Does this scenario sound familiar?
Rotable parts are a small portion of your inventory, yet they make up a significant amount of your inventory value. Yes, rotable parts are expensive. If they weren’t expensive, you wouldn’t bother repairing them. So you expect these parts to have a high inventory value, but it seems un-proportionally high. The non-rotable inventory is managed by your ERP. However, this system does not have the functionality to manage your rotable parts efficiently. As a result, a few members of your team that have been with the company a long time manually manage the parts. The service is not too bad but the inventory is too high.
There must be an opportunity to lower the cost of carrying rotable parts.
At Syncron, we work with lots of companies that manage rotable inventory. Common problems managing this inventory include:
- Ensuring that new parts aren’t ordered to replace parts that are out for repair
- Deciding when to purchase replacement parts and scrap the repairable parts
- Managing the purchasing process
- Sizing the safety stock correctly to meet the target service level, without carrying unnecessary, expensive stock
Most primary ERP-systems do not effectively support rotable parts management. However, there are best-of-breed systems, like Syncron, that do offer sophisticated rotable parts management.
Don’t get me wrong, your staff has done a good job manually managing your rotable inventory. But, it is not possible to manually optimize the inventory of thousands of parts. As a result, your service level is less than ideal or you end up carrying too much inventory. Typically, manual rotable management creates both low service and high inventory.
Rotable parts inventory management
Good inventory management starts with forecasting and forecasting rotable parts is no different from forecasting other parts. Highly sophisticated statistical analysis will predict future demand for rotables in the same way as for other parts.
The big difference comes in the inventory optimization of rotable parts. This becomes far more difficult than for non-rotable parts as you wish to repair parts as long as possible but at the same time you have to predict the repair efficiency and maintain a correct size of the rotables pool by ordering new parts from your supplier before it is too late.
A good rotable inventory management system can optimize your inventory and lower your costs, while meeting your target service. The system will do this by keeping track of where the un-serviceable parts are in your supply chain and including repair workshop efficiency in the planning. Customer return efficiency is also considered to ensure that there are enough rotable parts available. With good system support, your team can focus on the exceptions instead of trying to manually manage rotable parts.
As a result, your customers receive better service, you have lower inventory costs and your team has the much needed system support to use their time effectively.