Parts inventory management and storage costs are a real headache for many industries. Often perceived as random, the need for spare parts discourages many companies from looking for effective ways to minimize storage costs.
However, thanks to a CMMS application - especially to the latest generation that has emerged in recent years - it is possible to rationalize and considerably reduce the financial burden involved in preventive spare parts stock management while ensuring the continuity of machine operation and, therefore, production.
The Impact of Storage Costs on a Company’s Treasury
Inventory management is a major issue for many companies. Good inventory management is indeed essential to guarantee the sustainability of a company, because of its consequent impact on cash flow.
The stakes behind spare parts inventory management
The concept of inventory management includes all the measures used by a company to decide what quantities of goods, equipment, spare parts or raw materials to order, and when. The aim is to achieve the right balance between low storage costs and optimal responsiveness to customer requests or business needs.
In terms of maintenance, spare parts inventory management, which is essential to the proper operations of the machines, is at stake. It is in a company's best interest to avoid overstock as well as understock.
The risks of overstock
The main disadvantage of overstock is the increase in fixed and variable costs induced. Having an excess inventory of spare parts entails extra costs associated with storage capacity, human resources necessary to ensure their security, but also in insurance premiums.
In addition, the very notion of owning stock implies freezing capital. In the case of overstock, a certain amount of money is unnecessarily tied up whereas it could have been invested in projects with a better ROI. This is a loss of opportunity.
Finally, an unnecessary stock of spare parts exposes to a risk of obsolescence of these parts and their deterioration over time or as a result of material disruption.
The risks of understock
The main risk of spare parts understock is an increase in idle time of the machine in need of repair and, consequently, the interruption of production. This very often has a direct negative financial impact on the company. But it also has an indirect impact: the conditions for emergency replenishment do not play in favor of the company, as Purchasing is not in a position to negotiate or choose the most interesting supplier, as it must first and foremost obtain the best delivery time.
Spare parts inventory management methods
The methods used for goods or raw materials shall not apply to spare parts. In order to rationalize the management of spare parts stocks and thus limit storage costs, several specific strategies have been developed. Among the most effective are the ABC classification method and the PIEU method.
The ABC method
The ABC method consists in dividing spare parts into three groups according to their criticality (i.e. their importance in the maintenance of the machine fleet): A, B or C. Classification A contains the most important spare parts, which require special monitoring. They generally represent 20% of stocks, but are essential for most of the production. The spare parts in Classification B represent about 30% of the inventory. They are less important, but still require strict control. Finally, Classification C spare parts account for only 5% of sales volumes but represent 50% of stocks.
This method helps you identify three categories of stock, each requiring a different and suited frequency and level of inspection.
The PIEU method
The acronym PIEU comes from the French Panne (Failure), Importance (Equipment Importance), Etat (Equipment Condition) and Utilisation (Usage). This method was developed by French engineer Yves Lavina to classify assets according to their level of criticality. As its name indicates, the criteria used are the incidence of failure (P), equipment importance (I), equipment condition (E) and equipment utilization rate (U).
How to cut down storage costs with a CMMS
With the spread of software tools and new technologies comes along a new breakthrough in the management of spare parts inventory with a Computerized Maintenance Management System (CMMS). According to the official statistics of the AFIM (French Association of Maintenance Engineers and Managers), the use of CMMS helps reducing, in the long term, the value of the stock by 10 to 20% and stock procurement costs by 5 to 10%.
Reducing storage costs thanks to mobile CMMS
Initially, the adoption of a nex-gen solution will improve the monitoring of maintenance interventions and the condition of the machines. The teams have an analytical dashboard gathering all their maintenance data. This way, they have detailed feedback on their interventions and can monitor their equipment’s state. Stock levels can then be managed accordingly, taking into account present and future needs, delivery times and storage conditions.
Analyze your maintenance data with Mobility Work’s analytics tool and adapt your strategy
In addition, a community-based maintenance management platform such as Mobility Work allows maintenance teams to monitor stock levels at any time on their smartphones or tablets, and to enter the description of their interventions in real-time. In this way, stocks can be managed as close as possible to the technician’s actual needs on the field, avoiding stock shortages or overstocking.
This community-based application even allows the different stakeholders to exchange information and data in a matter of seconds. Finally, thanks to the integration of Big Data with Mobility Work software, predictive maintenance helps managers to accurately anticipate spare parts needs.
Synchronizing CMMS and ERP with APIs
Many companies use ERP software to manage their inventory, including spare parts inventory. These ERPs are usually archaic and complicated tools, and therefore not easily accessible to field teams. Inventory and maintenance managers are often reluctant to implement software specifically dedicated to maintenance, fearing that synchronization between it and the ERP is difficult or impossible.
However, thanks to the public API (Application Programming Interface) functionality, a next-gen software such as Mobility Work can exchange data with any ERP software very easily. Spare parts inventory management is thus perfectly and automatically coordinated with the needs of the technicians' teams.
The use of the new CMMS solutions therefore enables the costs of spare parts storage to be significantly reduced by streamlining their management and effortlessly synchronizing it with the maintenance requirements of the equipment.