Failure of logistics.

I currently have an exercise machine that is idle because the importer does not have a spring in stock – the sale price of the part is $5! So, I am continuing my (mostly bad) experiences with customer service and service parts.

Here is an example of a supplier that considers a low cost part not to be important, yet without it a customer cannot use the machine. Availability is what logistics is all about; if a part is not available when required, you have a failure in your logistics systems. This applies whether your business is to support your own operations, such as a mine or the defence forces or whether you provide post-sales support for customers.

To improve availability, suppliers need an inventory planning method which incorporates how critical each part is for customers (internal or external) and the risk of being out of stock due to supply disruptions. Segmentation is the approach to use. This requires that you set up a matrix, identifying the supply risk on the ‘x’ axis and the criticality of the part on the ‘y’ axis.

How to segment your service parts

Under supply risk, you place the parts into groups depending on their lead time. As an example of five groups, they could be ‘greater that 90 days from a single source’; 30-90 days from a single source; less than 30 days from a single source; less that 30 days from multiple sources and less than 7 days from multiple sources.

Criticality of a part can be measured on four levels. The highest is Catastrophic Failure – non-availability of the part will affect your own or customers’ ongoing business viability. Next is Operational Failure – non-availability will severely affect ongoing operations (internal or customer); then comes Operational Impairment – non-availability will reduce the performance of staff (internal or customer) and finally, Non-critical – out of stock (OOS) will not cause significant problems.

Where applicable, the more critical parts can be identified with their likelihood (or risk) of failure through using the ‘mean time between failure’ (MTBF) rating calculated by your technical staff.

Now that your service parts are segmented within a logical structure, you are better equipped to plan the inventory requirements of what are typically slow moving items. The risk of being OOS of $5 parts that are important will be much reduced!