- There is often hidden value in plain sight
- No need to invest in new software or equipment
- Leverage what you have to derive value
This is the first of a multi-part series intended to focus on improved leverage and utilization of systems that are typically already in place. The discussions are intended to be systems agnostic. Our discussions will focus on processes and change management. At the end of the series a new opportunity will be presented that may change the way CMMS/Asset management software is utilized.
First of all, let me pose one question: What percentage of utilization do you think you have for your CMMS/EAM system? If you are like most organizations, some analyst’s studies have indicated that most companies use less than 40% of their current CMMS/EAM capabilities and in many cases less than 10 percent.
Your CMMS/EAM arrived with great expectations. Management was convinced they would soon see results in the form of cost savings, productivity gains and have a better handle on asset management. The unfortunate reality is typically the results senior management was expecting, are not occurring because the system is underutilized. 50-75%% of CMMS Systems are deemed have failed.
After 25 years of experience in the process of managing implementation processes, we have documented ten consistent reasons why systems fail.
We will cover this in depth in a future blog.
Parts and Material Inventory:
One function that is widely ignored and underutilized is the Parts & Materials Inventory Processes. And why is that? After over 25 years of working with clients and assisting in the selection and implementation of CMMS systems I conclude:
- There is simply a miss-understanding of the risk/reward ratio.
- There has been a lack of clear documentation and focus on what is required to achieve benefits.
- There is a lack of understanding of the importance of the change management processes.
In this series, we intend to address these issues directly. So let me start by providing a high level overview of potential benefits and value. The business case for implementing a progressive Parts and Material Inventory Process system includes at least three major areas of key benefits:
1. Simplify and Improve Service Delivery .
How did a major research university accomplish the following?
- Increase the actual amount of technicians’ “wrench time” on equipment.
- Improve customer perception of reliability , and
- Raise the completion rate of preventive maintenance work orders?
And how did they do this?
Facilities Management Services (FMS) at University of Southern California (USC) simply changed its service paradigm. Instead of technicians being responsible for hunting down parts and supplies, parts and supplies were brought to them. Technicians spent more than 10% of their time gathering parts and materials to perform work and this caused inaccuracies in work completion estimates. With this information the FMS senior management team decided to redesign the parts and materials handling process. The net effect was a 10% increase in staff productivity as documented in the CMMS System. No small accomplishment in times of cost control and staff reduction.
In a future blog we will describe this Case Study in greater detail.
2. Reduction in inventory investment:
Sad but true, we find that in many cases organizations simply do not have a reliable metric on how much inventory is on hand. This is often due to “open stockroom” policies, multiple official and un-official stock points and most commonly, lack of attention and focus on supporting policies, procedures and processes.
It is not uncommon for us to see investment levels approaching and exceeding seven figures. Stock levels often are a reflection of perceived needs as opposed to statistical inventory management metrics. We have typically seen savings in the 20%-25% range, thereby releasing capital for use in other areas. This accomplished by the following:
- Graphic documentation of the important inventory work processes.
- Identification of critical steps, decision points and milestones impacting process effectiveness and cycle time.
- Identification of strengths and best practices which deliver a high level of customer service and productivity and/or support best practices.
- Analysis to determine inconsistencies which would inhibit the ability of the current practices to deliver reliable inventory accounting.
In a future blog we will describe this process in greater detail.
3. Carrying Costs:
The cost of maintenance inventory is made up of several components. There is the actual purchase price of the parts and materials which are to be kept on hand. But, then there are other costs to be considered.
· First, the administrative and staff costs of purchasing, handling deliveries, shelving materials when they arrive, tracking assets kept on hand, and dispensing them when requested.
· Second, there is the cost of the storage space, shelving, bins, tanks, or other receptacles which are necessary to maintain the parts and materials in an orderly and accessible manner.
· Third, there is the cost of money embedded in the hard goods (or liquid/gas goods) in stock. This monetary cost would also have to include the cost of any shrinkage.
· Fourth there are losses which are due to inventory either outliving its shelf life or otherwise becoming obsolete and ultimately being discarded.
Adding all these costs together can elevate the cost of parts and materials to a level that is second only to the actual labor costs of performing maintenance. It is estimated that with excellent inventory and stock handling practices, the annual cost of carrying a million dollars of inventory could be as much as an additional $300,000. This number could increase dramatically if the processes and practices are not efficient and effective.
In a future blog we will describe this process in greater detail.
Summary:
So, as you can see, there are tremendous opportunities for service improvement, productivity increases, reduction in inventory investments and reduction in carrying costs for the inventory processes. And, this can be accomplished without significant capital investment and by leveraging current technology investments in place.
In this series, we will explore each of these areas more deeply to examine costs, benefits and the change management issues involved. In the meantime, we are curious and interested in your reactions. We look forward to hearing from you. Please share your experiences as we all advance the conversation in this area.