For many companies, parts and inventory management are of great importance. Inefficient management can lead to major problems, such as machine downtime and higher costs of business processes. As a result, parts management is an important aspect of an organization’s entire business operations. Its goal is to strike a fair balance between part and inventory availability, cash flow, working capital, and operating expenses.
For many firms, reducing costs while enhancing efficiency in the area of parts management is a big challenge. In this article, we will take a closer look at how to balance managing parts availability while also keeping time, cost, and customer satisfaction in mind.
The challenges of parts and inventory management
Striving for optimal parts and inventory management often involves quite a few challenges, here are a few examples:
- Maintenance: what is the relationship between maintenance, parts, and inventory management in your organization?
- Inventory: what are the key considerations in Parts Management? Such as how does inventory management relate to parts management and service management across the organization?
- Customer: how does your parts and inventory management affect the customer experience? For example, think of waiting times.
- Material: how does forecasting help to achieve savings, for example on parts that are likely to become obsolete in the future?
- Costs: how do you achieve cost reduction without sacrificing efficiency and customer satisfaction?
Parts and inventory costs
Let’s take a closer look at the cost component: reducing costs is often an important goal and a challenge for many companies, especially those with large inventories and/or many spare parts to manage. Let’s discuss four sorts of expenses that may appear evident at first look but are frequently misunderstood in practice:
- Keeping spare parts in stock always involves a cost; there is no such thing as free inventory management.
- Some parts that companies keep in-stock may never be used.
- By reducing inventory levels of spare parts, you can often reduce overall inventory costs.
- Obsolete inventory can lead to additional costs.
KPIs for parts and inventory management
To monitor, analyze, report, and identify areas for improvement in inventory and parts management processes, a dashboard with KPIs (Key Performance Indicators) is an essential tool. Through KPIs, you uncover insights that would otherwise remain hidden. The insights from the KPIs enable you to control and improve your parts and inventory management, and thus ultimately improve your financial results. What are some interesting KPIs in the area of inventory management?
- Inventory fill rate: one of the most crucial supply chain KPIs. It represents the percentage of orders that are successfully fulfilled on the first try.
- Slow-moving parts: use this KPI to map out the parts that remain unused in your warehouse for a longer period of time.
- Holding costs: these are the costs for parts that remain unused, as part of the total costs of parts management.
- Stock-out: how long is a particular product unavailable for immediate purchase by customers?
- Lead time: also called order cycle time, is a KPI that gives a picture of how efficient your order processing is. A long lead time often indicates a bottleneck in the system.
A case study
One of our customers, Optronica, uses the Field Service Management solution from IFS. Optronica sells specialist ophthalmic equipment and offers maintenance and repair services. For Optronica’s customers, it is very important that critical parts are in stock and that when a repair is needed, it is done as quickly as possible.
Wondering how Eqeep helped Optronica improve its field service operations? Then check out the case case study.
Food for thought
A business is almost always in motion, which is why it’s wise to keep a constant focus on ways to improve your parts and inventory management. This starts with awareness. We therefore conclude this article with a number of questions in the area of Parts Management for you to think about:
- How well do you have insight into the components and parts that are held in your organization?
- How do you make sure you have the right parts in stock for all your repairs?
- Do you work reactively or are you able to forecast and respond quickly to inventory and repair needs?
- Do you have an IT system that helps you manage your inventory levels based on service levels and planning strategy?
For more information about our services, please feel free to contact us. We are happy to think alongside you on how to optimize and improve your parts management and field service activities.