When it comes to managing assets throughout their lifecycle, business leaders know they need a comprehensive strategy in place to succeed. But they aren’t always clear on the strategic opportunities around parts inventory management and the role it plays in maintenance strategy.
While asset management solutions monitor buildings, equipment, vehicles, IT assets and other items a company uses to conduct its business, parts inventory management tracks the spare parts maintenance repair operations (MRO) need in order to repair assets quickly and effectively when they break down.
Let’s start with definitions of the two terms.
What is an asset?
Companies use assets to run their day-to-day business operations and create value. This includes both physical assets (such as raw materials, equipment and vehicles) and non-physical assets (such as intellectual property and patents).
Company assets are divided into two categories, fixed and non-fixed. Fixed assets, or “property, plant and equipment” (PP&E) are items the company intends to use for more than a year. Examples include land, buildings, vehicles, equipment and computers.
Non-fixed assets are typically of lesser value to a company and the company rarely holds onto them for more than a year. Examples of non-fixed assets include office supplies, computers, audio-visual equipment and office furniture.
What is parts inventory?
Parts inventory, also known as “supplies inventory,” refers to the items a company must stock to repair the assets it owns quickly and effectively. Successful enterprises rigorously maintain a list of spare parts they need to keep their most vital pieces of equipment running smoothly and improve their bottom line.
But which spare parts are critical and which parts are merely “nice to have?” This is the question at the heart of parts inventory strategy. In order to answer it, maintenance, repair and operations (MRO) managers rely on “spares criticality”—the process of identifying which spare parts threaten business operations if there are shortages vs. the spare parts that aren’t as critical.
Asset management vs. parts inventory management: How it works
While both types of management deal with things businesses own, asset management systems deal exclusively with equipment and supplies the company needs to operate. Parts inventory management, on the other hand, deals with items the company needs to successfully repair an asset that’s broken down.
Assets come in many shapes and sizes, from trucks and manufacturing plants to windmills and pipelines. Asset management tracks the location and condition of both physical and non-physical assets the company needs to perform business operations throughout the asset lifecycle.
One of the most common asset management use cases is asset maintenance, which is used to maintain an asset’s value for as long as possible. To do this, many companies rely on asset management software like an enterprise asset management (EAM) system to create transparency, enhance monitoring capabilities and resolve issues quickly. Here are some of the benefits of effective asset management software:
Centralized asset information: Maintenance workers need to know where an asset is and how it’s performing at all times. In order to do this, many use a computerized maintenance management system (CMMS) as part of their overall EAM approach. This keeps maintenance information in one place and easily accessible to workers who must use it to perform regular maintenance activities like forecasting and replenishment.
Proactive issue resolution: In the Internet of Things (IoT) era, everything from a single valve to a thousand-mile pipeline can be connected to sensors that deliver real-time data on their condition and measure depreciation over time. By incorporating artificial intelligence (AI) and advanced analytics into the software system, maintenance teams in the field can access critical information in seconds and make more informed decisions. These capabilities form the bedrock of preventive maintenance, an approach that anticipates and prevents failures before they occur through a combination of machine learning, operational data analytics and predictive asset health monitoring.
Consolidated operational applications: Strong EAM software establishes a single touchpoint for the management of virtually any asset or asset type. Processes can be unified and standardized across a wide range of functions that span the entire enterprise.
Real-time asset information: Successful asset management depends on the availability of accurate, real-time information about everything a company owns. Imagine having paid for a critical piece of equipment you need delivered to your manufacturing facility but having no way of tracking it in transit. Asset tracking and asset tracking software play a key role in the success of asset management systems.
The following are the four most widely used types of asset tracking systems available today:
Radio frequency identifier tags (RFID): RFID tags are small tags affixed to an asset that broadcast a variety of information using radio-frequency signals and Bluetooth technology. In addition to an asset’s location, RFID tags can transmit the temperature and humidity of the environment where its being kept.
WiFi-enabled tracking: WiFi-enabled tracking systems use a tag affixed to an asset to broadcast a variety of information about it over a local WiFi network. Like RFID, however, WiFi-enabled tracking is only effective at tracking items as long as they are indoors and within range of a WiFi network.
QR codes: QR codes are a significant upgrade on their predecessor, the universal barcode. Like serial numbers and barcodes, a QR code can provide an abundance of information about an asset quickly and easily. But unlike the barcode, QR codes are two-dimensional and can be read by a smartphone that’s being pointed at the code from any angle.
Global positioning satellites (GPS): Many businesses use global positioning satellites to track their assets in transit. A tracker is placed on the asset that then communicates information about it to a Global Navigation Satellite System (GNSS) network. By transmitting a signal to a satellite, trackers enable managers to see where an asset is, anywhere on the globe, in real-time. GPS is the most widely used system for tracking assets and inventory that reside outdoors and away from a Bluetooth or WiFi network.
Parts inventory management
Where asset management focuses on items that help companies operate, parts inventory management focuses on spare parts and materials the company needs to keep on hand to repair equipment when it breaks. To accomplish this in a reliable and cost-effective way, maintenance repair operations (MRO) teams must strategically maintain parts inventory levels so they have what they need, but minimize the retention of excess or obsolete stock.
Here are three critical components of parts inventory control and some questions you can ask to ensure success with them:
Quality of service: Does the MRO team provide fast, efficient repair service when called upon that gets critical pieces of equipment up and running again after a breakdown? What could be done to improve the service and how would that impact parts inventory levels?
Level of inventory: Does MRO keep the items it needs on hand while still achieving financial, budgetary and warehouse considerations? What could be done to reduce inventory further without compromising service levels?
Cost to organization: Is the overall cost of MRO parts inventory something the organization can afford, or does it need to strategically eliminate some items it currently keeps on hand in order to reduce costs further?
Benefits of effective asset and parts inventory management
Every day, business leaders make critical decisions about how to cut costs, increase efficiency and seize new market opportunities. But without strong asset and parts inventory management systems in place, those decisions would likely be irrelevant. Well-executed asset and parts inventory management provides many important benefits to an organization, including the following:
Improved business efficiencies and outcomes: When performed correctly, asset and parts inventory ensures seamless operations, identifies redundancies in equipment and spare parts and improves business outcomes.
Reduced costs: By keeping careful track of asset performance and maintaining a rigorous parts inventory management system, decision makers can spot opportunities to improve processes and optimize parts inventory to reduce costs.
Greater safety and security: Strong asset and parts inventory management systems improve conditions in places like warehouses, industrial plants and assembly lines where both theft and accidents are frequent. This can lead to a safer workplace environment as well as a reduction in theft—and lower insurance rates—over time.
Asset management solutions
Today’s top-performing asset management solutions leverage cutting-edge technology like real-time data delivered via IoT, AI-enhanced analytics and monitoring and cloud-based capabilities. Enterprise asset management with the IBM Maximo Application Suite helps companies optimize asset performance and extend asset lifespans. It’s a fully integrated platform that uses advanced analytics tools and IoT data to improve operational availability and reduce downtime and costs.