Cooperative-model maintenance inventory leads to savings

Lisa Towers asks whether a cooperative model for managing maintenance inventories that can help reduce costs would be right for your organization.

By Lisa Towers, managing editor

As Americans, we tend to value our individuality, a characteristic that defines us as a people. This is especially true in business: Differentiation from competitors is a key selling point in most industries, and it can define a company’s culture as well.

But, what if sharing, cooperating and being on the same page with your competitors could save your company big bucks? Would you be willing to standardize the way you run your maintenance operation — namely, how you inventory your parts — and work with other companies that have the same interests as yours if it would result in significant savings?

Standard Solutions Group (SSG), Sundsvall, Sweden (www.ssg.se), has been using a cooperative model for managing maintenance inventories since 1968, and has delivered big results for a group of Swedish pulp, paper and steel companies. With 40 years of experience under their belts, SSG is looking to expand a larger pilot program within the process industry in Europe — and beyond, and is now working in the mining and steel industries.

Jonas Berggren, CEO of SSG, says the group’s work with the aforementioned pulp and paper plants, and the resultant pooling of their maintenance inventories and use of predictive maintenance management practices reduces capital tied up in maintenance inventory by as much as 68%.

SSG has maintained a database of its customers’ maintenance inventories and keeps track of the availability of more than 550,000 parts. Because these pulp, paper and steel companies are a great distance from many of the suppliers they rely on, there’s a particular benefit in borrowing parts from each others’ inventories rather than facing long periods of downtime should they need a replacement in a jiffy.

In addition to the efficiencies gained from sharing, SSG also has armed itself with predictive maintenance technology. Two years ago, the group began a pilot program to integrate its shared maintenance inventory database with the predictive maintenance functionality within IFS Applications (www.ifsworld.com/us/).

“The atmosphere in Sweden is unique,” says IFS Global Industry Director Anders Lif. “Pulp and paper is expensive to export, and the market is far away. This is a great example of an organization that has made it possible to share hard work and investment in areas where you really don’t need to compete.” Technicians access maintenance data through a portal on SSG’s Web site, which allows them to see other mills’ inventory.

To eliminate any confusion, they use a spare parts naming standard based on the United Nations Standard Products and Services Code (UNSPSC, www.unspsc.org) so participating companies can mask their naming standards. Each mill can see which spare parts are in the collective inventory because they use the same naming conventions. “The standard is stronger the more companies accept it,” Lif says.

SSG and IFS are extending their efforts outside the pulp and paper industry. “Steel and mining, for example, don’t have the same culture as the pulp and paper industry,” Berggren says. “It’s a new way of thinking; you have to want to cooperate. But it’s a very good system to provide benefits to the end customer.” Lif adds, “In Sweden, there are flat organizations and everyone is used to sharing. You’re almost naïve when you come out into the rest of the world. Sharing information is just positive for everyone involved, but you have to trust each other. You have to have buy-in from the major companies involved.” The result can be dramatically lower cost without compromising your service level or security level, Berggren says.

The two-year feasibility study, which began in 2005 and included three Swedish pulp and paper companies, gleaned an average cost savings of 57% for certain inventory parts, minimum cost savings of 49% and a total reduction of 68% in working capital tied up in maintenance inventory. SSG is ramping up to a larger pilot that it began working on this year.

Berggren acknowledges that not every industry will be amenable to this level of cooperation. “In some industries, there could be cultural issues with this type of collaborative model,” he says. The benefits are numerous, but are they enough to overcome our tendency as Americans, and industry, to want to go it alone?

E-mail Managing Editor Lisa Towers at ltowers@putman.net.

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