Not all storerooms were run efficiently before the COVID-19 pandemic. However, supply chain challenges related to the pandemic are complicating people’s best efforts to both maintain inventory as well as a well-run storeroom.
Jeff Shiver, CMRP, CRL, is president and CEO of People and Processes Inc., a Yulee, FL-based consulting and education services firm that guides organizations to achieve maintenance and reliability best practices globally. He also is the author of the Plant Services blog “Ask Jeff” (https://www.plantservices.com/blogs/ask-jeff). Editor in Chief Thomas Wilk sat down recently with Jeff to discuss the connection between reliability and good storeroom management, as well as how to overcome internal and external challenges to a well-run storeroom.
PS: You and I have been colleagues and friends for several years now. For those who don’t know you as well as I do, could you tell us a little bit about yourself and People and Processes, and especially why storeroom is an area of interest for you?
JS: I sincerely appreciate the opportunity to share the storeroom experiences that we have. Relative to my personal experience, I started my career as a practitioner, performing maintenance and reliability best practices. I should say, I didn’t start with the best practices, but I came upon that knowledge through education and personal development.
As part of that, I’m a Certified Maintenance and Reliability Practitioner (CMRP) through the Society for Maintenance and Reliability Practitioners. Through Mobius Institute, I have the Mobius Asset Reliability Practitioner certifications. I have the Association for Facilities Engineering CPMM, the Certified Professional Maintenance Manager certification. Also, I hold the Machinery Lubrication Technician I to understand more about lubrication practices. So, well versed.
I started my career at Procter and Gamble, then moved to IBM, and from there, spent 20 years in Mars. So, Snickers, Skittles, Pedigree, Whiskas, Waltham, all those brands. And relative to that, I held many different roles, everything from reliability technician, controls technician, controls engineer, maintenance manager, manufacturing application development manager, and operations manager. So, quite diverse, worked in four different plants, held two different corporate roles as well. As a maintenance manager, I transitioned the organization from reactive to proactive.
That’s really where the storeroom became important to me, more so than I realized. I started learning more about how maintenance impacted the storeroom and especially from an engineering perspective as well. I was one of those people who had to have the latest technologies. Often, we didn’t wait for the beta of something; we took the alpha, literally, while the company was developing it. I didn’t realize the impact that I had on the storeroom regarding parts standardization and training of the maintenance technicians. However, I came to learn that when I took the maintenance management role, it became very impactful. And studies have shown as much as 32% of downtime was related to not having the right parts and materials in the storeroom necessary to perform the work and keep the plant running.
PS:That 32% can only be growing right now. That’s one of the things that we keep hearing from people on the ground, is that lead times are just extending outward like crazy, and they’re unpredictable. Parts availability is just not what it used to be. You’ve been really busy this year visiting plants, so based on what you’re hearing in the field, can you tell us a little bit about how these hiccups in supply chain are impacting the way that storerooms are being run?
JS: Yes, it’s really a mixed bag. And what do we mean by that? For example, regarding the storerooms, you’re right, a lot of extensions of lead times. I follow other industries outside of the normal ones that we do maintenance and reliability consulting with. Allocations are being given out, materials rationed, things like that. It’s quite an interesting thing.
Before the pandemic began, PPE might have been 5% to 10% of what might be carried in the storeroom. Now that number, especially during the height of the pandemic, went up significantly. You couldn’t get the materials. Of course, the cost was so much higher, and then you saw the tapering off of the prices as things improved.
Now, unfortunately, we’re going back into some of that as well, so you’re seeing increased levels coming back up. We saw a reduction in pricing as part of that, too, as the supply finally was able to catch up with demand, so you’re able to get back to some normal levels of pricing. But to your point, around materials themselves, it’s still a very much almost day-to-day scenario.
I get an opportunity to see many storerooms, and at People and Processes, we do consulting, and education around storerooms. We teach the classes for the University of Tennessee Reliability and Maintainability Center. One of the interesting things, I think, is that most people assume that many organizations have their storeroom practices in place. The reality is, we go to many organizations that have no formal storeroom processes.
I was in a plant last week, it was out of the country, and they started up the plant as a new plant two years ago. And now they’re just starting to catalog their inventory and get it in SAP—two years later. I was in a different site three months ago at most, and they had no storeroom processes whatsoever. The storeroom wasn’t cataloged, none of the inventory was in the system.
I did an on-site storeroom class for a group, some months before that, with five plants. And across all five plants, no storeroom processes were in place. As a matter of fact, they didn’t even have a physical storage location for the storeroom parts themselves in one location. They were lying in boxes in the middle of the floor. The plant had been around for a long time. So, it’s interesting to see the high-level, top-end storerooms, and then you see organizations with absolutely nothing.
PS: What’s the general difference in performance that you see between the top-end storerooms and the ones that are, like you said, the extreme cases where you might simply have boxes in the middle of the floor? Is it an issue of more downtime, longer downtime, longer unplanned downtimes?
JS: Typically, when you have storerooms that are not well-managed, you tend to have a lot of reactivity. And it goes hand in hand because when we talk about the role that maintenance plays in the stockroom, you have organizations with great processes, and then you have organizations with nothing. Relative to that, you’ll see that the organizations that tend to have the higher level in the storeroom practices from a process perspective tend to be a lot more proactive. Not to say they’re world-class by any stretch, but it goes hand in hand, and you have the partnerships that are established as well to make that successful.
When I was a maintenance manager, we had a pretty good storeroom process, and we happened to get maintenance to take ownership of the stockroom. We got maintenance to do it across the corporation at all the sites. It was interesting because accounting came to us, and said, “Hey Jeff, you guys know nothing about the storeroom.” “I wouldn’t say that, but I mean, we have not been doing it forever.” The storeroom’s primary customer is maintenance at the end of the day, so how do we build that partnership?
Procurement was more than happy to give it to us, which I thought was interesting, and later I found out why. We were a few months into the actual ownership of the storeroom. All the technicians, we called them parts coordinators, storeroom clerks, reported to maintenance. The buyer reported to procurement, and rightly so. It made sense, but that person was located in the storeroom.
It was only probably three months in, and we started getting all these variances. You shouldn’t see many variances: the organization paid to put that part in the stockroom. As you check it out, that money’s taken off against the work order to that particular cost center. Then that money is replaced to buy that part. You’ll have some variance, and you’ll have shipping costs, things like that. We noticed some huge swings, and we started digging in.
There’s always the push to reduce inventory value. As part of that, the person who ran the storeroom on the procurement side had done exactly that. They reduced the value— but they didn’t get rid of the parts. We had to go back and reprice 5,000 parts that were priced at $1 or one penny. They received great accolades that they had reduced inventory value and became a role model, but the reality was that the parts were still there.
When we bought the part, say a $2,500 gearbox, we had to make that up because now we had a huge variance. It wasn’t just inflationary costs or something like that. How they covered that for all those years, I don’t know. That person had long been moved to the national office and then retired. It was just amazing how that happened.
I have lots of stories like that. You never know what you’re going to get until you get in there and figure that out. It took us probably about three months to figure that out, so it was quite interesting from that standpoint.
PS: What are some things that your average MRO team can do to make a positive impact when it comes to the storeroom? Like you said, they don’t always own the storeroom, but it sounds like there’s things that they can do to focus their efforts and make a positive difference, and push for more proactivity.
JS: First off, the challenge is to have business processes. Most organizations we go to don’t. If you ask the question: “Show me your graphical workflows, and RACI charts (RACI being responsibility, accountability, support or consult, and then information),” you are met with blank looks. With these we are defining the roles and responsibilities.
So, the first step, is to document those processes: How do you do your work? What are your ways of working? And then relative to that, how do you examine your processes and determine how can I improve this? How can I optimize this flow? A goal is to systematize to make your job easier.
In some cases, we do consignment inventory as part of the reason for doing that, too. We can reduce our inventory values down, and at the same time, let someone else hold the inventory. The same thing with vendor-managed and vending machines, for example, that you would find from supply houses. They stock the machines, and they keep up with the inventory, so it makes your job easier from that standpoint.
When we map the processes, we learn about duplication of tasks and other things. I was on one site, teaching the storeroom class. Because of the way the course was structured, we were able to go in and walk down some of the processes. We went into their receiving area, which was a separate warehouse in a different building from the storeroom. I walked through their processes. And they would try to tell me the process verbally, and I said, “No, no. Show me. Show me.”
As we walked them down, we left that warehouse building and went over to stockroom inside the plant. As we walked through the processes, they were duplicating work. We asked, “Why in the world are you doing this? You’ve already done it over here in the warehouse. Now, why would you want to come back over here and do it again? You’re wasting all that effort.” It was eye-opening for them.
I was on another site, and the scheduler would go to buy non-stock parts. In some cases, they would be parts to put into the storeroom. They would be required to get three different price quotes from the vendors. With the show-me approach, I said, “Okay, let’s walk this down.” The scheduler carried the requisition and three quotes into the buyer’s office in the storeroom. He walked out. I said to the buyer, “Okay, now show me what you do with it.”
The storeroom buyer took all three quotes and dropped them in the trash can. I said, “What?” He said, “I have handshake relationships with the vendors that I buy from, and I just ignore those quotes.” I’m like, “But why are we doing this? Why do we spend all this time getting these quotations from all these vendors, and upsetting the vendors, because they never get the order? You know the order is going to somebody else, and at the same time, we’ve wasted the scheduler’s time?” It’s a great example of how we make sure that we’re doing what we say we think we’re doing. How do we build those processes out to truly understand our objective? That’s just one piece.
In most systems, when you look at the system itself, you find that the lead times are wrong, the inventory values are wrong, or we’re not cycle counting well. Some of that has to do with whether we expense the inventory or we capitalize the inventory. If the inventory is capitalized, there’s a push from the accounting side to understand the value and account for it as an asset. Controls are put in place. It’s top of mind, which is a simple way to say it. If you expense inventory, accounting may say, “Well, that money is spent. You know, we’ve taken that hit. At this point, we don’t care about it anymore.” It’s out of sight, out of mind. And that’s when you typically don’t have good practices in the storeroom.
In some organizations, they’ll set a threshold and say, “Anything that’s above $1,000, we’re going to capitalize. Anything below $1,000, we’re not.” And again, there are many parts that you can spend money on for less than $1,000 that you won’t understand usage or how they impact the site. One of the challenges for you is the critical spare parts. You may have a critical specialty item that costs way less than $1,000, and you must manage that the same way as you would any asset that costs $20,000, because it could shut your plant down. In these pandemic times, concerning lead times earlier, it may shut it down for an extended period, so you have to think through that as well.
Other things would be, what are the real goals and objectives of the storeroom? What are you trying to achieve? Ultimately, are we all headed in the same direction? Think about layout: which items turn the most? You want those closest to the window or to the door where people access them. Things like the critical spare that you may have never, ever issued in the entire life of the storeroom, should go to the back. That way, you think about the Seven Wastes of Lean, those concepts—how do we maximize what we’re doing? How do the products flow as they move through the stockroom? What do we do with rebuilds? Again: layout, processes, data.
There’s been much effort, especially in the top-tier storerooms, to mine the data. It is truly understanding what parts are moving, which parts are not? How do we optimize the stocking levels? That should be a continuous process. It’s not just about reducing inventory as some inventory levels are increasing due to the pandemic-driven supply chain gaps.
Groups have been looking and saying, “Do we need to stock this? At what level? And do we have secondary suppliers? What are some options?” as an example to minimize the time across the Pacific. A part may cost more—and it’s also not about the least cost—but it may be more readily available by spending those additional few dollars. That makes sense because now your lead time is significantly reduced, and therefore you have less inventory you have to carry. So, it’s always not about the least cost; it’s about the best value overall.
This story originally appeared in the October 2021 issue of Plant Services. Subscribe to Plant Services here.