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Gate Keeping the Storeroom - SMRP 2016 Annual Conference
- 2. JAMES KOVACEVIC; MMP, CMRP, CAMA PRINCIPAL CONSULTANT HIGH PERFORMANCE RELIABILITY Work Management, Track 5 Gate Keeping the Storeroom: The Key To a Sustainable Materials Management
- 3. James Kovacevic • James kovacevic; CMRP, MMP, CAMA • Host of the rooted in reliability podcast • Principal consultant at high performance reliability • High performance reliability is an education & consultancy firm • SMRP approved provider of continuing education and training
- 4. Where Did My Budget Go? • No access control • Stocking 2 years worth of electrical boxes • No naming system for parts • A kitting shelf with parts received 3 years ago • Parts in stock from equipment that was removed 8 years prior • V-belts dry rotted on the shelf, corroded valves, and bearings out of their packaging • Anyone could stock A part in the control room
- 5. Where Is the Control? • Pump, Centrifugal, 500GPM – ABC #98765 • Cent, PMP, 500GPM – ABC • Pump – ABC • Centrifigual Pump – 98765 • 6206-2CZ • Bearing 62062CZ • BRG, Roller, 6206 2CZ • Roller, Bering 6206 C2Z
- 6. Common Issues in Storerooms Source: MRO Connection 30% of stock will 30% of stock will not be used not be used 8% of stock SKUs8% of stock SKUs are duplicatesare duplicates 25% of technicians time 25% of technicians time is wasted looking for parts is wasted looking for parts
- 7. What Causes These Losses • A lack of understanding of the importance of master data • A lack of systems to facilitate master data management • A lack of risk tolerance to stock outs • An inconsistent usage of spare parts
- 8. Lack Of Control • The primary reason for poor storeroom performance is the lack of control; – Lack of data control – Lack of stock control – Lack of financial control – Lack of physical control
- 9. Sustainable Storerooms • A level of control is required for a storeroom to succeed • A sustainable storeroom will deliver returns to the organization; – Financial returns – Uptime returns – Risk reduction returns – Efficiency returns
- 10. Types of Control • Financial controls • Physical security • Data governance • Statements of authority (Approval levels) • Software access levels
- 11. What’s Your Control? • How do you control what goes into your storeroom? • Is it a security guard? Fence? • Do your control(s) address all the different types in a storeroom? • If you don’t have the controls, why not? • Controlling what goes into your storeroom doesn’t have to be difficult or complicated…
- 12. Gate Keeping • Many types of control will be addressed by gate keeping the storeroom; – Financial – Data governance – Statement of authorities • Gate keeping is controlling what goes into a storeroom, so you don’t have all of the issues in the first place!
- 13. The 3 P’s
- 14. Why A Policy? • “Intentions and direction of an organization as formally expressed by its top management” – ISO 55000 • Sets the expectations concerning how spare parts will be managed within the organization • Defines the acceptable level of risk to stock outs and downtime against cost and performance • Defines who is responsible for carrying out the intentions of the policy
- 15. What’s In A Policy? ABC Inc. Spare Parts Policy ABC Inc. is committed to the maximizing the return on ABC Inc.’s assets. In order to balance the operational and financial needs with risk, spare parts shall be managed on a risk-based approach*. To meet this required all sites within ABC Inc. shall; •Ensure adequate resources are provided to achieve the contents of this policy •All storeroom staff shall be trained in spare parts & storeroom management practices •Spare part descriptions shall conform to the ABC Inc. taxonomy •Spare parts shall be reviewed using a defined and repeatable procedure prior to being stocked •All spare parts stocked shall be included on a bill of material •All spare parts shall be subjected to a formal cycle count at least annually •All critical spares shall be reviewed annually for criticality and stocking levels •All other spare parts shall be reviewed bi-annually for criticality, stocking levels, and obsolesce •All spare parts shall be issued to a work order •All non-stocked or special ordered parts shall be ordered to a work order •All storerooms shall ensure it is protected from unauthorized access •All storeroom procedures shall be defined and documented •Storeroom and spare parts performance shall be monitored •Continually improve spare parts and storeroom management processes A high level statement outlining the purpose of the policy A statement indicating all sites are required to comply Specific expectations of each site in regards to spare parts
- 16. Using A Spare Parts Policy • Used to communicate expectations and intentions • Does not include the “who” and “how” • Used to develop specific procedures to achieve the intent of the policy
- 17. How To Execute The Policy? • Procedures are used to execute the policy • “Specified way to carry out an activity or process” – ISO 55000 • Procedure defines the who, where, when and how of the policy • Ensures all expectations are executed in a consistent and repeatable way
- 18. 5 Gate Keeping Procedures • Stock Request • Stock Review • Stock Approval • Stock Creation • Performance Management
- 19. Stock Request • Ensures all required information is available to evaluate the spare part – Part description – Manufacturer – Manufacturer part number – Equipment spare part belongs to – Risk to site if not stocked – Estimated usage per year • Will reduce the number on “convenience” stocking requests • Submitted to the storeroom for review
- 20. Stock Review Procedure • Most difficult and time consuming portion of gate keeping • Spare part catalog review for existing material – Even if already stocked, the spare part may have to be re- evaluated based on the new requirements • Additional information is gathered and verified; – Lead Time – Cost • Part is analyzed according to the policy and criteria established
- 21. Basic Analysis of Spare Part • Determine the RPN – 1 to 2 = Do not stock – 3 to 12 = Setup stock – 15 to 25 = Setup critical stock • Determine minimum quantity – Min = (usage per year / 365) x Lead time • Determine maximum hold quantity – Max = min + average consumption during lead time – Avg. consumption during lead time = daily usage x max. lead time
- 22. Advanced Analysis of Spare Part • Determine the RPN – (lead time x probability of failure x criticality) – 1 to 30 = Do not stock – 31 to 94 = Setup stock – 95 to 125 = Setup critical stock • Determine minimum quantity – Min = (usage per year / 365) x lead time
- 23. Advanced Analysis of Spare Part • Determine maximum hold quantity – Max = Min + Economic order quantity (EOQ) – EOQ = √(2DS/H) • D = Usage per year • S = Ordering cost per order • H = Inventory carrying cost • Determine safety stock (predictable usage) – Predictable usage safety stock = (max lead time – normal lead time) x normal consumption rate – Normal consumption rate = expected annual usage / 365
- 24. Advanced Analysis of Spare Part • Determine Safety Stock (unpredictable part usage) – Unpredictable usage safety stock = K x √D • K = Acceptable level of coverage • D = Average consumption during lead time = (expected usage per year / 365) x max lead time • If your CMMS does not allow for safety stock, add to the minimum quantity Level of Acceptable Coverage 50% 75% 80% 85% 90% 98% 99% 99.9% K Factor 0.0 0.7 0.8 1.0 1.3 2.1 2.3 3.3
- 25. Make The Analysis Simple info@HPReliability.com Part Number Part Description Part Price Asset Criticality Normal Lead Time (Days) Max Lead Time (Days) Expected or Historical Usage per Year Strategy Critical Part? Min Max EOQ Safety Stock FALSE No 0 #DIV/0! #DIV/0! 0 FALSE No 0 #DIV/0! #DIV/0! 0 FALSE No 0 #DIV/0! #DIV/0! 0 FALSE No 0 #DIV/0! #DIV/0! 0 FALSE No 0 #DIV/0! #DIV/0! 0 FALSE No 0 #DIV/0! #DIV/0! 0 FALSE No 0 #DIV/0! #DIV/0! 0 FALSE No 0 #DIV/0! #DIV/0! 0 FALSE No 0 #DIV/0! #DIV/0! 0 FALSE No 0 #DIV/0! #DIV/0! 0 FALSE No 0 #DIV/0! #DIV/0! 0 FALSE No 0 #DIV/0! #DIV/0! 0 FALSE No 0 #DIV/0! #DIV/0! 0 While every effort is made to ensure accuracy, not every situation can be accounted for, therefore all calculations should be reviewed for accuracy and applicability. High Performance Reliability can not be held accountable for the outcomes associated with the use of this calculator Spare Parts Calculator *Assumes a PO Cost of $100 and an Holding Expense of 24% *Assumes all Parts have a consistent pattern of use
- 26. Stock Approval • The Stock Request is routed to the appropriate individual(s) with all recommendations from the Stock Review • The individual(s) will sign off and final approval to stock the spare part • Sign off is typically based on price of stocking the spare part or level of risk to not stock. • The Stock Request is than routed back to the storeroom for stock creation
- 27. Stock Creation • Vital to the long term sustainability of the storeroom • Cleanses the spare part’s master data to the appropriate taxonomy and data standard • Review the spare part against the catalog one last time to prevent duplicate SKUs • Identify bin location • Create spare part in the CMMS • Add the spare part to the Bill of Material (BOM) • Activate the spare part and order initial quantity
- 28. Performance Management (PDCA) • Review performance of the gate keeping process; – Master data compliance – Right, first time data – Processing time • Review performance of the storeroom – Stock turns – Stock outs – Material $ / RAV • Use this metrics to make improvements to the process and the stocking levels
- 29. Who Will Gate Keep? • People are vital to the success of the gate keeping process • People have the ability to make or break the process • All staff need to be trained on the process • Often times the process will fail because people will fear the new process
- 30. Why The Fear? • Running out of stock • Extended breakdowns • Accountability for no stock • Past experience • Move to risk based spare parts stocking • Change
- 31. Risk Based Spare Parts • Remember, stocking parts is generally an insurance policy. • If you have a robust work planning & scheduling system and a good equipment strategy, you shouldn’t need to stock a lot of spare parts to begin with • This is why defining the level of risk and evaluation criteria is so critical and different between businesses.
- 32. Manage The Fear • A Policy • Procedures • Evaluation criteria developed by a cross function group and approved by senior leadership • Training • Change management
- 33. And a RACI • Used to ensure procedures are followed • Keeps everyone on the same page • Provides a single point of accountability
- 34. Technology • Can be used to assist with the gate keeping process, but is not required • May reduce or eliminate data entry errors • Improves reporting • Automated work flow • May be expensive
- 35. Automated Or Manual? • Regardless if technology or a manual solution is utilized, make sure it fits for your business and systems • All of the principles in gate keeping apply regardless of approach
- 36. Common Issues in Gate Keeping • Emergency orders are when a part is needed yesterday and cannot wait for the process. – Overcome with an exception process, so after the part is ordered, it is reviewed and stock accordingly • Processing time exceeding a few days will stop the process – Overcome with a calculation sheet, technology and a service level agreement
- 37. After Gate Keeping • Now remember that storeroom we talk about in the beginning? • What do you think happened to them after they implemented a gate keeping process? • Do you think the storeroom looks and operates the same way?
- 38. Show Me The Money! • With the new process in place and after reviewing all spare parts against this new process, within a year the storeroom was able to; – Reduced the storeroom value by $450 – Prevented unneeded spare parts by $50k – Reduced duplicates by 38 SKUs • All while improving uptime, as they were able to free up money to stock the right parts
- 39. Why Not Gate Keeping? • Implementing a gate keeping process is not easy, but the benefits are dramatic • So what is stopping you from the implementing a gate keeping process? • You are leaving money, performance and risk on the table
- 40. Questions?
Hinweis der Redaktion
- Brief intro to the presentation
- High Performance Reliability is recognized by the Society for Maintenance & Reliability Professionals (SMRP) as an approved provider of continuing education and training aligned with key subject areas related to reliability and physical asset management.
- I want you to image a storeroom. Really, close you eyes and think about a storeroom with; No access control Stocking 2 years worth of electrical boxes No naming system for parts A kitting shelf with parts received 3 years ago Parts in stock from equipment that was removed 8 years prior V-belts dry rotted on the shelf, corroded valves, and bearings out of their packaging Anyone could stock A part in the control room Does this sound familiar? This is common in many storerooms, I encounter. When you have a storeroom like this, you don’t need to ask where your maintenance budget goes, it goes to the storeroom, and out to the scrap heap
- Spelling mistakes are on purpose (at least on this page)… How many in this room have parts in your CMMS that look like this? Two examples of duplicate parts in a storeroom with different descriptions. First we have a pump The first is using full words, with a attribute and a part number The second is using abbreviations, with an attribute and a mfg. Third just says pump Forth is the pump, type and part number Second we have a bearing First just has the bearing number Second has bearing and the number Third we have some abbreviations & a number Forth we have a noun, modifier and a number Notice how the bearings #’s are not formatted the same? How are you supposed to search for these parts? How can you ensure that you are truly capturing what you use? With data like this you can’t
- So for a Storeroom holding $1M, this means… $300k will be thrown out $80k is duplicate materials That’s $380K you could be using differently in your storeroom or in your maintenance program. That is not something to balk about. Now if you had 10 techs, that means that 2.5 techs or 5000 man hours are wasted every year…. Imagine what work you could get done if you had that extra 5000 man hours.
- So what causes all of these issues….. If we really dig down into it, it comes to a few main reasons A lack of understanding of the importance of master data A lack of systems to facilitate master data management A lack of risk tolerance to stock outs An inconsistent usage of spare parts How many of these sound familiar?
- But if we dig further, it will come down to lack of control. Control over all aspects of the storeroom and this is what we are going to talk about today. Lack of data control in the examples we saw with the various naming Lack of stock control in which parts go unused, or not in the right location Lack of financial control in which parts are stocked regardless of financial impact or risk to the site Lack of physical control in which parts are removed without being signed out… All of these lead to a poor storeroom performance.
- So how do we ensure our storerooms are successful and support the site’s objectives? We control them. By controlling the storeroom we can improve not only the performance of the storeroom but in maintenance and the site. With a properly controlled storeroom you can expect A financial return – no longer writing off parts, or stocking more than you need Uptime returns – when you are stocking the right parts in the right quantity, you can stock more of right parts, enabling higher uptime Risk reduction – with a risk based approach to stocking, spares are stocked on the potential risk to site if they are not available. By focusing on the consequences of not having the parts, we can focus on the largest risks Efficiency returns – wrench time, overtime, and productivity of the storeroom staff will all increase when the parts are in the right spot, with the right information, and are easy to find
- There are many types of control. Financial controls are the policies and procedures put into place by a business or organization to track, manage and report its financial resources and transactions. Financial controls include, but are not limited to, income statements, cash flow statements, budget sheets, accounting systems and operating ratios. Physical security describes security measures that are designed to deny unauthorized access to facilities, equipment and resources, and to protect personnel and property from damage or harm (such as espionage, theft, or terrorist attacks). Data governance is a set of processes that ensures that important data assets are formally managed throughout the enterprise. Data governance ensures that data can be trusted and that people can be made accountable for any adverse event that happens because of low data quality. Statement of Authorities is a Document providing notice of who is authorized to act and approve certain financial transactions and at what level. Software access levels controls who can do what in an application. At the highest level, the network manager can install and remove software, access all user areas and change permissions. At lower levels, a group of users may only be able to access particular pieces of software and their files stored in their own areas These are all types of controls that need to be considered and put in place to ensure your storeroom is under control.
- Think about what controls you have in place for your storeroom. Does it cover all the different types of control? With a raise of hands, lets see what controls you have in place; ASK – How do you control what goes into your storeroom? Is it a security guard? Fence? Do your control(s) address all the different types in a storeroom? If you don’t have controls why is that? Because you don’t have time? People? What? Thankfully, controlling your storeroom doesn’t have to be difficult, nor does it have to consume a lot of resources.
- I like to refer to this control as Gate Keeping the storeroom. By gatekeeping the storeroom you will address many types of controls required in the storeroom. Financial controls Data governance Statement of authorities It works on the principle of controlling what goes into the storeroom in the first place, so you don’t have to worry about all of the issues that arise with a storeroom that is free of controls and oversight. With a show of hands, who has a gate keeping process in place? It doesn’t have to be exact, but do you have a system to control what does into your storeroom. If you do, hopefully you will learn something that will help you drive some further improvements. If you don’t, you will walk away with blueprint to implement a gate keeping process in your organization, and get your spares under control!
- So if we break down gatekeeping, we arrive at The 3 P’s Policy Procedures People By Addressing the 3 P’s any organization can implement a gatekeeping process that will achieve the level of efficiency and attention to detail required to make the storeroom and ultimately the organization successful.
- Now what does this actually mean to the people? A policy provides the high-level what and why If we look to ISO 550000, a policy is the “Intentions and direction of an organization as formally expressed by its top management” – ISO 55000 A good spare parts policy should; set the expectations concerning how spare parts will be managed within the organization Defines the acceptable level of risk to stock outs and downtime against cost and performance Defines who is responsible for carrying out the intentions of the policy A policy typically spans across the organization, or at least the region
- So lets take a look at a spare parts policy ABC Inc. is committed to the maximizing the return on ABC Inc.’s assets. In order to balance the operational and financial needs with risk, spare parts shall be managed on a risk-based approach*. (note how this does not say based on emotion, which is how many storerooms are operated) To meet this required all sites within ABC Inc. shall; Ensure adequate resources are provided to achieve the contents of this policy All storeroom staff shall be trained in spare parts & storeroom management practices Spare part descriptions shall conform to the ABC Inc. taxonomy Spare parts shall be reviewed using a defined and repeatable procedure prior to being stocked All spare parts stocked shall be included on a bill of material All spare parts shall be subjected to a formal cycle count at least annually All critical spares shall be reviewed annually for criticality and stocking levels All other spare parts shall be reviewed bi-annually for criticality, stocking levels, and obsolesce All spare parts shall be issued to a work order All non-stocked or special ordered parts shall be ordered to a work order All storerooms shall ensure it is protected from unauthorized access All storeroom procedures shall be defined and documented Storeroom and spare parts performance shall be monitored Continually improve spare parts and storeroom management processes As you can see, a policy covers a lot of areas and topics, but not the specifics of how it is done. Now with a show of hands, who has a spares or storeroom policy in place?
- The policy should be used to communicate to everyone, the expectations and intentions of the storeroom and its function A policy will never include the who and how, - remember it is high level A policy will guide the develop of the processes and procedures to carry out the intentions. No think back to the policy for a second Included in this example policy are a few key expectations that indicate a gatekeeping process is required. First, all spare parts shall be reviewed using a defined and repeatable procedure. Second, all spare parts shall be included on a bill of material. Third, all non-stocked or special order spares shall be ordered to a work order. Each one of these expectations now needs to be covered in a procedure.
- Having a spare parts policy shall ensure that not only are all expectations communicated, but also allow individual sites to develop processes to meet the expectations. This is critical as the who and how may vary across sites within an organization. The policy will not cover the details in how these expectations will be met, this is where procedures come in. “Specified way to carry out an activity or process” – ISO 55000 Procedure defines the who, where, when and how of the policy Ensures all expectations are executed in a consistent and repeatable way Procedures may be site specific
- Now diving into the policy, almost all, if not all of the expectations and intentions can be broken down ditto 5 procedures A gatekeeping process is typically made up of five that work together to implement and manage a risk-based approach to spare parts; Stock Request Stock Review Stock Approval Stock Creation Performance Management I will be discussing each of these in detail, as it forms the basis of any gatekeeping program
- Starting the gatekeeping process is the Stock Request procedure. The Stock Request ensures that all relevant information is provided to the storeroom, and the appropriate awareness of the request is present. This very basic procedure will reduce the number “convenience stock” requests that come into the storeroom. By convenience, I mean those stock request that are received because someone doesn’t want to wait a day for a part, or allows the site to do unplanned work and bypass the planning process The stock request generally requires the following; Part Description Manufacturer of Part Manufacturer Part Number Equipment Part is Used On Risk to Equipment if Part is Not Available Estimated Usage Per Year Approval Sign Off (Tier based on part cost, typically requires a sign off from the maintenance supervisor, if request is submitted by the technicians) The Stock Request is then submitted to the storeroom for Stock Review. This should be completed on a standardized form (electronic or paper based) which will be utilized in many of the procedures… this reduces the admin work and provides some traceability of the request.
- The Stock Review procedure is where the majority of the work takes place in the gatekeeping process. During the stock review, information is gathered, validated and analyzed according to the expectations of the policy. The Stock Review will determine if a part shall be stocked, what classification the part will receive, stocking levels, and approval levels required. This requires specific information and activities The first step is to review and see if the part is already in the system. If so, is it stocked, or a non stock part. Even if already stocked, the spare may have to be re-evaluated based on the new requirements Next specific data points are required to truly analyze the part. This includes getting the lead time and cost from the vendor. With the information, we can begin the analysis to see if the part will even be stocked and if so, how will it be stocked. There are 2 types of analysis we will cover… the first is a basic analysis. The second is an advanced analysis. You can use either one in your organization depending on resources, level of complexity, and the level of rigor required. Choose what is best for your organization / site
- The basic analysis utilizes a simple risk matrix…. Probability of failure x lead time of part. Once we have been able to identify the risk priority number, we can than guide our stocking strategy; 1 to 2 = Do not stock 3 to 12 = Setup stock 15 to 25 = Setup critical stock If the part will not be stocked, the analysis end… If the part will be stocked, we can determine the min and max values. To determine the min, we take the (usage per / 365) x the lead time in days Now we have our minimum stock level or reorder point Next we determent he max quantity. To determine the max we use the min and add the average consumption during lead time. To determine the avgas consumption during lead we take the daily usage x the max lead… max lead time is when you get a quote stating 4-6 weeks, you would use the 6 weeks. That is the basic analysis. By using this, you can control the spares going into your storeroom.
- The advanced analysis take the risk matrix and expands it based on the addition of the criticality of the part. The criticality can be determined in multiple ways, such as impact on environment, health, safety or operations and the ability to detect the impending failure. It can also be a combination of the those. However you choose to determine that criticality, make sure it is documented and used consistently. Determining the min is the same as the in the basic analysis… take the usage per year / 365 x lead time
- Now in the advanced analysis, we use a different approach to determine the max. We focus on the economic order quantity The EOQ is the balance between the costing of stocking and holding the spares vs the cost of ordering the parts. There is a cost to both… Stocking includes time to cycle count, clean, and even the area to hold the parts (typically a % of the cost of the parts) Purchasing cost is the cost to the business to create PO, receive the materials, inspect them, pay the bill, etc. (typically a $ value) To determine the EOQ – you take the sq rt of (2x usage / year x ordering cost per order / inventory carrying costs (%) Once the EOQ is determined, you now add that to the min and you have you max. Some CMMS allow you manage safety stock. This is a great function, as it ensures you have stock if there is an expected usage when the parts are being reordered.. To determine the safety stock, you need to know if the part has a predictable usage or if it is unpredictable… lets start with predictable. Predictable usage safety stock = (max lead time – normal lead time) x normal consumption rate Normal consumption rate = expected annual usage / 365
- If the part usage is unpredictable, we use a different approach, based on the level of acceptable coverage starting at 50% to 99.9%. To determine the safety stock levels of a part with an unpredictable usage, the use the formula K x √D Where K is the factor of acceptable coverage. And D is the average consumption during lead time. Now if your CMMS does not have a safety stock field, it can be added to min to provide the same level or acceptable coverage. After all these analysis are completed, record the results on the stock request form. This way the analysis can be reviewed and approved in the next step.
- This analysis can take some time and can be done incorrectly. In order to reduce the admin time, and possibility of errors, create a simple spreadsheet that does it all for you. With a little upfront time, you can streamline this process. Remember one of the 3 Ps is people and if we make it easier for them, chances are they will use the system. If you are interested in a spreadsheet, let me know and I will provide you with a link to download one for free (landing page).
- With the stock analysis complete, the request needs to be approved. This could be done on paper or electronically, but needs to include the analysis. Depending on the cost to the organization, the individual who approves the stocking may change, or may require 2 people to sign off on it. This is where the statement of authorities come in. The SOA will indicate who signs off based on the risk or cost to the organization and at what levels different roles are required. The thresholds and requirements should be spelled out clearly so that everyone knows who is responsible, when. Once the approval for the spare is completed, the request can be returned to the storeroom and can now be added to the CMMS.
- This process is vital to the long-term sustainability of the process as it will ensure the stock in the storeroom is correct and is not a duplicate Remember those incorrect naming's we saw in the beginning? This is where the taxonomy / data standard come in. It identifies the noun, modifier, attributes. Standardizes the mfg. number and name The first activity in the Stock Creation process (image of the process) is to apply the organization's data standards to the part. The data standard will be used to develop the description of the part (noun, modifier, attributes), determine what characteristics need to be entered for the part and lastly to standardize the manufacturer name and part number. With the spare parts data cleansed, the spare will be reviewed against existing materials in the spare parts master for the second time. This activity will ensure that there are no duplicates (whether direct or Fit, Form, Function duplicates) in the storeroom. With this complete the spare part can now be ordered and stocked.
- However, the gatekeeping process is not yet complete. As with all processes, there needs to be a check and act portion. This is known as the Performance Management process (image of the process). At a regular frequency, there needs to be a review of the metrics of the process. These metrics will ensure that the review actually took place, the appropriate approvals attained and lastly to ensure the data standards have been applied to the process. This report could look at; - Overall Compliance – the number of spares meeting 100% of required criteria against total spares - Right, First Time – in which only recently added spare parts are reviewed against the required criteria. - Processing Time – the average time to process a spare parts request You can also manage the performance of the storeroom by using a few key measures Stock turns Stock outs Material $ / RAV Utilizing these reports will allow you to identify gaps in the process and identify improvements
- Even with the best procedures in place, the gatekeeping process requires people to use the procedures. Therefore people are vital to the success of the process, and have the ability to stop the process. So we need to ensure we have our people on board First, make sure to communicate when there is a need for gatekeeping, and make sure you train everyone on the process. Next we need to understand that people may fear the new process.
- So what is there fear of a gatekeeping process. It is often a result of the storeroom being held to account for always having spares and never running out. The fear may also be a result of a low tolerance for risk. Chances are in the past people we disciplined (formally or informally) for; Running out of stock Extended breakdowns In addition, people may not want the Accountability for no stock or have had experienced blow back as a result of not having parts. This is a significant change for many and change is not easy for many. The move to risk based spares stocking is a major change for many
- Spares stocking is an insurance policy, and as such we need to balance it and manage the level of spend for coverage. This is where the risk based approach comes in. If you have a robust work planning & scheduling system and a good equipment strategy, you shouldn’t need to stock a lot of spare parts to begin with so focus on a risk based approach. By forcing all parts to be reviewed against criteria, a part may not be stocked, or may be out of stock when it is required, as stock levels are based on risk. To address this fear of accountability and low tolerance for risk, it is highly recommended that a cross-functional group of people is used to define the criteria in the analysis.
- So how do you manage the fear? Start by using the first 2 P’s Policy and Procedure. To address this fear of accountability and low tolerance for risk, it is highly recommended that a cross-functional group of people is used to define the criteria in the analysis. The criteria developed by the team is Probability, lead time and criticality rankings. In addition, gathering support from senior management, finance, procurement, and operations will help to reduce the emotional reaction when the part is not immediately available will provide reassurance to the storeroom staff. Use a good change management framework such as ADKAR. This will help ensure that the adoption of the process. Part of ADKAR and any other Change management process is proper training. Not just on the policy & procedures but also on the why
- The topic of change management is beyond the scope of this paper, but all relevant change management techniques should be utilized when implementing the gatekeeping process. However, one easy to implement tool, for getting people on board and keeping them accountable to the process is to use a RACI chart. A RACI can be used to clarify roles, responsibilities and accountabilities I remember the first time I was introduced to a RACI chart. I was struggling to get a Parts Kitting process in place. There was poor communication between Planning & the storeroom, regardless of what we tried. Ad-hoc reports, Planning & the storeroom verifying receiving reports, it was a mess. An Engineering Director asked; “ You have a nice process defined, but how does everyone know what they need to do?” I responded “I color coded the steps in the process”. He looked at it for a minute and followed up with another question. “ok, that defines who is responsible for the step in the process, but how does one know what specifically takes place, and what they are measured on?” “I guess they don’t.” I answered. “You need a RACI chart…” So what is a RACI Chart? It is a simple chart that highlights who is Responsible: Who Is Responsible For Actually Doing It? Accountable: Who Has Authority To Approve Or Disapprove, or Answers for the completeness of the task Consulted: Who Has Needed Input About The Task? Informed: Who Needs To Be Kept Informed About The Task? This is what I needed to make my process successful, so lets take a look at the specific roles with the Maintenance Planning & Scheduling process, so we can build a RACI Chart.
- Ensuring the RACI is followed can be accomplished a few ways. Technology can make the governance around some of the data and processes easier, but you do not require technology to make gatekeeping work. Technology has the ability to improve data entry, reporting and work flow, but it can be expensive to implement I have seen this approach work successfully with a technology solution and a manual system. If you implemented followed the 3P (Policy, procedures and people), the approach will work regardless. Technology may also be determined based on the size of the organization.
- Depending on the size of the organization, an automated (or technology) or manual solution may make the most sense. It will depend on the number of layers and approvals required. Also, if you have multiple sites using a single databases, an automated system may be the best as the creation of spares may be best handled by a central resources. There are fully automated solutions out there. You can use these, or you can use a hybrid method as well. Regardless of the solution picked, It needs to fit the organization, and work with the organizations processes. Do not try to make your process match the automated tool. Have the tool match your systems and processes.
- As with all new processes, there are a few common issues that are encountered, but can be overcome. By being aware of these common issues, it is possible to avoid them, or at a minimum, reduce the impact the have on the gatekeeping process. Two of the most common issues are; Emergency parts – Many organizations have a requirement in place, that a part may not be ordered unless it has a CMMS / EAM part number. While this does prevent free text orders, it may cause poor / incorrect data in the system. When an emergency does happen, virtually no one will take the time to follow the gatekeeping process. To overcome this, there should be an exception process in place, in which the rough data can be entered into the CMMS to order the part. The part should be ordered only to the required quantities, no extra. After this part is ordered to address the emergency, it should then be routed through the standard process, and data in the CMMS / EAM updated with the minimum, maximum quantities, etc. The process takes too long – Getting the correct lead times from the supplier, determining the usage, and gathering the criticality does take time. Executing the analysis and using the formulas do take time as well. But so does cycle counting obsolete parts, and adding a satellite storeroom to hold additional parts. By communicating the benefits of a little bit of upfront work, versus the long term work, it is possible to overcome this. In addition, even if a technology solution cannot be implemented, develop a simple spreadsheet to conduct the analysis and calculate the values. This simple spreadsheet will save time, reduce errors and eliminate the concern over how much time the gatekeeping process takes.
- Remember that poor storeroom in the beginning? With No access control Stocking 2 years worth of electrical boxes No naming system for parts A kitting shelf with parts received 3 years ago Parts in stock from equipment that was removed 8 years prior V-belts dry rotted on the shelf, corroded valves, and bearings out of their packaging Anyone could stock A part in the control room What do you think happened after they implemented a gate keeping process? Do you think it operates the same way and has all of the issues as before? The answer is a simple NO.
- After implementing a gate keeping process, a site stopped adding new parts to the storeroom without the review process. In addition the site reviewed all of their existing materials using the same criteria, and reduced the value of the storeroom significantly, without increasing any risk. So what were the results? After starting with a stock value of $3m, they were able to reduce the total value by $450K. They prevent approx. $50K from being added to the storeroom in a single year. Lastly they were able to eliminate 38 SKUs in the storeroom, as they were determined to be duplicate SKUs. Now compare this to your site. How much room for improvement is there in your storeroom?
- Now, there may still be some of you who think that this won’t work, or it will be too difficult. It’s true, it is not easy, but the benefits are dramatic, and can have a ripple effect throughout the organization. If money isn’t tied up in spares, it can be used for new capital equipment, or to further the marketing of the project. Remember, we are a support function to the business, but we all have the same goal, which is to make the business successful. So I must ask you, what's stopping you from implementing a gate keeping process? Take the first step and start by controlling what is going into the storeroom, and you will not be leaving money, equipment performance or risk on the table Thank you