Typical Challenges in a Repair & Return Process - Part 1
Through this 2-part blog I will attempt to highlight a few challenges pertaining to this process and possible solutions to the same. I have tried to bring out the issues in this process by using certain hypothetical characters playing various roles and the conversations between them.
ABC Corporation had been in the domain of pipeline maintenance, transporting crude oil from the exploration sites to the nearest port, for past 35 years. The organization had a Work Management System in place which was used to schedule and execute their day to day maintenance work orders. The same system was also being used for procurement of materials and inventory management. Apart from these functions the other departments like HR, Payroll, Finance and Projects were using another ERP system. The project we were a part of was a means to consolidate the IT landscape into a single platform thereby avoiding a lot of interfaces and bring in efficiencies in the processes.
Repair and Return Process - Challenges
The Inventory Controller at ABC Corp. (who is responsible for Inventory Management across organization) had around 25 warehouses under her purview. Out of these 3 were central warehouses which used to stock larger quantities of materials and the rest of them were expensed mini warehouses spread across various pump stations along the pipeline.
One of the most common concerns for any Inventory Controller is keeping a check on the inventory on-hand. At ABC Corp. also Mrs. Janet, the Inventory controller, was constantly keeping an eye on the value of stock held in inventory. During one of her routine quarterly stock analysis exercise she observed something unusual. That whole quarter there was a steady increase in the month on month inventory valuation. That is when she called for a discussion with the three warehouse managers (Mr. Patrick, Mr. Joe & Mr. James) who were in charge of the central warehouses. She told them about her observations about constantly increasing stock valuation. She also highlighted that she had ruled out increase of maintenance activity as a cause for this issue because she had discussed this issue at length with the Operations Director. He had categorically stated that there hasn't been any unusual increase in maintenance operations. On further analysis she had found that the major contributor for this stock valuation had been certain high value nozzles which were repairable in nature. When she tabled her analysis during the discussions the warehouse managers promptly responded.
"Yes, very true Janet" said Mr. Joe. "Those nozzles are very critical to our operations and we always get requests from the maintenance team to stock these. To avoid stock outs we try to order additional one or two quantities every time we go below our minimum."
Mrs. Janet tried to probe them further. "But if they are requesting for such items they will have cases of replacing an existing one which malfunctioned, isn't it?"
"That's true Janet" said Mr. Patrick. "Most of the times that is the case. They come with a Work Order Number and are always in a hurry to get the new part issued from the store."
"And the malfunctioned part which is replaced lies in the mini warehouse at the pump stations", added Mr. James.
Mrs. Janet was a little annoyed on hearing this. She could clearly see some of the issues which were coming out. She tried to continue the conversation to get some more details.
"James, isn't it very obvious that we can repair and reuse these costly items again and avoid unnecessary stock pile up?"
"Very true, Janet." James responded. "But looking from the maintenance team's perspective, what incentive do they have to get it back to the warehouse so that we can ship it for repair? Once these Items are issued out to them it is charged to their cost center", he added.
Mr. Joe pitched in again, "Moreover even if they return it, the repair cost is being borne by our cost center as we raise the request for repair services. Apart from these things, the malfunctioned items lying in the mini warehouses do not get valued in our inventory balances too."
"That's very true, Joe" remarked Mrs. Janet. "We can't show them as available in stock because then someone will ask for it while the item is in the repair cycle. This thing is indeed a little more complicated than I thought. Can we try to come up with an actionable plan to tackle these issues?"
"Sure, we can" retorted all three warehouse managers.
In the next part of this blog I will try to analyze the problems presented through the above conversation and the possible solutions to it.