Inventory management solutions: The key to avoiding stockouts

Reliability manager Randal Shutt at Cascade Steel Rolling Mills in Oregon notes that if you want the storeroom to keep stocking something, you must use it. You must withdraw it regularly and consistently. The storeroom really does want to stock the items that you regularly use. If you use one filter each month, then just withdraw one filter each month. Don’t withdraw six filters and put five on the shop shelf after you use the one you need. The storeroom does its best to buy the right amount to keep ahead of regularly used stock.

Irregular usage misleads the storeroom into thinking an item should have a high safety stock at best or should not be stocked at all at worst. Carrying high safety stocks for everything is expensive. Purchasing items just in time for everything is also expensive and greatly hinders routine maintenance. The storeroom has an opportunity to both to lower plant cost and enhance maintenance efficiency when it carries the right amount of inventory stock for routinely used parts.

Second, if the storeroom does not have something it should have had – creating a stockout situation – you have to say something. Stockouts are problematic. Let’s say a craftsperson asks for a filter for a job in progress and the storeroom says that filter is currently out of stock. The stockout hinders a job. Consider a plant manager who looks at a $10 million inventory that has never recorded a stockout. The manager might well think that the storeroom is overstocked. However, actual craft practice at many plants unintentionally hides the incidence of true stockouts. When that craftsperson asks for a filter and the storeroom says it is out of stock, the craftsperson says “never mind” and does the job another way! The storeroom does not have needed parts, but it never records a stockout because the craftsperson withdraws the request.

A stockout does not necessarily keep a job from being completed. The craftsperson might finish the job with an alternative part. But what if the alternative part is an inferior substitute? Craftspersons often “make do” with whatever is available when necessary. And in any case, the craftsperson has to spend extra time at the cost of maintenance efficiency.

The biggest problem is that not seeing a true picture of stockouts misleads management. Management sees the high cost of inventory with no stockouts as a significant opportunity to reduce plant cost. Sometimes management advocates cutting stock until it gets a feel for an adverse effect on maintenance. But loss of maintenance efficiency is usually subtle and a difficult indicator of adverse effects. Stockouts would seem to be a fair indicator, but management should not rely solely on stockout reports coming from the storeroom. Stockout data will be more useful if it is taking into account feedback from craftspersons. Work orders could have checkboxes or failure codes for craftspersons to record stockout problems.

Planners can help check stock levels before jobs start to head off stockouts, but if management slashes stock levels, planners will soon be specially buying parts for every job, which is a great hindrance to routine plant maintenance. To keep the storeroom from not carrying something, use it and speak up when it’s out of stock. These two good habits will help build good communication and trust that the right parts are being stocked in the right quantities.