Problems and Solutions on MRO Spare Parts and Storeroom 6th Discipline of World Class Maintenance Management: 1, #5

By Rolly Angeles

This is the 5th of a series of books about World Class Maintenance Management disciplines about MRO Spare Parts and Storeroom.   It is written for industries with MRO problems and searching for solutions to their Spare Parts and Storeroom.  MRO Spare Parts and Storeroom Management is one of the most neglected maintenance strategies in any industry, which should not be the case. Others say that this is the missing link to any reliability and maintenance improvement. Almost every type of industry, whether from manufacturing, processing, pharmaceutical, power plants, mining, construction, aviation, oil, and gas, has a storeroom to keep their spare parts, but the problem is about managing and controlling them.  There are two main goals of MRO Spare Parts and Storeroom, which are quite conflicting.  First, this balances the cost of spares inventory and provides all the parts and supplies needed to keep the plant operating.  It may sound conflicting or contradicting, but thinking about this thoroughly, it is really not conflicting if the MRO Storeroom is well managed.  Second, the role of maintenance is to make the equipment available.  Two of the main highlights of this book are to provide the reader an algorithm or MRO Decision Diagram to determine if a spare needs to be stock or not, and the second is to determine the correct quantity of parts to be stocked in our storeroom. Some of the highlights of this book include:

- Provide a decision-making process on whether to stock or not to stock parts through an MRO Decision Diagram or Algorithm
- How the MRO Algorithm or Decision Diagram is Used
- What can we do about squirrel stores and how to eliminate them permanently
- Different ways of analyzing MRO Spare parts
- Learn the basic"Golden Law" on MRO Spare Parts Management
- Learn several options on what to do for obsolete parts inside the storeroom.
- Learn one option on what to do with non-moving parts
- Learn why not all critical parts need to be stuck in the storeroom.
- Learn important  factors to consider before making a decision on whether to stock or not to stock parts in the storeroom
- Learn a much better way of determining the minimum quantity to be stored besides min-max and EOQ calculation.
 How to address squirrel stores permanently
- Provide the reader with a step by step roadmap on how to finally improve their MRO Storeroom
- Understand who are the best people or function to handle the maintenance storeroom and why
- Learn that one of the most important functions of the storekeeper is to maintain and care for the spare parts.
- Different methods on Automating MRO Spare Parts and Storeroom
- Detailed Step by Step roadmap on how to improve your storeroom
- Why improving the storeroom should be done inside and outside the storeroom and many more.  

99.99% of all the problems on MRO Spare Parts and storerooms are man-made, and they may come from different departments or functions of the organization.  If man created the problem, let the man find the solution to their MRO Spare parts and storeroom problems.  This book starts with a survey on the different problems common to industries on their MRO Spare Parts and Storeroom.  As you read each chapter, it will provide the reader with a clear understanding of dealing with each of these problems.  On the contrary, we cannot simply stock every single part of every piece of equipment we have in the plant if your industry still wants to remain in business.  

• Language: English
• Publisher: Rolly Angeles
• Release date: Jun 12, 2021
• ISBN: 9798201151829

Book preview

Take IQ Quiz on MRO Spare Parts and Storeroom

(Refer to Appendix B for the answers)

1) THE NUMBER ONE CAUSE for non-moving items

a) OEM and vendors

b) Parts become obsolete

c) Parts are modified

d) Because the boss tells us to stock

2) Secret hiding places of parts not held in the storeroom are called

a) Rabbit stores

b) Elephant stores

c) Squirrel stores

d) Cat and dog stores

3) The best way to make a decision on whether to stock or not to stock a part is through

a) MRO Decision diagram

c) EOQ calculation

b) OEM recommendation

d) Allow purchasing to make the call

4) When the part or item have not moved for a year or more, it becomes

a) Obsolete part

b) Non-moving item

c) Extinct

d) Slow-moving item

5) A spare part becomes obsolete because 

a) Equipment was decommissioned

b) Part was modified

c) The part exceeds its shelf life

d) We no longer use the part on the machine

6) Survey shows that the biggest contributor to the cost of inventory is because of

a) Fast-moving parts

b) Slow-moving parts

c) Non-moving parts

d) Obsolete parts

7) One of the activities for the storekeeper for rotating components such as motors and pumps is to

a) Perform inspection on the seals

b) Paint them every year

c) Rotate the shaft once a month

d) Change the bearing every year

8) For industries with the same assets but different locations of the plants, the best strategy for your storeroom is

a) To centralize

b) To decentralize

c) To keep the parts, you need

d) Use just in time method for ordering parts

9) Size of your storeroom depends on

a) Number of equipment you have

b) Number of breakdowns you have

c) The bulk of spares you have

d) Amount of consumption & capital spares

10) Which among these parts should be stored in a cold area

a) Belts

b) ESD and electronic parts

c) Lubricant in drums

b) ESD and electronic parts

d) Pumps and motors

11) In MRO Spare Parts, one fortnight means

a) 1 week

b) 2 weeks

c) One year

d) One month

12) Non-moving parts or items is also termed as

a) Rarely used inventory

b) Infrequently used inventory

c) Non-active inventory

d) Slow-moving inventory

13) In MRO Spare Parts Management the term stock out means

a) Fast-moving item

b) Item not available when needed

c) Obsolete part or spare

d) Lead-time to acquire the part is long

14) FSN Analysis means

a) Fast, Slow, and Non-moving Items

b) Federal Spares Nomenclature

c) First in, Stock and non-stock items

d) First, second and non-stock parts

15) MRO stands for

a) Maintenance, Repair, and Overhaul

b) Material Replenishment Order

c) Maximizing Revenue and Operations

d) Maintenance Repair and Operations

16) According to the author of the book, who should manage the MRO storeroom and spare parts?

a) Accounting Department

b) Maintenance Department

c) Purchasing Department

d) Logistics Department

e) Administration Department

f) Warehouse Department

17) The best way to determine the minimum and maximum parts to be stored is through

a) EOQ

b) MTBF and MTTF

c) Minimum and maximum

d) Asking the OEM

18) Spare Parts Management is also termed to as

a) MRO Management

b) Storeroom Management

c) Maintenance Material Management

d) Managing Maintenance Storeroom

19) 60 to 80% of the total cost of inventory on MRO storeroom is due to

a) Fast-moving Items

b) Slow-moving Items

c) Non-moving items

d) Obsolete items

20) The smartest way to make the decision on whether to stock or not to stock a critical part

a) Follow the recommendation of OEM

b) Based on the cost of spare

c) Ask the boss to stock or not to stock

d) Through the MRO Decision Diagram

21) The best person to decide which parts to stock or not or not to stock is

a) Purchasing Department

b) Storeroom Department

c) Accounting Department

d) A Team from maintenance, storekeepers, and Other Departments

22) When equipment is retired or decommission, the parts in the storeroom becomes

a) Non-moving

b) Obsolete

c) Slow-moving

d) Stock-out

23) The best way to start with the CMMS on automating Spare Parts system and control would be

a) At the beginning of implementing spare parts

b) When the OEM tells us to stock big parts

c) When the basic equipment condition has not been well established

d) When a manual system is already in place

24) The founder and originator of Radio Frequency Identification (RFID) used at some storeroom.

a) Ford Whitman Harris

b) Joseph Woodland

c) Leon Themerin

d) Bernard Silver

25) According to the author, the Golden Rule for spare parts and storeroom is

a) Honesty is the best policy

b) To trust everyone

c) Trust no one

d) Have complete faith in the storekeeper

Trivia Question: Who Sang the Song "No Spare Parts

(REFER TO APPENDIX A for the answer)

FIGURE A: WHICH BAND or Singer Sang the Song No Spare Parts?

Chapter 1

Top Problems on MRO Spare Parts and Storeroom

1.1: A Typical Day in the Storeroom

MANY SAY THAT MRO SPARE Parts and Storeroom is one of the most neglected, unseen, and less talked about issues and problems on maintenance.  There is no universal standard or law as to whom should directly manage the storeroom.  While in other industries, it can be the Warehouse, Supply Chain, Logistics, Accounting, Purchasing, or Maintenance that manages the storeroom.  I will discuss this matter in the later chapters of this book as, in my humble opinion, who is the most appropriate function of the organization that should manage the storeroom.  In the meantime, let us hear some appalling stories from maintenance and the storeroom.

It was a Friday, and you have just checked in for your shift.  Everything was running normally until the unexpected occurred.  You noticed an unusual noise in the engine, and based on your experience, the noise came from a bearing that is almost gone.  You raised a notification for the bearing to be changed in order not to allow the entire unit to go down because if it goes down, then management might think that you are sabotaging the company.  You provided an instruction to the lube man for the bearing to be grease while waiting for the arrival of the spare.  What is on your mind is that for as long as the bearing is still working, no attention will be given to your request for corrective maintenance, as this is the typical norm from operations.  They always won’t let go of the equipment.  The time for Preventive Maintenance has come, but production is trying to cope with late deliveries, so they decided to defer the maintenance request for the nth time, as usual, nothing new, and it was expected.  Finally, the equipment failed, and the entire plant was in complete darkness.  This is a story of a diesel generator that had been shouting for a complete overhaul.  The gas generator came down on a broken fan blade.  After a couple of minutes, the standby diesel generator was started.  Still, it could not carry the load because the O-rings were gone, and the equipment was smoking heavily.  Finally, as expected, the diesel generator failed, and the plant was in complete darkness.  The operations manager asked you how long it would take you to repair the diesel generator.  You replied and told him that it would be for a couple of hours.  What is on your mind right now is that if they just allow the equipment to be corrected or undergo their scheduled Preventive Maintenance, this will never happen, but that is all in your mind, of course.  The operations manager left you, and you started to dismantle the generator.  The backup generator was started but went down again after a couple of hours.  This time it was because of the fan belt.  You check the system for the part number of the belt, and it was your lucky day.  There were two belts left in the system.  You rushed to the storeroom to requisition for the fan belt, but the storekeeper took too long to find the belt.  Finally, after 30 minutes of waiting, he went back and told you that the belt was no longer available.  You told the storekeeper that the system has two more belts left, and the storekeeper laughed at you and told you not to believe everything you see in the system.  You are now under a tremendous amount of pressure since the generator is still down, and the entire plant was still in complete darkness since the backup generator was also out.  Finally, you told your boss about the problem, and the boss instructed you to cash advance and use his car to buy the belt outside.  Your boss called the storeroom and argued about the discrepancy in the inventory.  The storekeeper said in a mild voice, give me more people, and I will do as you please.  He hanged up the phone and instructed you not to come back without the belt.  His instruction was vividly clear; do not come back without the belt.  Time is running out, and every minute counts.  What is in your mind is not only about fixing the equipment but also about the discrepancy in the system.  Production is finally pressuring maintenance since they need to ship the remaining lot before the shift ends.  Finally, as you were driving down the road, you spot an auto shop and inquire about the belt.  Luckily, they have the belt you were inquiring for.  The Lord has heard your prayer.  You purchased five belts just in case you might need them once more.  As you drove back to the plant and looked at your watch, you still have a couple of hours left before your shift ends.  With your hard-earned experience at the University of Hard Knocks, you replaced the belt with the new one and brought the generator back into operation.  The lights were on, and there was applause from everyone.  You have saved the day with your heroic efforts.  The operator immediately continued processing the remainder of the lot until it was ship out finally.  You have saved the day with your heroic efforts.  As you were about to sign off, the boss called you in his office; again, you were thinking that the boss would thank you for saving the day for your heroic stuff just like superman.  To your surprise, the boss questioned you on why you’re not aware of the discrepancy between the actual stock and the system.  Again, what’s in your mind is how on the planet would I know that.  There was absolute silence on your part as you practice your right to remain silent.  Finally, the boss let you go for the day.  As you went back to your car, you were listening to some music, and the song goes, and a hero comes along, with a belt to carry on.  Was it a belt or a strength?  I believe Mariah Carey sang that song.

During my days working in the semiconductor plant here in the Philippines, we had a central hub for our spare parts.  It was a big plant.  The plant has 22 departments, including the facilities.  Each department has several machines.  Some have a couple of hundred machines.  We experienced many problems with our spare parts.  One day as I was working in my office, the maintenance manager approached me and asked me to look at the two pieces of bolts he was holding and gave them to me.  He asked me if the bolts were identical or not.  While I was visually examining the bolts, the heads were the same.  The sizes were the same; the length of the bolts was identical, as well as the pitch on the threads.  Everything was utterly identical except for the coating, which was slightly different as one bolt was coated black.  At the same time, the other was lighter in color.  Without hesitation, I told the department manager that the two bolts were identical.  The maintenance manager smiled at me and told me I was wrong, which totally surprised me.  In my mind, this guy is nuts.  He told me that everything is identical except for one thing, which is their part number.  The two bolts have different part numbers since they came from different vendors.  He told me that he ran out of stock of this bolt, which they needed for their Preventive Maintenance activities, and asked the storekeeper if they have bolts similar to this.  The storekeeper gave him an identical bolt.  It belonged to another department.  The last time they made a withdrawal of this bolt was 3 years ago.  The department manager asked me to check the storeroom for other parts that are identical but have different part numbers.  I did what I was told to do and audited the storeroom.  I was shocked to find out that there were so many identical parts with different part numbers.  There was actually no way of knowing if the part exists just by logging into the system.

A couple of years back, there was a commercial on TV about a well-known food chain in the Philippines.  Their commercial brag about the speed and efficiency of their food chain services while catering to their customer’s orders.  The commercial goes like this, a customer walked into the food chain, placed an order, and the staff repeats the order while the customer concurs.  A stopwatch was shown at the bottom of the TV commercial.  The message was simple.  The order should be complete in precisely 60 seconds or less.  After 50 seconds, the staff finally gave the customer his order with a smile.  It sounds impressive on TV, so I decided to try it.  One day, I took my family to this food chain and ordered food.  Just like in the TV commercial, the staff repeats my order, and I said yes.  I took my stopwatch on my wrist and started the countdown.  After 60 seconds, the order was still unavailable.  Finally, the food was given after several minutes.  I think it was more than 10 minutes.  I told the staff how come in the TV commercial; it was given in less than 60 seconds.  The staff told me that they ran out of fried chicken and were still frying them.  I told them that they should not place some TV commercials that they could not deliver.  After that, I never saw that TV ad again.  I do not know if I was responsible for that or perhaps other people experienced the same situation and complained.

Similarly, when the part takes too long to acquire in the storeroom, downtime is prolonged and adds up to the maintenance agony of waiting.  The bigger the organization, the more parts will be stocked in the storeroom.  My experience tells me that the bigger the storeroom, the more problems they can induce.

1.2: Top Problems on MRO Spare Parts and Storeroom

MANY MAINTENANCE EXPERTS agree that MRO spare parts and storeroom management is one of the most neglected aspects in any industry.  When a machine fails in operations, it is most likely caused by a part that failed to fulfill its function.  There are mechanical parts that wear out that need to be replaced, but we also need to figure out random failures that are possible to happen in the equipment at any time.  This will be the most challenging one since no one exactly knows what parts will fail and when will that part fail.  If that part is available in the storeroom, then the machine can be repaired.  If not, then maintenance has two options; first, they will cannibalize idle equipment and get the parts they needed liked they always did.  Another option is for maintenance to result in emergency buying where they will purchase the parts in excess and keep the remainder of the rest on the assumption that it might fail again someday, which is a widespread sentiment among maintenance.  They want to hold on to things that they think are important until their very last remaining breathe on the planet.  What is essential is for industries to keep downtime to a minimum.

A storeroom is simply a contingency plan for failures because industries know that it will happen.  It is just a matter of when and what part will fail.  The storeroom is a place to store MRO spare parts that are needed to keep the equipment running, but to manage the spare parts and storeroom means how fast the storekeeper can respond in acquiring the right part during the right time when both maintenance and operations needed them most.  Many problems in the storeroom exist today in industries.  What industries must understand is that MRO Spare Parts is one of the disciplines on World Class Maintenance where we could reduce maintenance costs big time if industries are serious about it.  Based on my training on MRO Spare Parts, Storeroom Management, and feedback from my students, here are the Top Problems on MRO Spare Parts and Storeroom in no particular order.

1.2.1: Disorganized Storeroom

ORDERLINESS INSIDE the storeroom is essentially important.  The longer the part is retrieved, then the longer the downtime will be on the equipment.  When the storeroom is disorganized, it will take a longer time to locate the parts, not to mention the dust and dirt that have accumulated on the parts for quite some time.  Think about a supermarket; it is easy to locate the things we need since every aisle and shelves were placed in parallel with each other for easy access.  We just need to look at the signs located above to know what to expect to see on the shelves.  Just read the signs so we can determine what we are looking for, such as coffee, cookies, canned goods, junk foods, drinks, fresh meat, snacks, whatnot.  If you want to improve the housekeeping of your storeroom, just visit a supermarket and observe how people can find what they need quickly without any assistance at all.  That way, you will have some ideas on how to proceed.  Having a disorganized storeroom not only adds time in locating the parts but it also adds stress to the storekeepers.  It is more comfortable to work in an organized place than in a chaotic environment.  Housekeeping and orderliness inside the storeroom is an essential part of any MRO Spare Parts and Storeroom Management responsibility, as this is critical to the ability to retrieve the correct item quickly to the user.  Remember, the longer you retrieve the part, the longer the downtime will be on the equipment.

1.2.2: Large Quantities of Obsolete Parts in the Storeroom

FREQUENTLY, THERE ARE many parts held in the storeroom that do not belong to any equipment in the plant since the equipment had either been removed, decommissioned, or retired.  The equipment in the plant may be retired and no longer on site.  The problem, in this case, is that since the parts of the equipment are still inside the storeroom, there is a cost of holding the part in the storeroom that is called the carrying or holding cost.  If the cost of an obsolete motor in the storeroom is 100,000.00 USD, the cost of holding this part can range from 10 to 30 percent of the cost of the motor per year, which can range from 10,000 to 30,000 USD per year.  In this case, we are only speaking here about one item in the storeroom.  Just imagine if you have 100,000 to 200,000 items inside the storeroom, everything will have a holding cost just to place the item in the storeroom.  Remember that storing obsolete parts in the storeroom costs money and space.  A plant can utilize the space consumed by obsolete parts.  The worst case is when the storekeeper doesn’t know that the equipment was already retired and the possibility of reordering fast-moving parts for this equipment.

When the equipment is retired or removed from operations, maintenance tends to forget that the parts needed for repairing the equipment also become obsolete.  The important thing is for maintenance to communicate this to the storeroom people so that all affected parts can be identified.  Remember that these parts will no longer be used unless there are still the same equipment types operating in the plant.  If a plant has an automated CMMS or EAM generating system for spare parts, the parts will be reordered continuously if they will not be removed from the system.  This is like having a patient die in the hospital, yet the bill keeps on adding up.  The worst part is that some hospitals do not release the bodies of the dead to the family if the entire bill has not been fully paid.  I am beginning to think about whether hospitals are here to save lives or just prolong the agony of the family affected.  Instead of spending the time to heal, additional problems come in.  Same with industries, things get a bit more complicated because there are just too many red tapes, bureaucracy, politics, and signatories needed to remove a specific obsolete item from the list or perhaps a procedure on what to do after the equipment is decommissioned do not exists at all.  The thing is, if the machine is no longer around, the best thing to do is to identify all the parts that come with it.  Not only do we need to identify the parts in the system, but we also need to locate all the parts inside the storeroom that belong to this equipment, isolate them, and finally remove them from the storeroom, as they will no longer be used permanently.

Another reason why the part becomes obsolete is that the shelf life of the part has already been reached.  When the equipment is retired, the spares associated with it must be identified so that it can be freed up from the storeroom.  This will free up space, which can be used to store other items.  Remember that there is a cost of storing or holding obsolete parts inside the storeroom.  The problem is that not all storekeepers provide a report on this to management, and maintenance might be thinking that there is actually no cost of holding these parts inside the storeroom.  Nothing is free anymore.

1.2.3: Same Parts but Different Part Number

A PART CAN BE REORDERED because some people may need them without knowing that there are some alternative or substitute parts inside the storeroom.  Another reason for this is that the same parts can have different part numbers, brands or may come from different vendors where the part may have some very slight differences but can be retrofitted on the equipment.  The part number should remain consistent, and alternative or substitute parts must reflect in the CMMS or EAM system when inquiring for a specific part.  These parts can be used as a substitute or alternative parts.  Samples of these parts include oil filters, belts, bearings, valves, bolts, seals, and many more.  They can have the same specification, but the only difference is their brands.

The problem, in this case, is if both the storekeeper and maintenance are unaware that these parts exist inside the storeroom.  They can remain idle for a definite period, just accumulating dirt and dust.  There are several reasons why this happens.  One reason is that purchasing may use a different vendor to supply parts, which was previously supplied by an existing vendor, perhaps to cope with the great demand.  To have control over the matter, the purchaser, or whoever in charge of the codification or part numbering, may assign a different parts code or stock item for the same part.  Another reason is that the part may have different brands but the same specification.  What is important is that these alternative or substitute parts must be identified completely, physically inside the storeroom.  These parts must be consolidated and must be seen in the system; otherwise, they will remain idle inside the storeroom.

FIGURE 10.1 SAME PARTS with Different Part Number

1.2.4: A large Amount of Non-Moving Parts

WHEN THE EQUIPMENT was commissioned in the plant 10 years ago, the OEM (Original Equipment Manufacturer) told us to stock some critical parts, or else the warranty will be voided, which scares the maintenance leaving them with no option but to follow the OEM’s recommendation.  Today, the parts have not moved for the last 10 years and are still stocked inside the storeroom.  Remember that these parts are classified as non-moving parts, which is entirely different from obsolete parts.  This means that the equipment is still currently used.  Most sentiments among maintenance people are to hang on to these parts since their thinking is that these parts may be used someday.  Obsolete parts are more comfortable to address compared to non-moving parts.  Stocking critical parts recommended by OEM and vendors will always be a debatable issue.  Still, there is a rational and better way of making a decision on whether to stock or not to stock parts inside the storeroom.  This can be addressed by having an algorithm or MRO Spare Parts Decision Diagram, which will be discussed later in this book.  The survey indicates that an ABC Analysis shows that 60% or more of the overall cost of MRO spare parts inventories come not from fast or slow-moving items but from non-moving items.  These parts are significant as well as their cost, not to mention their size as well.  A survey on different MRO storerooms in industries indicates that spare parts that are currently used consist of around 5 to 10% of the overall inventory of the store.  This means that the remaining 90 to 95% of them just remain idle and sit in the industry’s storeroom only to use a few times per year or never at all.  The user of these parts are not the maintenance but the lizards and spiders that now consider these idle parts as their permanent home.  The survey shows that 60% or more of the parts have not moved for the last 3 years or more.

1.2.5: Physical and System Inventory Do Not Match

ONE OF THE ESSENTIAL factors in our MRO Spare Parts Management quest is having control over the inventory of the parts inside our storeroom.  To have an accurate inventory means that the number of parts physically present inside the storeroom should match the number of parts indicated in the system or computer.  Some books say that the benchmark is at 95%.  My standards would be to have an inventory accuracy of 98% or more.  This means that if I have 100,000 parts inside the storeroom, 98,000 of these parts should reflect the same numbers physically in the actual location in the storeroom and in the system.  When the system reflects a higher quantity than what is physically present, then there is an excellent possibility that the storeroom can experience a stock out.  At the same time, if too much inventory is present than what is reflected in the system, then that industry remains costly.  Either way, the company loses.  If maintenance checks the system to determine if a particular belt is in stock, and the system indicates that the belt is there, but when you go to the storeroom and withdraw the part where the storekeeper says that they no longer have stock of the belt, how would you feel?  You will lose your trust and confidence in the storekeeper and start squirreling your way on the belts for a start, and it goes on and on.  It is like going to a restaurant known for its specialty menu.  When you place your order, the waiter tells you that they run out of stock and advise you to order other food or return tomorrow.  When maintenance starts to lose their confidence with the storeroom people, there is a great tendency to hoard some of these parts in their cabinets, lockers, and perhaps even in their homes.  Once hoarding begins, then there is no more control over the storeroom.  We just do not know the number of spares held in stock since there are also stocks or unofficial stores everywhere in the plant.  Just like the case today on covid 19, where you cannot see even a single bottle of Isopropyl Alcohol in a supermarket because some people are hoarding them and selling them online 5 times or even 10 times the cost.  If you ask me why people do this, just listen to the song by the late King of Pop, Michael Jackson on Human Nature.

If the actual inventory is lower than the system recorded, then the risk is high that an out-of-stock condition will occur because parts will not be reordered.  At the same time, if the actual physical inventory is higher than the system recorded, then parts will be reordered by the system, even if it is not needed creating excess inventories and higher carrying costs.  This is true mostly for fast and even some slow-moving items.  It is critically important that not only the storeroom people should understand the importance of inventory accuracy, but also everyone in the entire organization.  If the inventory does not match the system, then the users will lose their confidence in the storekeeper.  Why do you think maintenance has squirrel stores, which will be our next lineup of problems to discuss?

FIGURE 1.2: MAINTENANCE Squirrel Stores

One of the main reasons why system inventory and its physical inventory do not match is that everyone has access to the storeroom during late night and peak hours when the storekeeper is no longer around, resulting in stock-out of parts when the users need them most.  Why does maintenance do that, because the storekeeper is just from 8:00 to 5:00 pm?  If you ask why management refuses to add additional storekeepers even if their operations are 24 hours?  If you ask me, everything is written in the bible.  From 1 Timothy 6:10 for the love of money is the root of all evil.

1.2.6: Emergency Buying and Maintenance Squirrel Stores

WHEN EQUIPMENT FAILS and the part is not available in the storeroom, emergency buying takes place.  There are many cases where the parts were ordered in excess for fear that the failure might happen again in the future.  These excess parts will not be surrender to the storeroom, but rather maintenance will keep them in their own secret hiding places.  These unofficial stores are called squirrel stores.  Charlie is hoarding up belts, and he is the only one who knows where it is hidden.  Still, not only Charlie is the one doing this, in fact, every single maintenance is doing it for themselves, and each one of them has their own secret hiding place somewhere in the plant.  One day the same part fails that evening when Charlie was on leave since the storeroom has no record of the part, it was purchased the following day again, and now John keeps the rest in his new secret hiding place.  This is a big problem in the plant.  When maintenance squirrel parts, the storeroom loses control since the storekeeper can only control what is inside the storeroom.  The problem is, we actually do not know, or we have no idea what the total cost of the parts squirreled by maintenance, mostly if this had been done for decades.  Once control is lost, then the cost of maintenance increases, and the boss gets mad where everything is just a merry-go-round.

Another reason for squirreling parts is that maintenance withdraws the parts in excess.  If they only need one piece for the repair, they will order three pieces or even more.  What would you think maintenance will do with the rest?  They keep it in their squirrel stores.  The problem I see here is that if the inventory of the part falls below the minimum, then the parts will be flag down for reordering, unknowingly that it is just being kept in one of the many squirrel stores inside the plant.  To some plants, squirreling had been done for decades, and you might be surprised at the number of parts being squirreled by maintenance.

1.2.7: Equipment Vendor is No Longer Around

THE MACHINE YOU HAVE been using has been around for more than 15 years.  The vendor may no longer be producing the parts needed, or worst if the vendor is no longer around or had shifted to another business.  Another reason for the vendor being extinct is due to technology.  With all this digitalization, IIoT, cloud computing, smart sensors, artificial intelligence, and whatnot were most of the parts on the equipment had already been phased out or modified to a newer version where the existing spares needed is no longer manufactured by the OEM or the original vendor.  The decision on whether to continue running the equipment or to retire it for good can be done by conducting an economic and feasibility study that will be appropriate for this situation.  If the decision is to allow the equipment to run, then parts that frequently fail in this equipment should be identified and source other vendors that can fabricate these parts.

1.2.8: Purchasing Going for the Lowest Bidder

IF INDUSTRIES ARE SERIOUS about saving cost, they should focus not on the initial cost but rather on the Life Cycle Cost of the item or component being purchase.  Life Cycle Costing does not only apply to purchasing new equipment alone but also for MRO Spare Parts.  There is always a temptation for purchasing people to purchase spare parts based on the lowest or cheapest possible source for industries.  It is common for Purchasing to buy parts from the lowest bidder, thinking that they are saving the company money where the fact lies that maintenance suffers on the other end.  Purchasers are good at negotiating prices, but they should also consult with maintenance and engineering regarding this matter.  Going for the lowest bidder might not be such a good idea since purchasing parts based on the initial cost only tells us just one side of the story.  The real costs will reflect on its actual performance and lifespan.  In my experience, this is the problem with most procurement and purchasing departments since they make the decision to purchase these parts based on the lowest bidder or lowest possible costs, leaving the burden to maintenance people.  The savings these departments claim are insignificant since both operations and maintenance experienced many failures as a result.  Purchasing always looks at the initial cost of the part and not the cost of problems the part may give the user in the end.  This is the problem with purchasing since cheaper parts will likely yield a much more considerable amount of cost in a period compared to a slightly higher cost of spare parts.  Decisions about purchasing spare parts should not be solely based on the tag price of the part, but rather it must be based on its entire Life Cycle Costs and MTBF as well.  Before making a decision to purchase parts, try asking these questions:

• How will the part perform in the long run?

• What will be the cost of operating and maintaining this equipment with this part?

• Does the spare part frequently fail during operation?

• How frequently should this part be replaced?

• What is the Mean Time to Fail of this part?

• How long will the equipment be down in the event of a breakdown?

Purchasing cheaper parts may actually mean spending more in the long run.  While many industries are introducing some cost-cutting schemes in their plant, the best way to reduce costs is to understand that it is more important to look at the running cost rather than the initial or procurement cost itself. For example, when we buy a T-Shirt from a department store, it has a tag price.  In the study of Life Cycle Costing, this is what we called the initial cost of the shirt.  However, once you purchase the shirt, there will still be an additional cost to be spent, such as washing the shirt, the labor of the person who performs the laundry, the cost of detergent, ironing, electricity, water, and other bills.  These things are what we called the running costs so that we can re-use the shirt once more.  In the study of Life Cycle Costing, it is also essential to look not only at its initial cost but as well as the running cost.  There is always a possibility that going for the lower bidder may not be the best course of action unless we have an idea of the running cost of the part being purchase.  Buying cheap is actually expensive, and buying expensive may actually be cheap in the long run.  It is vital to have a balance of this.

1.2.9: Everyone has access to the Storeroom during Peak Hours

THIS IS A WIDESPREAD problem in most industries today, where anyone can access the storeroom whenever the storekeeper signs off for the day since their operation is 24 hours while the storekeeper is from 8:00 to 5:00 pm.  If this is the current practice in your plant, then expect a domino of problems to exist inside the storeroom.  Expect mayhem and chaos every time.  The old saying that honesty is the best policy will not apply to spare parts and the storeroom.  Honesty policy would not be the best strategy to adopt inside the storeroom where all maintenance can have access to get the parts they needed whenever they want, especially