Analysis & Probable Solution:
The conversation which is mentioned in the blog titled "Typical Challenges in a Repair & Return - Part 1" brings out some of the key issues which are pertinent to a repair & return process. In the following section I have attempted to classify the issues into categories and suggested possible solutions for them.
1) Avoid over stocking of high value parts by enabling tracking: This has been a very common problem plaguing operations & inventory management. We all know that trying to keep optimum stock levels is the ultimate aim of an Inventory Manager. More often than not it so happens that once a part has been issued out to maintenance team personnel based on their work order material requirements it is considered as expensed . If such a parts happen to be a repairable part, then it becomes imperative for an organization to track these and ensure that if it goes faulty it comes back to inventory, goes through the repair-return process and is finally back on the shelf as available to use. But if it does not come back to the inventory then it results in reordering of such parts again and again leading to unnecessary stocking of these parts and blocking valuable capital which could otherwise have been used somewhere else.
If there is a mechanism wherein one can track such repairable items/parts a little differently than the using a system it will definitely provide more visibility in the system. This could well be the first step towards solving such an issue. Such parts can be differentiated from other normal parts by serializing them and having a special attribute in the item definition which distinguishes it from others.
2) Incentivizing returns: How do I get the operations team to return back the item? If the technicians working on removing the faulty part fails to return or ship it back to the main warehouse the part will remain in the mini-warehouse forever. This seems to be the case in the above scenario as well. If there is provision to give the credit back to the cost center returning the faulty part it will definitely help improving the situation. There are many options to do this using an asset management system. We can have a weekly reporting capability built in order to show the work orders which have drawn repairable items from inventory. This can be grouped by cost center and published to the cost center owners to show them the credit's they would receive if they return the faulty part to inventory. This will ensure that there is adequate pressure from the cost center managers down to the technicians to return the faulty parts to inventory. This can be built in as a part of standard operating procedure as well for the technicians who execute the work orders.
3) Avoid showing items in repair cycle as available: Once the faulty part is returned to inventory and is back we have to make sure that such an item is not shown as available to issue. Many a times it happens that in when I look up for on-hand stock it shows up as available and I go to store to get it issued only to find that it is in the repair cycle and there are no items on shelf. To facilitate this, provisions can be made in the inventory management system which show these items as in-stock but not ready to use. Most of the inventory management systems have provisions to have various statuses for on-hand stock .For example RH- To indicate repair hold, Active - To indicate as ready to use, RV - To indicate repair at vendor site etc.
4)Tracking items in repair cycle: More often than not an item sent to the supplier for repair is easily forgotten by the inventory management team if they are not enabled to keep track of repairs. In their day to day operations while managing Min-Max related requisitions it is difficult to isolate a single item which might have gone for repair unless there is an indication of the same. The other option is to ensure that such items are serialized in your inventory management system. Along with this use the on-hand stock statuses indicated above to clearly differentiate items out for repair at vendor site using a weekly report which is published to inventory management team. This helps continuous monitoring of such items and enables proper tracking.
5) Apportioning repair costs: The issue related to apportioning the repair cost of an item is relatively an easy one to solve. It is a matter of ensuring that your operations team is made aware that the cost has to be borne by their cost center and informing the team managing the repair cycle to choose the correct operations cost center on repair requisitions. Once these 2 things are taken care of, the cost will get tracked appropriately. Of course buy in from operations management team is a prerequisite to this as well.
6) Proper reporting of assets in balance sheet: An item in the repair cycle is still an asset for the organization till the point it is declare as unfit for use and scrapped. Hence it becomes an audit finding if the valuation of such parts are not shown in your balance sheet. To ensure that you correctly state your inventory value, having a provision to take back your repairable assets into your inventory first and then sending them across for the repair cycle becomes very important.
In summary the Repair and Return process in an organization can be streamlined if we can adopt the following steps.
Step 1: Having an integrated Asset & Inventory management system with capabilities to track serialized items and producing operational reports to enable tracking for such items.
Step 2: Incentivizing returns by ensuring that the operations cost center gets back the credit on returning the faulty repairable items is the next step. This will also address the issue of including such parts in inventory valuation.
Step 3: Properly training the inventory management team to use appropriate cost centers for repair services.
Step 4: Ensuring that the items in repair cycle are not visible for other departments as available to use.