Forklift Parts Best Practices
Supply chain management can prove to be quite the daunting task. Despite the difficulties, ensuring that your inventory remains at optimal levels should be a science that you master as soon as possible. For many businesses, however, this can be quite the challenge. When it comes to accurately inventorying forklift parts you want to make sure that you’re ahead of the game. As an inventory manager, you may be faced with managing thousands upon thousands of parts, each different in their functions. If you want to do this effectively, you need to follow the best practices of the industry - using proven methodologies that work while also using analytical tools to help you get the job done. Without these two critical components in place, you’ll likely experience a sharp increase in inventory levels as well as a major shortage of spare parts. This can ultimately result in overpaying for underperformance.
To avoid costly issues such as shortages from occurring, it should be the responsibility of the inventory manager to be cautious when determining stock levels. Be mindful that this strategy doesn’t come without a cost. Stocking inventory takes up space, can become obsolete with time, and can even become damaged. On top of all of that, surplus inventory is an unnecessary expense for most organizations. As time goes on excess inventory equates to waste and loss.
What’s required is a perfect balance between supply and demand. To accomplish this goal you’ll have tooptimize your inventory. Using an optimized service typically translates to a workplace where all out-of-stock situations will be eliminated. At the same time, inventory costs will be reduced, and efficiency will be increased.
MRO (maintenance, repair, operation) Inventory
It can’t be argued that forklifts face wear and tear on a regular basis due to the nature of the workplaces that they serve. The maintenance, repair, and operation of forklifts can account for as much as 40% of a companies’ annual procurement budget. With that being said, there are a number of key business benefits that support the management requirements of MRO inventory. These include:
- High Price
- Long lead time
- High criticality
- Low data quality
- Infrequent and highly variable usage
When using optimized inventory, real time measurements are taken to obtain data points and evolution of the inventory in question. Ultimately, when decisions are made based off of best practice methodologies, inventory managers are given a powerful tool to do their jobs better. That means they can focus more on accomplishing business objectives and making their teams more efficient. With the use of the proper tools, along with inventory management best practices and automated processes, there will be a significant drop in wasteful processes in the work place. For example, you’ll see an improvement in these areas:
- Less resource time spent on managing inventory
- A reduction in funds invested in safety stock
- A drop in administrative costs for replenishing inventory
- A decrease in write-off of obsolete stock and surplus
- Fewer stock-out that equates to improved availability and productivity
Best practices of forklift inventory optimization
The following best practices are based on tried and proven methodologies. If you follow them correctly you can achieve rather significant inventory reduction savings where your bottom line is concerned.
- Criticality Analysis
When taking an inventory of your forklift parts it’s best to generate a recommended criticality (business impact code) for every stock item in your possession. To do this you’ll want to analyze these crucial things:
- Commodity classifications
- Practical real-world considerations AKA workarounds.
- Demand Forecasting
Demand Forecasting is the prediction of future demand for a product. Essentially a demand forecaster has to predict probable demand based off of past performance as well as current trends. It may be necessary to commission additional equipment to increase demand for particular items in inventory. Demand forecasting should include these things:
- Appropriate forecasting algorithm selection
- Isolate project demand and planned maintenance from unplanned demand
- Each stock item is automatically matched to an algorithm
- The use of statistical distributions and forecasting that would be appropriate for a range of spares items including lumpy and slow moving demand.
- Using knowledge of expected events that will take place in the future (or trends) to apply demand profiles to future forecasts.
- Managing abnormal data by filtering and clipping techniques.
- Lead Time Forecasting
Lead time forecasting is crucial if you’re accurately estimating the amount of inventory needed to fulfill future demand. Lead time forecasting is just as important and essential as demand forecasting. Accurately forecasting lead times can you help you to develop statistical data such as day of the week effects and seasonality. Also, lead time forecasting is key in determining optimal safety stocks. Keep these capabilities in mind:
- Assess expected service level by calculating lead time variance. Also override lead times as required.
- You can forecast your average lead time by using receipt history and purchase order.
- Eliminate abnormal data by using clipping and filtering techniques.
- Issue Size Forecasting
The issue size (the number of units typically required for an application) is a primary component in determining stock levels. Excellent inventory optimization solutions will provide these things:
- The ability to calculate issue size variance and using that variable when determining expected service level.
- Using issues history to forecast average issue size.
- Eliminate abnormal data through appropriate clipping and filtering techniques.
- Overriding forecast issue size as required.
- Economic Modeling
In the field of economics, a model is used as a theoretical construct representing economic processes. These processes are represented by variables and the relationships between them.
- Holding costs for inventory for different types of items.
- Costs for total replenishment for various purchasing methods.
- Emergency freight costs or expediting.
- Costs associated with stock out. This is based on the duration of the stock out and criticality.
- Thoughtfulness towards real-world constraints such as storage capacity, maximum bin capacity, and more.
- Optimization of Reordering Parameters
Reordering parameters, minimum and maximum levels (MIN/MAX), are used by the ERP materials management system. When employed by this system, the ERP materials generate replenishment orders though it’s seen as a significant detriment to inventory outcomes. It’s recommended that reordering parameters should be optimized periodically to reflect changes. The optimization process addresses these things:
- Consideration of real-world constraints
- Exception Management
Exception Management is a style of business management that puts an extra emphasis on identifying and handling cases that are not deemed “normal”. This form of management has both a business intelligence application and general business application.
- Inventory Segmentation
Inventory segmentation allows the inventory manager and subsequently the supply chain department to focus more of their attention on individual high value items. The inventory in question is segmented by attributes (such as heavy, light, chargeable, non-rechargeable, etc.).
- The inventory is segmented on characteristics such as movement frequency, holding value, and more.
- Apply business rules or structured policies when managing an inventory segment. For example, reviewing potentially obsolete items, or the manual control of special items.
- Spares Risk Assessment
Some inventory will include a high ratio of spares that are expensive, critical in nature, requires long lead times to receive, and has no expected usage. When managing these items there are specific techniques that you need to follow:
- Modeling or over riding all inputs to the stocking decision.
- Risk modeling of the effect of holding zero, with multiple sets.
- Performing sensitivity analysis around expected mean-time-between-demand and stock-out cost.
- Spares Pools
Overall safety stock investment can have significant reductions through the sharing or pooling of infrequent, high value items across more than one site. One dealing with such arrangements an inventory manager should do these things:
- Determine the ideal number of pooled spares to be held.
- Ascertain the optimal location for holding the spares.
- Recognize common spares that are suitable for sharing.
- Knowledge Capture
Knowledge capture occurs when knowledge is converted from tacit to explicit form and vice versa through the sub processes of externalization and internalization. Identifying and utilizing organizational knowledge about inventory items is considered to be a significant business process when it comes to preventing mistakes and re-investigation. When examining an inventory optimization solution you should consider these things:
- Remind the appropriate parties when reviews are due.
- Present an audit trail for all important decisions.
- Keep record of commentary and notes involving inventory items.
- Ensure high data quality for classification codes and input parameters.
- Reporting Inventory KPIs
If you wish to see improvement in inventory to be tracked it’s important that you utilize KPI reporting. KPI reporting should always include these things:
- The customization of reports and statistics for users
- The ability to choose a pre-defined inventory management report.
- Capacity to capture a large selection of pre-defined inventory KPIs.
Without best practices and technology solutions, companies will undoubtedly struggle. They’ll have to deal with ad hoc databases, spreadsheets, and manual processes that are as tedious as they are inefficient. Sure, these methods have been known to work in the past, but they’re often prone to error and can be quite difficult to maintain on a regular basis. As an inventory manager who has to deal with forklift parts, it would behoove you to follow these best practices. Forklifts have to deal with wear and tear on a regular basis making a well-maintained inventory of spare parts all the more vital. Overall, inventory optimization can and will help your business. With the right tools, processes, and best practices in place you’ll be able to succeed.