74 tips for reducing equipment costs (31-45)

Updated Aug 26, 2013

construction equipmentWith this post, we’re now more than halfway through my 74 ways to reduce equipment costs. Here are tips No. 31-45:

31: Track turn rates

Turn rates (how often items and inventory value are replaced) are important indicators to show what is and is not moving.  Slow and no movers can be removed but you need to have a sense of their usage. Tracking turns improves efficiency and costs.  Industry turn averages are one turn a year—World Class is two to five turns a year. This is calculated as Cost of Inventory Sold over Average Inventory.

32: Keep the storeroom clean

Clean the stores or parts room on a routine basis. Clutter and trash make it unsafe and difficult to search and retrieve items.

33: Stage jobs

Stage or kit jobs for upcoming work in a designated place. This reduces the cycle time to complete work. An example would be to produce standard kits for PMs (filters, belts, etc.) to shorten prep time. A separate area needs to be marked off to place these jobs so the parts aren’t used for other work and to expedite finding them when the job comes due.

34: Implement a reliability program

A good reliability program identifies and corrects defects through a root cause analysis process, thus reducing the need to perform certain activities. If I can eliminate the need, I can reduce my costs. This is proactive maintenance. It reduces the needs for parts, labor and downtime.  Click this link for a description of the process.

35: Use consignment parts

Use consignment parts as much as possible—you only pay for it when it is used.

36: Examine vending machines

There are many vendors now with vending machines that can distribute parts and keep a record of their use.  This controls access and provides better tracking than other methods.

37: Eliminate uncontrolled parts storage areas

Collect all the uncontrolled satellite stores (pigeon-holed and rat-holed parts) to eliminate ordering parts already on-hand. Another advantage is having a record of those to prevent redundant ordering.

38: Watch parts usage in the Computerized Maintenance Management System

Use a CMMS system to manage parts—unmanaged parts usually will cost three to four times their value.  Also, by tracking parts usage, you can identify culprits or bad actors, e.g. “Why are we having problems with this particular bearing?”

39: Label and mark

Label everything to make it easier to find—time is money.  Use overhead banners, placards, labeling, floor tape, to easily identify locations, tools, special storage, etc.

40: Shop around

Look for bulk deals (grease, oil, etc.).  You can sometimes get in a rut and buy from the same vendors without comparing prices.  It is good to shop around to keep your regular suppliers competitive.

41: Use a BOM

Develop Bill of Materials for each piece of equipment; or at least crucial equipment.  Having a list of parts reduces valuable time researching.  It also helps with the purging of obsolete parts when equipment is sold or salvaged.

42: Cycle count

Screen Shot 2013-08-23 at 9.14.52 AMUse cycle counting to provide an ongoing count.  This improves accuracy over the traditional annual inventory count process. Use an ABC system (see box) to identify parts value.  Usage and counts are randomly generated each day so that everything gets counted, with the most valuable parts counted more frequently.  Cycle counting reduces the costs and labor burden of an annual inventory count and improves accuracy.  It also allows you to examine reasons for anomalies easier because the cycle count is done daily and therefore discrepancies can be found quicker than waiting until the end of the year.

43: Eliminate redundancy

Eliminate redundant parts and material from different suppliers. Many times we will have the exact same item but it appears to be different because we have several vendors for the item.

44: Identify critical or insurance spares

They are handled separately from the other parts and should be listed.  A good process to identify them is to look at the lead time, cost to carry, impact or downtime, etc.  Use this source to help identify whether they should be considered critical spares or not.

45: Review safety stock

Improve safety stock calculation—review and refine.  It is a level of extra stock that is maintained to mitigate risk of stock-outs (shortfall) due to uncertainties in supply and demand. Adequate safety stock levels permit operations to proceed according to their plans. Safety stock is held when there is uncertainty in the demand level or lead time for the product; it serves as an insurance against stock-outs.  They need to be reviewed periodically and adjusted.

In my next post I’ll look at fuel management, idle time charges and developing an equipment optimization plan.

About the Author

Preston IngallsPreston Ingalls has more than 41 years of maintenance experience and is president/CEO of TBR Strategies, a Raleigh, North Carolina-based maintenance and reliability consulting firm. He has consulted with firms that have won the Association of Equipment Management Professionals’ Fleet Masters Award for fleet maintenance excellence in 2004 and 2009. In addition, he assisted two other organizations in winning the North American Maintenance Excellence Award.