. On top of this required information, there is additional information. This is not found in a manual catalog but typically is included in a computer-based catalog/inventory management system.  This includes total quantity on hand; specific storage location and quantity stored in each; economic order quantity; reorder point; 12-month usage; usage year-to-date; last price paid; recommended vendor and address; and secondary vendor and address. Accuracy creates buy-in By now, there should be an appreciation of the many things that must come together to upgrade the maintenance storeroom.  The good news is there is a methodology to follow.  This start-to-finish storeroom modernization master plan involves: A) Operations assessment 1) perform an operations audit 2) define opportunities 3) establish need 4) define the scope of work 5) specify the approach 6) establish a team B) Strategic master plan development 1) document current warehouse operations (operating costs; space use and floor layout; storage and handling equipment specifications; staffing plan; receiving and shipping activity; sales and inventory levels; customer order profiles; SKU data; special operating requirements). 2) determine future requirements over the planning horizon (sources of data [business plan, production forecast]; throughput requirements [receiving, order picking, packing, shipping]; storage requirements [cube, popularity]; control system requirements). 3) identify and document alternative storeroom plans (equipment planning; space planning; personnel planning; layout planning). 4) Evaluate the alternative plans (conduct economic and qualitative analysis; select and specify the recommended plan). 5) document the strategic master plan (description of operations; staffing plan; layout drawings; analysis of alternatives; justification; implementation strategy; written report; oral presentation. C) Detailed design 1) refine the storeroom design 2) prepare standard operating procedures 3) develop functional bid specifications 4) establish qualified bidders list 5) develop an implementation schedule D) Implementation 1) develop a detail plan 2) procure facilities, equipment and control systems 3) train personnel 4) prepare for stock relocation 5) construction and installation 6) relocate inventory 7) start up new operations 8) perform a post-implementation audit A maintenance storeroom strategic master plan is a prerequisite for success.  There is efficiency in order.  We must know the goal and the proper order to achieving it.  It all starts with a plan, and successful planning requires teamwork. Roland Newhouse in the project manager for Tompkins Associates, a consulting firm specializing in total operations. This article appeared in the December 1999/January 2000 issue of MRO Today magazine.  Copyright 2000. Back to top   Back to Inventory management archives