Warehouse Optimization 9 Spare Parts Inventory Management Best Practices

It's essential to keep spare parts inventory managed to ensure operations in Managing spare parts inventory is important to running an efficient operation and stockroom.  Spare parts and critical parts are the life blood of manufacturing business, especially when a problem occurs or equipment failure. Spare parts inventory management depends on disciplined processes, utilizing good inventory software and management oversight.

Often, spare part warehouses and inventories do not receive the attention needed to ensure that they operate efficiently and remain accurate. The following are often reasons for the challenges:

• Spare part stockrooms don't generate income for the company, so they are given fewer resources.
• Accurate inventory tracking is not front and center for spare parts.
• The inventory management software is not utilized or is not capable of managing inventory accurately.
• Not utilizing barcodes to manage inventory and movements, or the perceived effort is too large to use barcodes.
• No documented processes and poor processes leading to human error.
• Not maintaining proper inventory levels or inventory costs.
• Lack of good management and personnel.

This mindset, along with failing to manage spare parts systematically and failing to utilize warehouse inventory best practices, can be costly. A lack of focus on spare parts inventory control and inventory management software is difficult and very painful.

Fortunately, there are things that can be done that will help ensure that problems don’t arise, and your parts warehouse will run smoothly. An accurate parts inventory system allows the parts department to be more proactive and responsive to the plant.

Companies can save significant dollars by not having to expedite a part when in fact it is already on-site in the warehouse. Here are seven spare parts inventory management best practices for managing parts inventory more effectively:

1. Systematically Identify all Parts

A crucial aspect of all operations is a proper spare parts management system managing all inventory tracking and transactions. For these systems to be effective, each unit of inventory must be:

• All SKUs must be identified within the inventory management system.
• Utilize the manufacturers barcode or create a barcode for internal use.
• For small items such as screws and bolts, barcode the bin for scanning purposes.
• Discontinue older, unused spare parts so as to not accidentally trigger purchasing, etc.
• Properly maintain BOMs within the system to keep accurate inventory levels.
• Utilize asset tracking using RFID when necessary.

Regardless, all spare parts and inventory levels must be managed and maintained in the inventory system. This would include inventory units that are to be recycled, remanufactured, testing and destroyed. This is designed to keep the inventory as accurate as possible.

2. Effective Management of Unused Parts

When equipment is going to be down for a major overhaul, there may be several items that are purchased for a one-time use. Because of this, some of these parts may not be a stocked item and not created as a part record in the inventory control system.

Once the machinery overhaul is completed, or unplanned downtime forced repairs, there may be unused parts which have future use and should be inventoried. Other equipment in the plant may be able to utilize these unused parts.

Rather than maintenance storing these parts in a box, work bench or cabinet somewhere, the items should be added to the inventory control system and placed into parts inventory.

3. Utilize, Manage and Maintain Bill of Materials (BOM)

Proper spare parts management also means having accurate BOMs that are maintained. BOMs will make ordering parts and placing work orders much simpler. Additionally, make sure that your BOMs are kept up to date. The worst thing that can happen is to start creating inaccurate inventory levels because a part was not added, changed, or removed from a BOM.

Having accurate BOMs will also assist you with scheduled preventive maintenance (PM) that is needed on a given piece of equipment. In some systems, the PM schedule will generate a work order with the scheduled date of the PM. BOM updates must be done in real time to prevent downstream problems.

4. Streamline the Work Order Process

One way to improve spare part efficiency is to have a strong but simple work order process that can be followed by everyone. Work orders need to be created for all spare parts issuance so that inventory remains accurate. This process is made easier with centralized inventory which is discussed further below.

Develop a work order process that is not overly complicated but ensures that all necessary information is passed along. If it is too complicated or there are ways to get parts without a work order, you will find employees not using the desired process and inventory inaccuracies begin to occur.

Have a process where non-emergency work orders are placed in advance. Work orders requested in advance can be pulled and staged for pickup or delivered to the requesting department. This will reduce the maintenance department’s wait time at the parts warehouse for their work order to be fulfilled.

5. Adopt Security Measures

Ensure that effective security measures are taken in the parts warehouse. Several critical practices should be considered. Limiting access to the parts warehouse inventory is crucial to maintaining inventory accuracy. Adopt a policy that parts inventories are “off limits” and only parts department employees have access.

The first way to insure this is to adopt physical security measures such as parts counters that prevent employees from entering inventory stock locations and pulling parts required. Allowing everyone to have access can quickly make parts inventories inaccurate.

The second practice to help assist in this objective is to install security camera systems and begin utilizing badge access to entry and exit points.  Additionally, equipment such as vertical lift modules for spare parts provide strict security.

6. Centralized Inventory and Consolidate Spare Parts

Where possible, centralized inventory will provide greater control of stock levels. This also means consolidating satellite parts inventory into your main parts warehouse. With centralized inventory, you are tasking a core group of personnel to be responsible for all stock levels, real-time inventory tracking, and inventory control.

By keeping all inventory tracking and inventory control with a core group, this limits who has access to inventory units which leads to more human error.

Having centralized inventory will also make security easier.

7. Utilize an Inventory Control System

By utilizing your ERP’s warehouse functionality or a warehouse management system (WMS) - and not spreadsheets - to manage your parts inventory will ensure accuracy and ease of managing your parts warehouse.

Also, utilizing barcodes and scanning functionality in conjunction with the system will greatly enhance the efficiency of the processes in the parts warehouse and improve on inventory accuracy.

Inventory management features in most systems are around control of the physical asset. This is made easier by utilizing barcodes for real time tracking through receiving, cycle counting, stock moves, stock adjustments and issuance of inventory items.

8. Give Every Spare Part a Stock Location 

Ensure that stock locations are created at the lowest detail (typically a bin and slot location for each SKU) allowed by your systems. It can be difficult for employees to locate a part if the location identifier is a shelf where many other parts are in a shared location.  This should be part of a disciplined internal stock room and warehouse assessment.

By instituting the above recommendations, you will be able to have better control over your parts inventory and provide faster and accurate fulfillment of work orders and other parts requests.

9. Implement Strong Spare Part Inventory Management

At the heart of spare part inventory management are strong inventory processes such as cycle counting, physical inventories and proper management of inventory discrepancies. A good inventory management program requires the following:

• Documented processes that are to be followed.
• A consistent, disciplined inventory cycle count routine.
• A comprehensive physical inventory count at least annually, unless the cycle counting is well regimented.
• Management of inventory inaccuracies / discrepancies and reporting.
• Real time inventory transactions through all functions.
• Well trained managers and personnel that are accountable for accurate inventory records.

These inventory management strategies will keep your stockroom and warehouse running as efficiently as possible and minimize downstream issues and human error.

Summary

Unplanned downtime, asset failure and standard equipment issues of critical equipment will test even the most disciplined spare parts inventory system and stockroom.

This means that the most optimal inventory levels are maintained from a purchasing perspective. This can only be done if the inventory is accurate, pulling the right item from inventory, and timely receiving of items back to the stockroom.

Train staff well, restrict who has access to inventory, and hold the staff accountable for the most accurate inventory records.  Lastly, consider how a warehouse consultant can improve your overall spare parts inventory management.