Lean Six Sigma

Get your stuff together: A road map for a better storeroom (Part 1)

In Part 1 of this two-part series, learn how to build a more-effective storeroom.

By John Ross, CMRP, Marshall Institute

“Even if you know where you’re going, you’re still lost if you don’t know where you are,” my colleague Earl Porter told me years ago. Earl and I had been assessing the preventive maintenance program at a client’s site. Those words rang true then, and they still carry a lot of weight in our reliability work today.

It’s been a few years since Earl and I worked on that assignment, but I’ve never looked at another client the same way since. Think about it: We usually have a sense of where we want to be, but the direction to get there is unknown unless we know from where we’re starting.

Two years ago, we sat down to create a road map: a visual representation of what makes up a world-class storeroom. The genesis of this need was the simple fact that companies can’t build a clear route to a world-class storeroom without establishing where they are presently.

The road map to a world-class storeroom looks like most road maps; it has sections and coordinates. The first task is to become effective in your storeroom practices and processes; the next is to become efficient. Without this basic tenet, companies run the risk of becoming very efficient at being ineffective: not an envious detour.

There are no shortcuts here; you need to become effective at a foundational level and then drive toward intermediate and advanced levels.

When I’m determining where a storeroom is on the map, I don’t proceed until I’m certain everything behind me is solid. This prevents me from making a U-turn, or in continuous-improvement terms, from “backsliding.”

This month and next, we’ll examine each sector on the road map to a world-class storeroom. Here, in part 1, we’ll focus on the journey to effectiveness. Next month, we’ll explore storeroom efficiency in more detail.

The first grid is the intersection of Foundational-Effective.

The processes and practices within these coordinates are:

  • Defined space
  • Physical organization
  • Security
  • New item setup
  • Ordering parts
  • Receiving
  • Issuing

An effective storeroom must have a defined space. This is a location that clearly and unambiguously denotes the areas considered the storeroom.

The storeroom manages the items within its control. This must be made clear: Only items in direct support of assets currently in the plant will be kept in the storeroom. If any other entity wants to hold onto something “just in case,” it will not be stored in the storeroom.

Also foundational to storeroom success: There must be a defined physical organization, and someone must be identified as being in charge. Remember, too, that one can’t expect full-time results with part-time help.

With regard to security, there is a very simple proverb that governs this tenet of creating an effective storeroom: A storeroom’s inventory accuracy will never (and I mean NEVER) be greater than its ability to protect what it already stocks. Securing the storeroom and its million-dollar inventory is paramount to having solid inventory accuracy.

The maintenance organization has the primary responsibility for telling the storeroom what items to stock and in what quantity. It is up to the storeroom to use its tools and formulas to maintain that stock. For items to be installed as stocked items, the request and the part specifications need to be formally submitted in writing.

A new-item setup form will be submitted by the requestor and will include, as a minimum, the following information:

  • Nomenclature
  • Where the item will be used
  • Manufacturer part number
  • Supplier part number
  • Suggested supplier information
  • Unit of issue
  • Physical size
  • Suggested quantity to stock (min/max or otherwise)
  • Cost
  • Suggested reorder point
  • Suggested reorder quantity

For the nomenclature, I suggest you consider this format or something similar to it:

Format – Noun: Attribute, specifications, further detail
Example – Bushing: Dodge Taper-Locking, 2517, 2 3/16

Most industries utilize some sort of materials requirement planning (MRP) for the automatic process of ordering parts. Commonly, when the inventory is established for a certain item, the reorder point and the reorder quantity are determined.

When stock levels match or go below the reorder point, then a purchase requisition is automatically generated for the reorder quantity. This is ideal. I still believe in some human interaction, and I recommend that the stores supervisor reviews the listing of computer-generated orders to confirm what is being ordered.

There are other instances when a part is not stocked and needs to be ordered or where an item is stocked but at 0/0 levels and has to be ordered when required. Ordering items that are not stocked items must be done with attention to the specifications of the part to facilitate the receipt of the correct item.

When receiving parts from various suppliers and vendors, it’s critical to confirm that there are no obvious signs of damage, that the delivery is accompanied by a bill of lading or other shipping document, and that the content of the package matches the information on the shipping documents. Next, the shipment must be reconciled with the purchase order. Proper reconciliation will ensure that what was ordered was what was received and paid for.

There is one guiding principle when issuing parts from the storeroom: Stocked parts will be issued only against a valid work order. Under no circumstances will a part be issued without accompanying a work order. Many personnel will say that for emergency work, we should do the work first and the paperwork later. But there are no emergencies that cannot allow an extra two minutes to create a work order to track labor, material, processes, and other circumstances. A highly performing storeroom should and will have the ability to generate a work order in the time of great need.

Our road map will lead us forward to the next grid, which involves the principles that make our storeroom Intermediate-Effective.

This intersection involves:

  • Return to stock
  • Return to supplier
  • ABC classification
  • Cycle counting
  • Emergency procurement
  • Inventory accuracy
  • Inventory service level

{pb}

I would like to knock out emergency procurement right away. Let’s be honest: Emergency procurement is always going to be a part of doing business. I just suggest it not be our default process. I want an emergency procurement process to be easy enough to accomplish in a pinch but painful enough that we never want to do it.

Often, in an emergency we don’t even have a work order. In a crisis, we don’t do our best work, but instead we do our most creative work. I recommend that emergency purchases have plant manager approval. Making the process somewhat painful (yet doable) may help to tamp down the number of emergency purchases.

A return-to-stock transaction occurs when a previously issued part is returned to the storeroom for restocking. There are a few cardinal rules regarding this process; they are simple, yet vital. The part being returned must have first been issued out of the storeroom through a valid work order and must actually be an item that is normally held as on-hand inventory.

Do not accept for restock any item that was not actually issued out of the storeroom, and do not restock any item that does not already exist as on-hand stock.

The return-to-supplier process serves a great value in helping to recoup costs associated with inventory that no longer provides a value to the organization. This could refer to obsolete, excess, or even salvaged items.

Returning parts to the supplier is often accompanied by a restocking fee. I have found that if we have been good customers and easy to do business with, our best vendors will defer this restocking fee.

ABC classification and cycle counting go pretty much hand in hand. In most facilities, there is typically a group or grouping of equipment types with functions that have a recognizable and agreeable level of criticality or importance. Likewise, the components and items in the storeroom have similar levels of importance. ABC classification gives us an indication of how much we care about the item. I don’t mean to be cavalier about the value of parts in the storeroom, but there is a degree to which we ensure stock is available.

There are many schools of thought on how to break out the ABC classification:

  • by criticality of the equipment the part is assigned to
  • by the dollar value of the part
  • by the number of times the part issues from the storeroom

Some CMMS systems use a combination of the number of times the part is issued and the part’s cost. With respect to a distribution of classification, the following is a good rule of thumb:

  • 15% of your SKUs are ‘A’ items
  • 35% of your SKUs are ‘B’ items   
  • 50% of your SKUs are ‘C’ items

Once you’ve divided your parts into classifications, cycle counting will become that much easier. Counting all of your inventory twice a year can be accomplished when you count a little bit every day. Try this:

  • Count A items once every 30 days
  • Count B items once every 90 days
  • Count C items once every 180 days
  • Count critical spare items once every week

Two relevant key performance indicators include inventory accuracy and inventory service level.

Assume an inventory accuracy goal of 98%. Calculate your inventory accuracy as follows:

(Number of line items counted with a correct inventory count × 100) / (Number of line items counted, in total)

This is a lagging indicator that tells us whether our processes are working. The processes we want to measure as “leading indicators” are cycle counting, issuing, and receiving. We’ll be discussing these later.

Now assume an inventory service level goal of 97%. This is sometimes measured by “stockouts.” Calculate your inventory service level as follows:

(Number of requested items needed and successfully issued at the time of request × 100) / (Number of requested items, in total)

For service level, there are a few caveats. First, the requested item has to be needed and not simply wanted: That makes a big difference. Second, the item must have been requested to be stocked in the first place in a quantity that would handle normal needs.

This is also a lagging indicator. The leading indicators we want to measure are receiving, issuing, and some work-order planning metrics (a work order should list the items that are needed for the job), also some kitting metrics.

Here our roadmap takes a slight detour to the next grid, Foundational-Efficient.

This intersection involves:

  • Stores stock committee
  • Kitting
  • Data scrubbing

The stores stock committee is the alpha and the omega of the storeroom decision enterprise. Its membership consists of the storeroom users: those recently self-identified as the “victims” of the storeroom.

The stores stock committee has great responsibility to make consequential decisions. The most notable would include:

  • Inventory value level
  • Key performance indicators
  • Staffing
  • What to stock on-hand and what not to stock
  • Critical spare-parts definition
  • Cycle counting quotas

Kitting in the maintenance-storeroom sense is meant to eliminate or at least to reduce one of the major forms of waste in a reliability effort: searching for and/or obtaining the necessary parts for planned maintenance repair.

Of significant note is the point that kits are developed for planned maintenance activities. The parts to be assembled in the kit are listed by the maintenance planner on a pick list. Stores use this list to identify the type and quantity of part needed. These kits should be shelved with the work order number annotated on the container.

When do you kit the parts? The two schools of thought on this topic are kitting the part as soon as the planner develops the pick list as part of the process of building the job plan, or kitting the parts once the job is committed to the weekly schedule.

Data scrubbing is a strategic practice to confirm that the information contained in the item master for the stocked item is correct, relevant, complete, and up to date. Item masters vary from CMMS to CMMS, but usually the information contained within is typical and would take on the form of requiring some specific data:

  • Identification number for each item
  • Description of item using NAICS format
  • Manufacturer’s name and number
  • Primary supplier and supplier number
  • Unit cost
  • Unit of measure
  • ABC classification
  • Ordering information—order point, order quantity, lead time
  • Quantity on hand
  • Where used

These three map sections are critical and necessary to build our world-class storeroom. Next month, we’ll complete our journey. Until then, safe travels.