MRO Today - Witco: 0.2 turns per year

0.2 turns per year
Witco attacks bloated inventory levels,
seeks clean and lean storerooms

by Paul V. Arnold

Nothing exemplified the unstructured, “old school” MRO purchasing environment at Witco better than its storerooms.

Until recently, these plant areas were a trouble spot.

“They were completely unorganized,” says Michael Fernandez, purchasing manager for this chemical manufacturer’s southern United States facilities. “There was no record keeping. If you were lucky, you had shelves. Some places, stuff was on the floor in boxes or thrown into a corner. Some never had a storeroom. They scattered stuff around the plant.”

That wasn’t the worst part.

“You could have rebuilt a plant with the amount of stuff we had,” he says.

Overstocked would be an understatement.

On average, storeroom inventory at Witco plants turned at an alarmingly low rate of 0.2 per year, meaning only 20 percent of the 5,000 or so units kept in stock had any activity. The remaining 80 percent was either dead stock or labeled as “critical spares.”

Option A,B,C or D?
"A” items: The local supplier stocks these items, so why should you? Clear these out of inventory and have the supplier hold them. They can be delivered in just-in-time fashion.

“B” items: If they aren’t available from the local supplier or would take more than 48 hours to get, consider stocking them. They may be items specific to the plant’s needs.

“C” items: These are critical items required for the orderly operation of the plant. Make sure these are indeed critical since every item might be considered critical by at least one person. Only hold the amount needed to assure continuous operation of the facility.

“D” items: What is this doing in your storeroom? It’s dead stock. See if a supplier needs it for one of its other customers. Sell it to a surplus operator or for scrap. Or just trash it.

The storeroom at the Taft, La., plant held nearly $4 million of inventory. Fernandez says at its worst point, probably 80 percent was dead stock.

How did things get this bad? The manual requisition and inventory tracking system hurt.

A lack of planning was partly to blame. Maintenance manager Sam Scholle says his department used to do a ton of capital projects. Instead of planning and estimating the correct amount of supplies needed, workers guessed. Orders usually included a lot of excess. Leftover materials went into the storeroom.

Fernandez says inventory was also a security blanket.

“You’d ask a mechanic, ‘Why do we need 20 ring gaskets on the shelf when the supplier is right down the street?’” he says. “The guy would tell you, ‘Ten years ago, I fixed this machine and it took 20 ring gaskets. After that, I swore I’d never have less than 20 in stock.’”

After years of such practices, things began to add up.

“As the plant got larger, the dollar volume of inventory increased,” Scholle says. “It hit a point where it caught people’s attention.”

A computerized requisition and inventory management system installed in 1997 shed light on the state of the storerooms.

Then, in 1998, Fernandez led a “clean and clear” project.

Storerooms were organized. Racks and storage systems were erected where needed. Integrated suppliers received housekeeping responsibilities.

“It’s kind of the grocery store system, where the bread guy has his shelves,” says Fernandez. “He fills what needs to be filled, dusts, organizes, keeps it nice.”

In each storeroom, personnel classified items.

Distributors agreed to hold or buy back some items. Other items were scrapped or sold. At Taft, such efforts dropped inventory to a more manageable $1.5 million.

Outsourcing capital maintenance projects, combined with better planning and trust in suppliers, keeps inventory levels down.

“Except for critical spares, we want inventory that turns six times a year,” he says. “I want six turns, but I’d be happy with four.”

This article appeared in the August/September issue of MRO Today magazine. Copyright, 1999.

For more info on Witco, see: "The glass slipper"