How to overcome the biggest challenges faced by Materials Management teams

21 May, 2020 by Add Energy

The role of materials specialists can be challenging, especially when trying to strike the perfect balance between not only ensuring you have the inventory required to keep operations running smoothly, but also that costs and processes are continually being optimized.

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Iain Wood, Add Energy’s Materials Manager, has shared the biggest challenges he has identified during his 35 years of working in the materials space, and provides actionable advice for overcoming or mitigating against them...

1. Budgets

“Understandably, budget sits at the top of the challenges list for materials teams. How can you maximize the budget you have, while still ensuring you have the right spares at the right time?

“My top tip is to focus on purchasing what you need, not what you want. I have seen many companies holding loads of spares for low criticality equipment - and they don’t need to do this. You don’t need to hold spares for everything. If low criticality equipment fails, the impact and risk to your people, business, and environment is low. Instead, order these parts as and when you need them to reduce your footprint and costs.” 

2. Surplus stock

“So many companies across the globe are holding excess spare parts, and they could unlock significant cost saving opportunities by conducting a simple review. For example, we are currently working with a client in Canada, and have identified $20-40million of spares they do not need to be holding. 

“The common cause of this is following manufacturer recommendations to a tee. Instead of doing a technical review, and determining if you really need to hold this part, companies follow the manufacturer's guidance and hold all of these spares in stock. However, materials teams must remember that the manufacturer does not know what you can or can’t fix, or the specific environment you’re working in. 

“Our recommendation is to conduct a surplus stock review. Look at all your spares, and select one of the following three options:

  1. Stock it: if the items are general consumables that are used on a day to day basis and do have a large financial impact, hold more stock than you need to, to save purchasing costs over next 2-3 years
  2. Sell it: if brand new in unbreached packaging, you may be able to sell it back to the manufacturer for a credit note or use elsewhere in the company global footprint
  3. Scrap it: if completely damaged or no longer required, either scrap it or sell it as scrap to try and get some money back”

3. Preservation of spares

“It is very common for companies to be spending millions of dollars on spare parts, for them to sit in a warehouse and be forgotten about. And this can result in significant cost implications. 

“If an item has sat on a shelf for four years, and nobody has looked at it, there is a strong possibility it will not work on demand. If the correct preservation maintenance is not conducted, operations could be disrupted and money wasted by urgently sourcing a replacement part at a premium price. 

“Our advice is three-fold:

  1. Ensure your equipment is being properly stored
  2. Conduct the correct maintenance, and create a preservation maintenance log
  3. Train your warehouse personnel

“You can read more tips from our team around preservation maintenance by clicking here.” 

4. Spare parts for planned maintenance 

“Many companies hold a huge amount of spare parts that are linked to their planned maintenance regime which have often been purchased years in advance and multiple times over. Doing this can create significant issues, these include:

  • Tying up cash unnecessarily before it is required 
  • Taking up premium space on the asset holding spares you don't immediately need 
  • Difficulties in management and tracking of stock due to excess clutter 
  • The equipment not being fit for use because preservation maintenance has not been done 
  • Spares to perish over time, causing premature failure of equipment once installed 

“To avoid these issues, companies should consider utilizing the “just in time” approach to ensure spares arrive just prior to the work being executed. But in order for this to work properly, you must have visibility on lead times, and your planning and scheduling process must be well established and optimized for spares to be ordered at the work order call horizon.  

“There are a number of additional benefits that can be unlocked by doing this:

  • Spare parts are ordered against the correct maintenance work order, so the true cost of maintaining the equipment can be recorded 
  • You gain more life-time from the parts by reducing shelf time 
  • You don't spend this years budget buying spares for work orders that will occur in 2 years time -  for example”

5. Data 

“The final challenge I want to speak about is around data, and specifically data standards - as this is the root cause of so many problems for companies. 

“Within a CMMS, you will likely find multiple variations of descriptions for the exact same items. English may not be people’s first language, there could be spelling errors or varying abbreviations, the CMMS may not have an autocorrect, and so on. 

“The system won’t recognise the potential duplicate item, and instead a new record is created each time. This can result in overstocking, as the figures are incorrect, and in the worst case scenario, you may believe you don’t have any stock (due to descriptions not being correct) and then do an emergency purchase which could cost an extra 50% of item cost - but the part was in stock the whole time. 

“I cannot stress the importance of data standardization and data cleansing enough. This may not seem an exciting or important piece of work, but the knock-on benefits can be huge - and it should only need to be done once. Once done correctly, you can train your team and create standards for them to follow.”

How we can help…

At Add Energy, we have a team of materials experts that are working with clients across the globe to help them reduce OPEX costs through immediate and reliable access to critical spares. 

Our services can help you:

  • Know what you need to stock, based on risk, consequence and likelihood
  • Remove capital tied up in non-critical stock holdings
  • Reduce equipment downtime and maintenance expenditure, through availability of spare parts
  • Understand what you have in stores, and where they are located, to avoid unnecessary expenditure and time wastage. 

Learn More - Inventory Management Optimization

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