As a parts manager you make a lot of decisions. The most important decision you make is which parts to stock. Deciding how many to stock is second on the list. If you don’t get the first decision right, the second one doesn’t matter.
Aside from Initial stocking lists provided by manufacturers, dealers typically stock parts for 2 reasons:
1. Instinct/Gut Feel: You know which parts are going to wear out or get damaged, but this can be dangerous. It can be hard to tell the actual lifecycle of a part by comparing it to similar parts. You may be dealing with an improved design or material. You also need to consider the installed base of machines using that part. Remember the phrase “the road to hell is paved with good intentions”? Along that road are several landfills full of parts that were stocked and scrapped because of someone’s gut feel. I have the utmost respect for anyone who knows the product well enough to predict wear patterns — but there is a better way to make stocking decisions.
2. Repeating Demand: Many parts wear out and some are replaced during a maintenance interval. Other parts are the victims of stupid human tricks or natural disasters. Maintenance parts and wear parts will have repeating demand patterns. If we watch for repeating demand patterns, we can be confident in our stocking decisions.
We use the term “hits” to describe the number of times a part was sold. In your system it may be called either hits or demands or sales or bin trips or lines. Hits during a set timeframe will allow us to create a Stocking Parameter. That parameter will decide if we stock the part or treat it as a special-order part when customers need them.
Repeating demand is the best method for deciding what to stock. If a part sells once it may or may not happen again. If it sells twice or 3 times, we can usually assume it will continue to repeat. The more hits the more confident we are that it will sell again.
Ignore the quantity for now. As crazy as that might sound, we can’t focus on quantity when deciding what to stock. Instead, look for repeating demand. Don’t worry, we will come back to quantity when we make that second decision: how many pieces to stock.
It can be tough to transition from “instinct based” to “hit based” stocking. There was probably a time when you could keep your eye on every part available and make instinctive stocking decisions based on your product knowledge. It is nearly impossible in this era to keep up with all the models and resulting parts using instinct. By using hits, we can identify more of the parts we should be stocking.
A co-worker once told me using hits was ridiculous and had no place in predicting equipment parts. He went on to tell me that only companies like McDonalds, Coke and Nike could use a process like this. Actually, he had that backwards. While these big consumer goods companies can, and do, use statistical methods to predict demand, they are only partially accurate because of one thing: humans make those demand decisions. They may at a whim decide they do not like a certain flavor or style and shift the demand pattern. Equipment parts don’t behave that way. Parts either wear or they don’t. Wear parts are going to fail. It may speed up or slow down, but they will wear out. For that reason, watching hits is a great way to predict what you will need.
Decide what to stock first. It’s all about the hits.
