MRO Q&A: How to minimize cost of taking inventory

June 5, 2012
MRO Q&A is a Food Processing series addressing maintenance, repair and operational issues in food plants.

Q: We are a small company, and every year accounting needs a physical inventory of our unmanned parts storeroom and, as a result, a significant adjustment is made to our maintenance budget. Is there an alternative to eliminate or minimize this?

A: I can see how this could be problematic, especially when adjustments are made at the end of the year that could result in a negative impact to your budget. Short of using RFID tags on all parts in your unmanned storeroom and having them automatically scanned as they exit or installing a camera system, there is no silver bullet that will eliminate the adjustment

There is one technique, however, you may want to consider. It is called “cycle counting.” It helps minimize the annual adjustment needed by having mini inventories done at shorter increments. It also helps you manage your inventory better because it is easier to remember what costly parts were used within a shorter duration as opposed to within the last year. Here’s one scenario on how it can work:

You take the total number of parts in your storeroom and identify the ones that have not been used for the past three years (your choice of number of years). Then, take this list and determine which of these parts are “insurance parts” that you need to have on hand -- typically high-cost items used infrequently, but would cause major production downtime if you didn’t have them. Excluding the insurance parts, you subtract the slow usage items from the overall total parts. Now, depending upon how much control of your inventory you wish to have, you choose the number of weeks this number will be divided by. The resulting number will be the number of parts you will need to inventory each week.

You might initially try a certain frequency and see how it works for you. If this doesn’t work, you can make adjustments to suit your needs. A good rule of thumb is to reconcile your inventory once every 13 weeks in order to make changes in the min/max levels for individual parts.

This technique is no substitute for having a formal parts check-out procedure for controlling inventory removals, but it will reduce the major need for overtime that is normally needed to inventory a complete storeroom in a short period of time over a holiday. It will reduce the impact of adjustments and also allow you to better manage your parts usage.

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