Imagine a maintenance technician finding the part they need on-site, allowing them to start on a work order right away. Now imagine the same tech needing the same part, but this time the part is two days away in a vendor’s warehouse.

Which will cost you more money, having the part on-site on time or not?

If you’re using basic inventory tracking, or none at all, you’ll probably say it’s better to have the part on-site. Time is money. But that’s not always the right answer. Sometimes not having a part in inventory saves money, even after factoring in a two-day wait every time you need it. How is this possible?

Carrying Inventory Costs a Lot

Getting inventory costs you money. The process requires :

  • Time and energy to track down vendors and negotiate prices.
  • Transportation costs to get the parts to your facilities.
  • Legal or processing fees to ship across borders or comply with regulations.

And then keeping that inventory costs you money, too. Inventory carrying costs come from :

  • Maintaining the physical space required for storage.
  • Losing opportunities to invest in training or new equipment because the department’s budget is tied up in inventory.
  • Suffering depreciation, as parts are lost to corrosion, obsoleteness, and degradation.

These costs, also called “holding costs,” add up quickly. Across industries, they’re usually 20% to 30% of the value of a company’s inventory. If a part is large, expensive, degrades quickly, or is “slow-moving,” which means you rarely if ever need it, and non-critical, the cost of carrying it in inventory could easily be more than the cost of having to wait to get it.

Lowering Inventory Costs is the Goal

Now that we know what carrying costs are, we can see that in maintenance management, it’s best to have the absolute smallest amount of inventory that still allows your department to keep the facilities up and running.

But optimizing inventory is challenging, and many maintenance departments struggle. Even though they have a lot of money invested in inventory, annually only about 8% to 10% of inventory is ever used, according to Wally Wilson, an expert in plant management with over 30 years of experience at Fortune 500 companies.

Inventory management for facilities maintenance that is both lean and responsive is possible. The key is to get your computerized maintenance management software to do all the heavy lifting for you.

Benefits of Tracking Inventory with a CMMS

Cloud-based CMMS for inventory tracking gives you two core capabilities. With a CMMS, you can :

  • Maintain current information for all your parts, including vendor prices and lead times as well as exact inventory levels and locations.
  • Make this information available to everyone who needs it, in real time, no matter where they are.

Let’s look at some of the ways CMMS can help you to lower inventory costs.

Finds the Sweet Spot

CMMS software can hold all stock levels, keeping them up to date by tracking their use through work orders. Over time, this data can be used to establish optimal stock levels. By looking at how often you need a part and how long it takes to order replacements, you can calculate a reorder point.

Once inventory levels for a part dips below this point, you can set the CMMS to send you an alert. 

Just in Time Deliveries

Parts for scheduled preventive maintenance are ordered only when they are needed. Instead of collecting dust on shelves, the parts arrive just before the work is scheduled to begin. This also ensures that you’re using the most latest versions of parts. If the product is perishable, it ensures you’re not using something that’s past its best-before date.

Tracks Vendors and Suppliers

CMMS software can also keep records of all your vendors, including their current price lists and lead times.

Knowing current prices allows you to stock up when prices are down, while knowing lead times allows you to hold back when lead times shorten and it makes more sense to let your supplier shoulder the cost of holding the parts for you.

Divides the Risks

A cloud-based CMMS allows you to maintain a shared virtual warehouse of parts across several locations, where technicians can quickly see what’s available at each site.

If a tech doesn’t have a part they need, they can check other facilities before placing an order with a vendor located further away. This gets parts more quickly to where they are needed, and also helps ensure old inventory is used before new orders are placed.

Communication among various locations is important not only for parts that are critical to keep a facility running but also for the ones which are expensive and rarely required. Instead of having duplicates of expensive inventory at each location, you can keep one where it’s cheapest to store, and move it to where you need it, when you need it.

Avoids Waste

CMMS inventory tracking allows you to track not only where parts are, but also how long they have been there. Technicians now use inventory according to “first in, first out,” and parts and materials are not lost to depreciation.

Information about how parts and materials should be stored can also be added to the CMMS software (also known as facility management software). This helps the maintenance department store inventory so it lasts for as long as possible.

Taking the First Steps

Implementing a new system can be daunting, because it’s often hard to know even where to start from. But when a maintenance department wants to take control of its inventory, the first steps are clear. To be successful at inventory management, you must maintain up-to-date records of the parts that the maintenance department has in inventory and then make those records accessible to managers and technicians in real time and from anywhere. CMMS’s features gives you these capabilities, and over time, all the benefits that can be leveraged from them.

About The Author

Jonathan Davis

Jonathan has been covering asset management, maintenance software, and SaaS solutions since joining Hippo CMMS. Prior to that, he wrote for textbooks and video games.
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