Don’t Ever Let That
Ever Happen Again!

These were challenging times for the company, already struggling with slim profit margins and no planned out of service time for weeks to come. The failure caused the plant to halt operations, incur downtime, jeopardize the contract with the client, and significant revenue loss. This unfortunate incident exposed the company’s poor asset and inventory management practice and left them idle waiting for long lead spares to be delivered.

With the operations manager’s words still echoing in his ears, the chief mechanic took immediate action. He compiled an extensive list of spare parts and submitted the requisition to the inventory manager for immediate action. The chief mechanic’s reactive approach aimed to prevent such a costly revenue loss from reoccurring. By having this extensive list of spares on hand, the company would reduce their dependence on availability from external suppliers and minimize potential future downtime.

Years passed, and a new inventory manager, eager to showcase their expertise in materials management and cost-saving opportunities, arrived on site. During the monthly cycle count, the manager and warehouse coordinator made a startling discovery – a collection of dusty shelves containing parts with labels printed from over three years ago. The accumulated value of this neglected stock amounted to a substantial six figures.

As they continued to delve into the dusty spares, they noticed the majority were not directly manufactured from the original equipment manufacturer (OEM) but repackaged to appear this way. Each of them spent considerable time opening each packaged component and identifying the details of a second label or the product’s name tag. This practice of component data collection and identifying the original parts manufacturer (OPM) was time consuming and not part of their daily routine.

Many hours and days later the inventory manager and warehouse coordinator completed the cross-reference of the three-year-old inventory and provided it to the company’s purchasing manager. The purchasing manager, excited to receive such vital information, bestowed the project to the department’s category management supervisor. Within several days the supervisor completed a review of the OEM and OPM spares comparing price and delivery of each from multiple sources of supply.

The results exposed a future cost savings opportunity of more than 30% of material cost and a reduction in delivery time of more than four weeks. The alternative source was added to the company’s master data catalog for future requirements presenting an opportunity for hard cost savings and a shorter supply cycle. Working together the inventory management team and procurement team had exposed significant cost savings opportunities and was keen to identify additional OEM vs OPM cross reference master data.