The good news was that we knew exactly what the problem was and how to fix it. We also knew that the spare part we needed had been in the storeroom earlier in the day - I had seen it there myself.
The bad news was that it was no longer there. And although we didn’t know with certainty where the part was, we were pretty sure that one of the dayshift crew had taken it and put it in his locker.
Waiting was not an option so locks had to be broken. We just hoped that we found the part before doing too much damage.
This scene is played out in maintenance workshops all over the world. Maintenance team members take parts and put them away in their own stores and sometimes, when really needed, the part cannot be found. The team members do this either because they think it is ‘convenient’ or that it ‘saves time’. Convenient and time saving for them but what about the rest of us!
Let’s face it, reliability and maintenance people are different. They have a unique position in the world. We all know that when things go wrong maintenance gets the blame. But when things go right, production gets the credit. As a result, some maintenance folk hoard spare parts, like squirrels keeping nuts for the winter. That’s why these unofficial stores are often referred to as ‘squirrel stores’. Look around almost any workshop and you will find spare parts that are being held in private stores, ‘just in case’.
The problem with this, as demonstrated above, is that when parts are held outside of the official storeroom or inventory management system, they actually impact the rest of your inventory holding for that part. Not only in the obvious ways of poor availability and access, but also in less obvious ways relating to inventory levels, operational expenditure and even your reliability program - more on that in a moment.
First, let’s understand why these stores exist. One reason is trust. That is, the trust that your official store will actually have the required parts when they are needed. If your storeroom management is unreliable, this erodes trust in the system. Also, if team members know that other team members are ‘squirreling away’ parts then they might do the same - just in case. No one wants to be caught short. Not only does it let the plant down but it is personally inconvenient.
Second, more than just being inconvenient, not having the spare part can be a real hassle. If the plant is down at 2:00am, it’s your job to fix it and there is no spare, then you get the hassle from production - even though it is not your fault. Better to avoid all that and keep your own little emergency squirrel store - just in case.
A third reason is a rationalization that squirrel stores improve service (or at least reduce downtime) by reducing the time needed to go and get the spare from the official store. Squirrel stores are usually held closer to the plant (or at least closer to the team member) than the official store, hence, the time to access the store is reduced.
No matter what the reason, squirrel stores are ultimately a cultural issue, and they need to be managed on that basis. This requires building trust in the system, communicating the negative impact of ‘squirreling’, modeling and encouraging the right behavior, and not allowing any exceptions.
Now, how do squirrel stores really impact your inventory levels, operational expenditure, and reliability program? And why would you be nuts to allow your team to keep squirrel stores? Here are six reasons:
1. You Will Hold More Inventory
Duplicating the parts being held in your official store by holding parts in a squirrel store obviously adds to your inventory but it is the flow on effect that can be much, much worse. You might be surprised to realize that in addition to duplicating your inventory, squirrel stores can also significantly increase the level of spares held in your official store. How? Through a mechanism that I call Induced Demand Volatility (IDV). IDV occurs when your team takes more spares than actually required so that they can put some into their squirrel store. This behavior produces false data on usage and shows higher volatility than is really the case. This higher volatility then results in a need to hold more safety stock - after all safety stock is held to account for volatility. The breakout box shows a situation where induced demand volatility could increase spares holdings by 264%!
2. You Will Spend More Money
Obviously, the parts in the squirrel store and the extra parts in the official store have to be paid for. Therefore, this ties up much more money than would otherwise be the case. What many people don’t consider is that this diverts funds from other and more useful purposes. Still waiting for the money to buy that tool to make your life easier? Perhaps the money is tied up in your squirrel store!
3. You Will Spend More on Your Operating Budget and Skew Your Reporting
When your team removes more items from the store than they really need, the costs have to be charged somewhere. Guess where - one of your operating budgets! Not only does this limit your ability to manage and improve your reliability (with what will already be a tight or underfunded budget), but it skews your reporting of costs by bringing forward costs that you could have incurred later. In many cases you may even be paying for parts that never get used, which leads to the next point.
4. You Will Have Increased Obsolescence
Is anyone really keeping track of those squirrel stores? Of course not. So, you have spent the money and when the item eventually becomes obsolete (as everything does) the squirrel stores will contain items that should have been used or should not even have been purchased! The only time they will be cleaned out is when someone decides to tidy up their squirrel store or workshop and you know that they will then just throw the parts in the trash.
5. You Will Increase Your Downtime
This is perhaps the worst part of the squirrel stores phenomenon. If the ‘unofficial’ parts are held in a locker or tool kit so that only the ‘owner’ can access them, then the rest of your team cannot access them. If you have a breakdown and need that part right away, you might not be able to get to it or might not even know that it is there! The irony here is that the part was being held in order to improve service and the squirrel approach actually made things worse. The result of this scenario is an increase in ‘official’ holdings, increasing expenditure even further.
6. Your Reliability Program Will Be Endangered.
As mentioned previously, when your team keeps squirrel stores they skew the data on usage. But this doesn’t just impact your expenditure. It also means that your official records will show higher demand than actual at some times and lower demand than actual at others. If you are trying to perform any sort of analysis to understand your failure patterns, this data will be useless at best, and at worst, misleading. All that money spent on reliability training, software, gadgets and cultural change could be wasted because of a failure to control squirrel stores.
Unfortunately squirrel stores are almost a fixture of maintenance departments. They result from the mindset of reliability and maintenance professionals that are passionate about reducing downtime and take equipment failure personally. This drives them to hoard items that they can use later and to ‘short cut’ the system to try to improve response times. However, this approach does not work. Squirrel stores are a blight in your system and can have a significant and detrimental impact on your expenditure and your reliability program. In fact, you would be nuts to allow or endorse them.
Phillip Slater is an Inventory Process Optimization Specialist and is widely known as ‘The Inventory Guy’. He is the author of a number of books, including Smart Inventory Solutions and The Optimization Trap, both of which deal directly with MRO and engineering spares inventory. For more information visit www.InitiateAction.com