From the Editor: Linking inventory management and asset reliability to improve plant productivity

I just connected on LinkedIn with Shaun Flaharty, director, technical services, Kraft Foods (www.kraft.com) in the Dallas/Fort Worth area. He knows the tangles of inventory and how they’re linked to reliability. “Inventory is cash that's tied up,” he said at the 2013 MRO Materials and Asset Reliability Symposium in St. Charles, Illinois. “Inventory is cash with little value over 90% of the time. Inventory is cash you can't use anywhere else. And inventory covers the flaws of your maintenance program.”

Inventory also has a seemingly organic habit of growing over time, the result of many correctable problems — incomplete bill of materials, no criticality for parts, technical obsolescence, poor failure analysis on parts, loose procurement policies, equipment and part orders based on OEM recommendations instead of internal analysis, and inconsistent naming conventions. “Labor spend and material spend should be within 20% of each other,” he recommended. “When the ratio is off, there are issues with accounting practices or maintenance schemes or stores schemes.”

Flaharty and his team at Kraft looked at parts to wages. “Some plants were 50%, and some were as high as 200%,” he said. “In the plants that were high, we looked at what we needed to do. We developed a kanban system to develop maintenance strategies. We asked them to understand why and when parts are failing. We went to the parts room to see what we're using and built the maintenance strategy around that.”

Mike Bacidore has been an integral part of the Putman Media editorial team since 2007, when he was managing editor of Control Design magazine. Previously, he was editorial director at Hughes Communications and a portfolio manager of the human resources and labor law areas at Wolters Kluwer. Bacidore holds a BA from the University of Illinois and an MBA from Lake Forest Graduate School of Management. He is an award-winning columnist, earning a Gold Regional Award and a Silver National Award from the American Society of Business Publication Editors. He may be reached at 630-467-1300 ext. 444 or [email protected] or check out his Google+ profile.

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Kraft also embraced the P-F curve mentality to identify defects early, plan jobs three to four weeks in advance, get the correct mix of low- and high-priority jobs, and protect maintenance time for all assets by creating maintenance windows.

Here’s where it gets interesting.

Kraft relies on operator involvement. “Cleaning is one thing, but cleaning to inspect is another,” said Flaharty. “We're going down a TPM path; it's a much different prospect than just cleaning. We learn how to inspect when we clean.” Condition monitoring includes vibration for drive trains and infrared thermography for electrical assets, and ultrasonic is used by operators and mechanics.

“Just like safety, 100% planned and scheduled maintenance requires a zero-incident mindset,” said Flaharty. “And reliability requires a 100% planned and scheduled mindset. Protected maintenance time is a requirement.”

Putting theory into practice, Flaharty looked at one of Kraft’s capacity-constrained plants and his team determined what needed to be done to increase reliability from 85% to 93%. “We didn't have to do it overnight,” he explained. “Capital was going to take us 12 to 18 months to install. We set up a series of 11 RCM blitzes. We put a cross-functional team together with mechanics, electricians, and operators, and we dedicated them 100% of the time. If a mechanic was dedicated to our team, that person had to ignore problems that occurred.”

As more and more organizations realize the value of cross-functional teams for improving reliability, what seems counterintuitive is dedicating them exclusively to the team. If they’re no longer operators or mechanics, then they’re no longer cross-functional, are they?

Stores went from turns every year and three months to every eight months. “Reliability requires the right part in the right place at the right time,” explained Flaharty. “Reliability helps to define what the right place and the right time are. Reliability helps you to free up existing cash and helps you not to tie up other cash for the future.”

Inventory and reliability are undeniably linked.

Read Mike Bacidore's monthly column, From the Editor.