High Velocity, High-Tech Service Parts Logistics: Inventory Management

Inventory Accuracy

To maintain mission-critical SLAs for a global install base, forward stocking locations strategically positioned worldwide must be available. These locations should hold adequate levels of service parts that correspond with the unique needs of each client and their end users. The amount and types of parts in stock are based on an understanding of the install base of equipment, demand history, failure rates, repair cycle and usage levels for each unit. There is a p

lanning element to make these determinations, which is based on data supplied by the mission-critical 3PL partner that manages the parts. To be effective, any technology, service or OEM organization must use this information to dictate which parts need to be where and how often replenishment should take place.

It is impractical and cost prohibitive to carry a full arsenal of service parts in each stocking location. A specialized 3PL can help determine the level of parts needed by location so that assets can be maximized. Money is wasted when too much inventory is stocked; conversely, service obligations can’t be met in a timely fashion if there are too few parts available. It is extremely important to manage this delicate balance to control costs, and this is an area where a service parts expert provides a competitive advantage.

Regular cycle counts of on-hand inventory at forward stocking locations will ensure items in stock correspond with the inventory management system. For mission-critical urgency, it is advisable to conduct these counts at least weekly to ensure parts are available when needed, before the pressure of expedited fulfillment becomes reality.

Physical Inventories

The more parts held and the more frequently they move, the greater the opportunity for human and/or system error. Accordingly, tight controls are required. In addition to regular cycle counts, which are a component of day-to-day operations, physical inventories should take place at least annually for additional validation.

Physical on-hand part checks act as another layer of quality control and serve as a baseline for routine cycle counts. They are also significant for financial operations to determine exactly what assets are on hand for accounting and compliance purposes. This is of particular importance to publicly held companies that must adhere to Sarbanes-Oxley regulations.

Although the process can be labor intensive and expensive, performing a physical count is essential to correct misalignment between on-hand inventory and the records of the inventory management system. They are extremely important when inventory is constantly moving at an accelerated pace.

With this in mind, physical inventories should take place as quickly and efficiently as possible when there is minimal inventory movement, such as during off hours, to help avoid the need for additional reconciliation. For the count to be as credible and efficient as possible, sound preparation and detailed processes are pivotal.

Consider the following tips to ensure thorough physical inventories:

• Counts should take place at least once per year;
• Each unit should be stored in a bin according to size and type;
• Items should be individually tagged for either manual confirmation or barcode scan;
• Organization is fundamental. Make sure all bins and tags are facing forward and clearly visible to speed the process.