Factors That Determine What Materials To Keep On Hand

Factors that determine what materials to keep on hand

Obviously, there are advantages and disadvantages to keeping anything on hand always, whether it be production materials, maintenance repair items or goods for sale. Keeping items on hand has the advantages of convenience and offers some downtime prevention but has added costs of storage, shelf-life and overall upfront costs that may or may not meet future demands. When it comes to materials on hand, if they are overstocked they will often be overused or a general increase in waste. When it comes to deciding what to stock ask these four questions.

Will not having this item stop production? If so, for how long?

These are the items that are the most critical to identify. If it something that will cause a shutdown then it should be a necessity to have it on hand. The core of your both your production plans and MRO storeroom goals should revolve on managing and maintaining these items.

Is this item something readily available?

When doing purchasing planning one of the most important things to consider is availability of an item. For instance, a can of paint that can be found at half a dozen local suppliers within a five-mile radius, should be stocked at relatively low levels. It is an item that is readily available and if need can be obtained quickly. There is obviously no need to inherit storage and stocking costs for this kind of item. But let’s say the item has a 5-day lead time, then a good place to start is to have at least five days worth on hand always.

What is the rate for consumption for this item?

Another good thing to determine on any item that has frequent use in your facility is the rate of consumption or ROC. This will ultimately determine the rate at which the item is purchased and keep your stocking levels as lean as possible resulting in cost savings. As a rule, if the item is critical, then your stocking levels should meet or exceed your ROC always. This will certainly demand a certain level of awareness and skill on the part of your purchasing personnel and orders must be made promptly. Supplier reliability can dramatically affect the success of this “just in time” stocking scheme for better or worse. But if well managed, just in time stocking can have huge cost savings.

What is the items overall cost?

It is important that not all items are treated equally when it comes to stocking levels. Every item has its own cost which includes transportation and storage. The top 10 to 20 percent of items with the highest overall cost deserve the most analysis. By taking a top down approach to examining stock levels you end up making the most impactful items in your inventory the most scrutinized and small purchasing errors will hopefully be relegated to lower cost items.

If you need help with stocking spare units for backups or if you don’t have a spare and need a RUSH repair, the experts at Global Electronic Services can help! Be sure to visit us online at gesrepair.com or call us at 1-877-249-1701 to learn more about our services. We’re proud to offer Surplus, Complete Repair and Maintenance on all types of Industrial Electronics, Servo Motors, AC and DC Motors, Hydraulics and Pneumatics. Please subscribe to our YouTube page and Like Us on Facebook! Thank you!

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