This document outlines 9 keys to maximizing profits and equipment uptime through inventory management for maintenance parts. It discusses: 1) classifying parts by criticality and usage, 2) managing demand through forecasting, lead time analysis, and optimizing inventory parameters, and 3) clarifying roles and responsibilities through policies and KPIs. The overall goal is to balance inventory costs, stockouts, and service levels using an inventory optimization system that analyzes data and allows simulations and adjustments.

1. PROCUREMENT 9 Keys to Maximizing
Profits and Equipment
Uptime through Inventory
Management for
Maintenance Parts
MEMO 2011 Conference in Saskatoon
Gallery C
By Robert Lamarre, B.B.A., M.A.Sc.
President of IMAFS inc. & GCRL inc.
November 7th, 2011
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2. 1. Parts classification
2. Managing service
3. Managing demand
4. Forecasting demand
5. Managing lead times
6. Optimizing inventory parameters
7. A good inventory optimization system
8. Clarifying roles and responsibilities
9. Policies, procedures and key performance indicators
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3.  True or false: all parts are created equal ?
 Classify the parts in relation to both their relative
importance on operations (criticality) and
frequency of usage
 Classify the parts taking into account inventory
strategies
 Pareto on hits and value
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4. Identify product family and demand stream
Obsolete Critical Reparable Stock New
or or or or
not not not non stock
Classes
Inactives ABCD
(no usage for X Based on Hits or
months) usage value
Updated
 Annually
 Monthly
 Manual
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5.  The reason we keep inventory
 Analyzing our performance is important
 Ability to supply the parts when needed
 Estimate parts availability
 Service goals to be determined for each product class,
each product family and each warehouse
 The system has to adjust Min-Max to service goals
 80 – 20 Rule -> Focus on important items
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6. Measures existing levels
Allows service goals on part’ criticality level
Allows service goals by class, by family, by warehouse
Safety stock set in line with service goals
Simulations
to measure impact of service goals variations
Dashboard to track service results
Tools to take corrective actions
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7.  Historical Information
 More data = more accurate you can be
 Demand flows regular, project, planned maintenance
 Demand patterns: planned or emergencies
 Regular demand or intermittent demand
 Manage on demand data; not shipping
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8. Better data for accurate forecasts
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9.  Forecasting: Prediction or science ?
 Human, machine or both ?
 Sales & Operations Planning (S&OP)
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10. Better forecasts = better service + less stock
Good solid
statistical
forecasts
Forecasting
methods that
Filters & account for
alerts demand trends,
seasonality and
intermittence
Possibility
Best fit by
of manual
item
adjustments
Can integrate maintenance planning data
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11.  What is a lead time ?
 Lead times are often long and variable
 Reality versus promises
 Measure and manage the various elements of lead
times
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12. Bad lead time information result in stock outs or surplus stock
Dynamic
calculation
Compare real By vendor and
lead time with transport mode
vendor promises
Lead
Possibility of
time Cleansing of
manual control extreme delays
Internal lead
time managed
by components
Can run simulations to analyse impact of changes
Tools to take corrective actions
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13.  What is a Min ?
 What is a Max ?
 Min-Max variations
 Safety stock provide the service level goals
 Demand variability and forecasts
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14. Service $
objectives Ordering Stocking
per class / costs costs
family/
warehouse
Calculation Simulation Adjustments
SS Lead time
Min Max
Forecasting
Lot sizes
DATA BASE
ERP or
CMMS
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15.  Look for inventory management system specially designed for
spare parts. They should account for:
 Parts criticality
 Service goals per product class and product criticality
 Erratic demand forecasting
 Planned demand
 Lead time management
 Dynamic inventory parameters optimization
 Allow simulations
 Surplus stock identification, prevention and disposition
 A complete set of KPIs and exception reports
 Data mining
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16. Overall results that can be drilled down
Inventory analysis reports gives full picture of inventory
management results with pointers on necessary corrective
actions with drill down possibilities
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17.  Clarifying roles and responsibilities
 Who is responsible for inventory ?
 What are the roles of Supply Chain Management ?
 What are the roles of Maintenance ?
 Change management is very important
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18.  Service goals
 Policies determine roles and responsibilities
 Key performance indicators
 Benchmark
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21. Inventory Management can be passionate and exciting
 Yes eliminating 25% or 40% of equipment downtime due
to lack of parts brings a smile to operations manager
 Eliminating 80% of stock-outs at the store has a major
impact on maintenance efficiency
 When you can reduce total inventory by more than 25%
while improving service, you are freeing up capital
money and space that are always badly needed
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22. Thank you
Questions?
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