Thursday, April 21, 2011

Now where did you leave those spare parts?

Today I had an interesting water-cooler conversation with one of the MISys salespeople over a prospect who is hung up on where to keep his spare parts.

In general, it is customary to transfer finished goods to the sales distribution inventory as soon as they are produced. But what about raw materials? Most every manufacturing company has an array raw materials that they also sell as spare parts.

So the question remains: should spare parts (raw materials that you sell) be maintained in the manufacturing inventory or in the sales inventory? As with many things, there's more than one answer to the question.

  • One option is to maintain a small supply (safety stock) of the raw material in the sales inventory. For example, if you keep 5,000 widgets in the manufacturing inventory to support your production needs, keep 5 widgets in the sales inventory just in case a customer wants to purchase one as a spare part. If you are using MISys as your manufacturing software, set the minimum and maximum stocking levels in the sales inventory to some low level (i.e. 5) and allow MISys to periodically replenish that inventory from the manufacturing inventory (Sales Transfers | Range To Sales).

  • Another option is to keep all the spare parts in the manufacturing inventory. When an order for a spare part comes in, write a sales order for it, then allow MISys to transfer a quantity of the item from the manufacturing inventory to the sales inventory sufficient to cover the unfulfilled sales order(s). Since MISys Manufacturing provides high-level functions for transferring inventory from manufacturing to sales (or from sales to manufacturing) this process that can easily be run once a day or so. All spare parts orders will be handled at the same time.

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