The function of a spare parts warehouse is to stock all critical inventory parts, material, and tools necessary to maintain and keep a manufacturing line up and operational. Often, spare parts warehouses are treated as a stepchild to the procurement or manufacturing of a business. Neglecting your spare parts inventory management and warehouses will not benefit your business as they often must go through transitions to improve their support of growing production volumes.

From a product/SKU storage perspective, the size of the spare parts range from large assemblies and subassemblies down to the smallest bolts, nuts, and washers. The inventory may include multiple levels of bill of material (BOM) and have parts, materials, and tools which are used across multiple pieces of machinery on the production line.

The starting point for improving the performance of a spare parts warehouse or stockroom’s function, and spare parts inventory management, is to perform an objective assessment of the:

Spare part facilities
Workflow of spare parts
Processes of pulling work orders for spare parts
Storage of spare parts
Systems and material handling used to manage the spare parts

Spare Part Warehouse Assessment Objectives

While performing assessment for clients of the spare parts inventory management and warehousing of spare parts, we have the following 8 objectives that all companies should consider:

Review the inventory and spare parts warehouse processes as they relate to the operational flow. Also consider current and future needs.
Determine how to increase spare part inventory accuracy, bill of material, and and software tools tracking the inventory. Determine what standardized processes and procedures are required for pulling spare parts inventory.
Review the layout and design of the existing operations in conjunction with the capacity and utilization.
Determine how well the facilities are being utilized in terms of capacity, storage, space utilization, and effective use of material handling equipment. Are there an opportunities to improve the layout and design? How can you boost productivity and increase throughput?
Determine if the inventory systems and processes are sufficient to support anticipated growth and be responsive to the when and how spare parts must be pulled.
Determine if the spare parts inventory department is disruptive, or supportive, to plant operations as a support function. How can service be improved to the plant floor?
Determine how to improve spare part storage to improve the operation’s processes and manage the parts inventory.
Determine what further planning is required to determine the proposed budget for anticipated racking and storage, material handling equipment and other capital equipment.

Detail Assessment Criteria

The following are critical areas to evaluate in the spare parts warehouse assessment:

Spare Parts Inventory Control and Accuracy

What is your inventory accuracy? Determine what you can do to increase inventory accuracy to 99.9% . What are the reasons and symptoms of the inaccuracy problems? Are SKUs being comingled, which complicates inventory pulling and potential error?

When unused or incorrect parts are pulled and returned to inventory, are undisciplined practices used? Typically, the necessary changes include:

identification of parts and location methods
implementing best practices for maintaining accurate inventories
and improved BOM maintenance.

Oftentimes, implementing a warehouse stock location system that identifies warehouse, zone, aisle, tier, and bin/slot location improves accuracy and picking. Or utilizing vertical lift modules for spare parts can achieve multiple objectives.

A major problem is how to allow for the pulling of parts during times when the parts warehouse staff has left for the day while still maintaining inventory accuracy. How will you staff the spare parts warehouse and how will you allow for certain workers to pull inventory when a critical problem arises on subsequent shifts?

Layout and Design of the Spare Parts Warehouse

What improvements to the layout and design should be considered to improve efficiency and throughput? Identify bottlenecks and pinch points in the existing facilities and processes. Then, eliminate these items in all future design considerations.

Procedures and Processes for Pulling Spare Parts

What changes to procedures and processes would improve efficiency and be more responsive to plant requirements? Evaluate spare parts flow and processes currently in use. Concentrate on:

work order processing
maintaining returned parts and wrong parts pulled inventory
part identification marking and inventory location control
bill of material maintenance procedures for the most immediate benefits.
reducing the number of touch points in the processes to streamline functions.

What recommendations should you consider as it relates to the pulling of parts inventory, the required tools and management of the inventory asset, and accuracy? Itemize the recommendations to reduce bottlenecks in the facility and improve material flow and efficiencies. What changes will allow you to maintain or improve quality and service standards?

Are there vendor compliance manual recommendations which would lead to changes in warehousing of products? Consider how you can improve receiving processes, delivery windows, frequency of deliveries, and how products are stored?

Spare Parts Inventory System Functionality

Does your ERP or WMS systems provide sufficient inventory reporting for spare parts? Some of the challenges we see include:

Not having accurate bin locations to manage spare parts
Not having accurate and up to date inbound Purchase Order details
Inability to manage receiving the same spare part from multiple vendors
Managing and updating the Bill of Material (BOM) so that inventory is accurately pulled.
Visibility into work orders, when they need to be pulled and what inventory is on backorder
Ability to easily manage spare part inventory coming back in from jobs or work orders

Should you consider potential system functional changes to make the department processes more effective?

Space Requirements for Storing Spare Parts

How much space is needed based on the current parts inventory? Are you planning for both future growth and inventory obsolescence? Do you have the capability to support the space needs within the current warehouses available on the campus? If not, what options are available?

How much space is needed to store all of the parts in a centralized location? Determine by SKU, the quantity and cubic volume that will be stored when combining facilities. This is often underestimated and space does not last as long as expected.

Is lighting in the spare parts facility sufficient for high productivity? Can workers read work orders and maintain computer systems?

Maintaining BOMs

Is your company properly maintaining BOMs and obsolete inventory? It’s not uncommon to see companies failing to maintain the BOMs, which causes the parts warehouse and stockroom to pull inventory that isn't needed. This costs a significant amount of inventory and consumes valuable space. Is someone in your company analyzing obsolete inventory and determining how best to eliminate this stock?

Spare Part Storage Media

Develop recommendations for the storage of parts based on how quickly they are utilized, the size and quantity stocked, work order picking options, and warehouse slot replenishment. Don’t forget to account for improved storage practices.

Review all types of racking, shelving, and vertical storage and consider if different storage media be more effective? What short-term and long-term recommendations should be considered?

Material Handling

Review all material handling equipment and look to maximize the capacity and utilization within the parts warehouse. What are the best material handling options to support your types of parts.

Spare Part Warehouse Safety

Are there any safety concerns as it relates to the material handling equipment or parts storage that you should review? Are fire exits restricted or blocked? Are there damaged racking uprights or beams that have been hit by forklifts that are unsafe? Is the overall parts warehouse or stockroom properly cleaned and maintained?

Spare Parts Warehouse Organization

Do you have proper staffing levels? As in, are the right people and organizational structure in place to support your company’s operating needs?

What written, standardized procedures need to be developed, agreed upon, and enforced? Tribal knowledge works against you as you try to be more efficient and more responsive to plant downtime and maintenance requirements. What training on systems use are needed to be more effective?

Spare Parts Inventory Security

Many companies need to restrict access to critical warehouse inventory to increase accuracy and standardize procedures. If you adopt policies that limit personnel access to the inventory, what are the realistic procedures that need to be in place for supporting a multi-shift operation and updating inventory with returned and wrong parts which were pulled?

Multi-facility Operations

Spare parts warehouse operations may have multiple buildings. Make sure you are fully considering how to develop an effective plan if you are going to consolidate facilities.

If the recommendation is to retain multiple facilities, is there a need to standardize and improve the processes and inventory management between facilities? It is not uncommon to have facilities that have different ERP or WMS systems.

Best practice evaluation

What industry best practices should you consider implementing overall? Consider implementing best practice recommendations in spare parts management, systems use, storage and material handling.

READ: 7 Spare Parts Inventory Management Best Practices

Budgeting considerations

Are there opportunities to reduce overall expenses in the parts warehouse and its operations? What changes in material handling should you consider? What are the capital costs and potential lead times for new equipment?

Develop recommendations and a plan

Develop a management report of the recommended changes, options evaluated and a roadmap for improving spare parts warehouse processes.

Consider fulfillment consultant

Consider using an experienced fulfillment consultant to bring the new ideas to the project. A fulfillment consultant can contribute by introducing best practices and improving inventory systems accuracy; systems functionality and use; material handling and storage options; and space utilization.