Technology That Tames Inventory

The power of CMMS, teamed with bar coding and RFID, can help streamline stockrooms, save money

By Kris Bagadia  

Maintenance and engineering is essential for the smooth operation of institutional and commercial facilities, and a well-managed inventory of spare parts is the backbone of maintenance.

A typical maintenance parts inventory has a value of $1-10 million, but statistics show that most departments could save 10-20 percent of annual inventory dollars by streamlining their inventory management.

One of the most common reasons front-line technicians can’t complete maintenance work is the lack of needed parts and materials. Too often, work orders don’t identify the required parts, these parts are not in stock, or they are in stock but can’t be found.

In a breakdown situation, technicians often can’t get needed parts for days or even weeks. In the mean time, the company might be losing hundreds of thousands of dollars. An efficient inventory management system can minimize these losses.

One of the most important tools in accomplishing this goal is a computerized maintenance management system (CMMS), and technology advances in bar coding and radio frequency identification (RFID) can further enhance its benefits to maintenance and engineering departments.

The Power of CMMS

Maintenance and engineering departments too often fail to take full advantage of the benefits a CMMS can bring to their operations. One of the most overlooked aspects in this regard is inventory management.

A CMMS can help managers generate several key reports and pieces of information that will help enhance the efficiency of storerooms, ensure the available of needed parts and equipment, and help curtail waste.

ANNUAL PHYSICAL INVENTORY. In most departments, a variance exists between intended and actual parts quantities. Among the reasons for this gap are poor recordkeeping, human error, and misplaced parts. Organizations can perform a physical inventory once a year to review the variance and take corrective measures based on the inventory’s findings.

Using a CMMS, managers can take the physical inventory either using traditional means — paper based — or, more often today, using a handheld device. Incorporating bar coding technology can further enhance the process.

CYCLE COUNT. Storeroom personnel often conduct a count of random items to check the accuracy of inventory records. Errors found through cycle counts often indicate problems that cause inaccuracies.

Managers can tap into a CMMS to perform several tasks that can streamline the cycle count process, including generating a list of parts to be counted based on predefined criteria. Again, mobile and bar-coding technologies can further enhance this process.

IDENTIFYING PARTS. Most storerooms struggle with a part-numbering scheme, and workers spend a great deal of time and money trying to figure out the most appropriate scheme. Some companies come up with part numbers that are up to 28 characters long and designed to embed all the details of the part.

The real question is whether the department really needs such a scheme. If the department uses a CMMS, it might not. A CMMS has fields in the database for the part’s type, subtype, size, etc. So properly using a CMMS, a part number can be simply a sequential numeric number.

INVENTORY PARTS. Managers must know the amount of much money tied up in their parts inventories. In fact, some state and municipal governments require an annual inventory because there might be tax implications. Inventory value also plays an important role in the organization’s bottom line.

Managers can use many different methods to compute inventory value, including: first in, first out (FIFO); last in, first out (LIFO); and weighted average. Tapping into the power of a CMMS enables managers to set up the desired method to instantly compute the inventory value.

REDUCTING INVENTORY. Reducing inventory offers many important benefits, including saving money, saving space, and reducing control requirements.

One of the most common ways to reduce inventory is to eliminate obsolete parts, and a CMMS can help here, too. Start with a list of parts that haven’t been used for a long time — say, three-five years.

Start with expensive items first, as opposed to all items, but be careful to not include critical insurance parts on this list. After showing the list to all concerned, eliminate these parts.

ADVANCED STRATEGIES. If a department can justify their use, there are many advance options available to improve the efficiency of inventory system more productive. Among these options are: automated storage and retrieval system; vertical storage and retrieval system; and vending machine. All of these work very efficiently with a CMMS, and while they can be expensive to implement, they offer excellent return on investment for the right applications.

Technology: A Higher Power

Working in conjunction with a CMMS, bar-coding and RFID and related technologies can deliver even greater benefits by saving significant amounts of time and money.

First, workers can use handheld readers to gather information needed for parts receiving, parts addition and depletion, cycle counts, and annual physical inventory.

Also, instead of recording inventory-related data on paper and then entering it into the CMMS database, technicians can enter it directly into a handheld device for downloading later. Using a wireless set-up, information in the database updates in real time.

Barcode and RFID technologies can further enhance the power of these devices. All the functionalities mentioned earlier can be made more efficient by using bar coding for data entry.

For example, instead of entering a part number into a handheld device, technicians can scan it using a bar-code reader. This saves time and ensures greater accuracy.

Bar coding also offers these benefits:
• increased data accuracy
• reduced paperwork
• provides active audit trail
• inexpensive to label items
• diverse hardware offerings and supporting computing infrastructure
• mature integration tools that are developed and readily available in the marketplace
• high level of expertise available.

RFID technology is essentially bar codes that operate at a distance to provide advanced parts tracking and inventory control. Applying RFID technology to inventory management, technicians can:
• identify the contents of a pallet without opening boxes, at long range, and with no line of sight
• reduce costs associated with shipment errors and shrinkage
• improve security practices and cut costs associated with manual processes
• monitor warranty activity and exchanges
• track mission-critical or expensive parts.

In addition, RFID tags can work in harsh environments, can store data, and are passively powered, requiring no batteries.

CMMS technology remains a powerful tool in carrying out tasks that are essential for efficient inventory management. Properly specified and applied, mobile, bar-coding and RFID technologies further enhance the entire process and deliver efficiency and savings to departments and organizations.

Kris Bagadia is president of PEAK Industrial Solutions, a CMMS consulting firm in Brookfield, Wis.

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  posted on 6/1/2007   Article Use Policy

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