When the industrial revolution came to the paper manufacturing industry in the early 1900’s no one could have envisioned how quickly we would progress to a fully automated production environment with supply chains of raw material and finished goods so optimized that the actual production became a mere supporting activity. We have evolved efficiency in all areas and are the embodiment of lean manufacturing – with one exception.
One area of potential efficiency is still untouched; harmonizing and optimizing spare part inventory levels and purchasing volumes (buying behavior) across the enterprise through enterprise asset management (EAM) software. A pilot calculation done by the Swedish company SSG reveals it is possible to cut inventory level by 42 percent with no negative influence on service level when coordinating spare part inventories at 3 mills within 100 km of distance. If rolled out fully, this would result in a total cut of $74 million dollars just for these 3 mills.
The challenge is that each of these mills – as is often the case for asset intensive industry around the world – have their own local naming convention when labeling their spare parts. It has been developed mill by mill, sometimes over 100 years of operation.
Asset intensive industries like pulp and paper manufacturing have managed to optimize well on the mill level, so now it is time to progress to optimization on the enterprise level – across multiple plants, locations and divisions — by using a common naming standard to create transparency.
To help move customers towards greater enterprise transparency of parts inventory, IFS Applications has the ability to relate local naming for spare parts to a master naming standard when available. In some cases, asset intensive companies are now exploring a common naming standard from SSG (Standard Solutions Group) to be used as a master. This creates a two-step process towards reduced spares and repairs inventory. In the first step, a plant or maintenance manager can see who else across the multi-location enterprise is carrying a specific spare part – for instance wear discs, bearings, pump rotors, etc. In the second step, they can start to optimize inventory levels to lower the capital tied into spare parts by using them to serve the enterprise instead of just the local mill.
If you can establish transparency at this enterprise level, you can also start to harmonize suppliers to limit the number of part versions and thereby reduce spare part needs. You can negotiate price levels based on the total purchase volume for the enterprise, administer the updates of information in a more efficient way and make it easier to buy on existing agreements.
In the years to come, we can expect to see a new wave of parts inventory management investments to be made – not only in the pulp and paper mill but in the asset intensive sector as a whole. These investments will quickly pay for themselves in the oft-overlooked area of asset management cost. But an additional investment – an investment in organizational will and focus – will be necessary to drive an enterprise towards the part standardization that will result in millions in savings to the delight of management and other stakeholders.