The Single Biggest Excess Cost Driver in Spare Parts Management
It’s not poor buying, bad supplier pricing or inaccurate stock counts. It’s static min/max levels.
Most manufacturing, engineering and industrial sites rely on a CMMS, ERP or EAM system to manage spare parts inventory. These systems usually hold a minimum and maximum stock level for each part. When stock drops below the minimum, the system triggers a reorder. The aim is to keep enough inventory available to protect uptime without holding more than necessary.
In theory, it makes perfect sense. The problem is that min/max levels are often set when a part is first created and then rarely challenged again.
Importantly, they may have been completely correct at the time.
The part may have been new.
The asset may have been critical.
The supplier lead time may have been accurate.
The expected consumption may have been reasonable.
The maximum level may have reflected the best available information.
However, spare parts environments do not stand still.
Consumption, lead times and suppliers all change.
Assets are modified, upgraded or retired.
Production schedules shift.
Maintenance strategies evolve.
Engineers find alternative parts.
Prices increase. Some parts become less critical. Others become more critical.
The min/max level, however, often stays exactly where it was. That is where the excess cost begins. A min/max level is not just a number in the system. It is an instruction. It tells the business when to buy, how much to buy and how much stock to keep holding. If that instruction is no longer aligned with reality, every downstream decision starts to drift.
A part that used to move regularly may now only be used once a year, but the system still replenishes it to the same maximum level. A supplier lead time that used to be six weeks may now be two weeks, but the business continues to hold the same buffer. An asset may have been replaced, but the spare parts linked to it remain active with historic stocking rules. A component may have an equivalent alternative elsewhere in the stores, but both continue to be reordered independently.
Static min/max levels become the root cause of overstock. Overstock becomes slow-moving inventory. Slow-moving inventory becomes obsolete stock. Obsolete stock becomes tied-up working capital, wasted shelf space and eventual write-offs.
This is not a failure of the CMMS or ERP. In most cases, the system is doing exactly what it was configured to do. The problem is that the configuration has not kept pace with the operation. Luckily its one of the easiest and quickest wins in spare parts management.
At Parts Control, this is one of the areas we focus on. We sit above existing CMMS, ERP and inventory systems and continuously test whether current stock policies still make sense. That means comparing min/max levels against actual consumption, demand history, supplier lead times, current stock on hand, purchasing behaviour, part criticality, obsolescence risk, duplicate parts and alternative parts across the estate.
The objective is best-fit inventory. That means holding the right parts, in the right quantity, for the right reason.
For many businesses, the opportunity is already sitting inside the data they have today. The CMMS, ERP, stock records, purchase history and supplier data all contain signals that can show where inventory policy has drifted. The challenge is that these signals are often spread across systems, buried in reports or reviewed manually only once in a while.
Parts Control turns that into a continuous process.
Reach out to info@partscontrol.com for a real world case study on this exact problem and solution!