Does your Spare Parts Management process support or hinder your manufacturing efficiencies?
Fewer areas within a plant sum up the term ‘the hidden factory’ better than a Storeroom within the facility. It can be an oasis of opportunity but contemplating tackling it can turn you green at the very thought.
The spare parts management process is critical in all manufacturing industries whether it is heavy industry, process, or assembly. Milliken recognizes that optimization of these processes has never been more critical with the move to automation and robotics as part of Industry 4.0. Within the Milliken Performance System (MPS), the PM pillar is made up of several modules/ sub-pillars focused on zero breakdown, improved reliability and reduced maintenance spend. One of these sub-pillars is Spare Parts Management.
If your storeroom looks like figure 2 and you aspire for a stores process akin to figure 3, Milliken can support you with a proven process.
Establishing a Spare Parts Management System
Step 1 – Define the current situation and targets
Assess current stock levels. Are the right parts at the optimized stock levels? The chances are the answer is no. There may be redundant parts or even unidentified parts.
Is the spare parts management system aligned to the strategic goals for the business? Remember, not all equipment is equal. Spare parts are a critical criterion when prioritizing equipment using the ABC equipment ranking system. As resources are limited, it is important that the strategy manages spare parts according to the criticality of the equipment. The ABC ranking system is a crucial input when determining what parts to hold and in what quantities. The Pareto principle of roughly 80% of the consequences come from 20% of the causes is often attributed to spare parts management. However, the management of risk, “what if?” Is key when considering which parts are the correct ones to stock.
Assess current spare parts cost – involve the finance team: what is the % accuracy register versus actual?
Define targets for the sub-pillar – determine the measures of success for (i) the project phase and (ii) the sustain phase.
Step 2 – Eliminate obsolete parts
Utilize existing or devise new tagging processes to avoid redundant parts. Aim to recoup costs and make profit on these parts and return to the vendor or sell them where possible.
Step 3 – Reorganize / 5S remaining parts
It is important to define the required spare parts needed for each machine. Consider cost of inventory versus out-of-stock costs and ABC machine classifications then 5S the storeroom and establish Stores Plan-for-every-part (PFEP).
Step 4 – Define storeroom policies
Review stock levels on a predetermined basis and refine upper and lower stock levels using proven methods. Then, create replenishment routines by implementing tugger routes from central stores to local satellite stores. Finally, create storeroom standard work through associate standard work, stores opening times, and refining procurement processes. Review purchase acquisition request processes and authorization stage gates.
Step 5 – Manage maintenance spare parts
Stock-taking and carrying out routine stock-takes will help with managing spare parts. Digitalize processes where possible to see real growth as far as spare parts procurement and management is concerned. Within Milliken, we use digital solutions to automate our procure-to-order process which integrates with our ERP system that manages invoice and payment processing. This significantly reduces the administrative work element and ensures negotiated savings reach the bottom line. Make sure to review these processes.
Global downtime research carried out by the VansonBourne organization found that:
- Unplanned downtime is costing companies $250K/hour.
- 70% of companies lack complete awareness of when equipment assets are due for maintenance or upgrade.
- Zero unplanned downtime is now a No. 1 or high priority for 72% of the 450 organizations surveyed.
This data not only reveals the scale of the opportunity but also the realization from organizations that they must address this as competition in the marketplace becomes fiercer.
With unplanned downtime driving significant losses, organizations cannot afford to neglect the opportunity to ascertain root causes for unplanned events and drive improvements. Spare Parts Management is key to addressing these losses. Recently, a Purchasing Manager said to me that “Our Spare Parts Management System is a bit like a smartphone, you didn’t know you needed one, and now you certainly wouldn’t be able to function without one.” The Purchasing Manager had led a radical overhaul of the purchasing function within their business, and the spare parts management piece delivered the most in terms of eliminating non-value add time from within the department.
Within Milliken we’ve experienced the identical journey as outlined by Nichola Whittle, Purchasing Manager for Milliken European Airbag Products. “Our Stores department was hidden away in a corner of the plant and I suppose the saying “out of sight, out of mind” is a reason why it continued the way it did for as long as it did. It worked – didn’t it? When you scratched the surface, it became clear there was very little structure in place, space wasn’t utilized very well and the purchasing system we used was archaic. Items would be ordered when we thought they might be needed, not when we actually needed them. There had been several attempts to improve the area without success. Finally, creating a new Stores location within the plant gave everyone visibility of where it was located and gave us the opportunity to address what stock we currently held and what stock we needed to hold. A new purchasing system was developed to operate the entire Stores process. We now have visibility of what we order and the frequency giving the opportunity to amend stock levels if required. The journey to get to where we are today was not an easy one and it took a lot of effort from the team involved.”
Maintaining a Spare Parts Management
Discipline is key. Like any system, the Spare Parts Management system is only as good as the information fed into it. This requires discipline from all those that interact with the system. Associates will require training; the importance of moving a Kanban card or scanning a barcode must be communicated. A robust Daily Management System (DMS) driven by habitual review and response routines, especially in the early days, is vital.
At Milliken we have adapted the Plan For Every Part (PFEP) principle for material flow to spare parts. PFEP is a material flow plan that includes specific data on every part from suppliers through to customers. The spare parts PFEP contains the data from the supplier but classifies the equipment as the customer. Based on historical data we can determine the optimal levels.
Benefits of establishing a Spare Parts Management
- Increased Maintenance Department efficiencies
- Eliminate the time Maintenance Team members spend looking for parts that are incorrectly located or not on site.
- The pre-approved PFEP empowers maintenance team members, eliminating the need to chase purchase request signatures or trawl through catalogues for part numbers/prices.
- Motion waste reduction through tugger route distribution of parts to satellite stores.
- Increased plant OEE through downtime reduction
- Response time reduction for unplanned breakdowns.
- Asset ABC prioritization.
- Increased working capital; the right stock in the right quantity
- Businesses will enjoy increased operating liquidity with cash released from inventory.
- Continuous data monitoring enables stock levels to be streamlined year-on-year.
- Spare Part/vendor standardization and rationalization reduces the need to carry multiple variants of the same spare parts.
- Selling off obsolete stock, transfer of excess stock to sister businesses and returning stock to vendors all contribute to the bottom line.
- Reduced costs
- Any costs associated with downtime that directly impact the bottom line such as express freight to expedite the parts, over-time spend and customer late delivery penalties & costs.
- Improved pricing and servicing agreements with vendors
- Spare Part/vendor standardization and rationalization projects consolidate purchase agreements with approved suppliers using a selection matrix weighted by service performance, part performance and price
- Industrial vending machines for spare parts
- Consignment stock agreements, pay at point-of-use
- Increased engagement from both production and maintenance teams
- Eliminate frustrations caused by ‘wait part’ or searching for a part that may or may not be there.
- Communicate the important role that associates play within the system and the bigger picture benefits by reducing downtime to support revenue and EBIT.
- Improved floor space management, 5S, and risk reduction
- Removal of excess and obsolete parts reduces floor space requirements.
- Supplier service agreements focused on lead-time reduction, enabling businesses to hold less stock as replenishment is more dynamic.
- Satellite Stores areas close by the point-of-use reduces the need for over excessive storerooms.
- 5S standards are lifted – ‘a place for every part and every part in its place’.
- Well organized areas have less hazards thus reducing the risk of harm to associates.
- Increased associate awareness of the cost of spare parts
- A Spare Parts Management System sensitizes associates to the cost of parts as they are involved in the replenishment interface. This leads to positive behavioral changes such as removing new parts that didn’t solve the breakdown and the rebuilding of parts rather than replacing full parts.
If you feel that there is a hidden factory within your spare part management processes where there is a wealth of opportunity then look to establish a Spare Parts Management System. Those that have are unanimous in that they wouldn’t turn the clock back and return to their old ways. Need help implementing a spare parts management process? Contact us today.