The High Cost of Low-Value C-Parts: Procurement of Low Priority Inventory Is Impacting Operational Productivity

Distributors Unlock Value of Tail Spend with ACTYLUS Smart Bin Systems

C-parts represent around 20 percent of procurement costs within a business, but an astounding 80 percent of purchasing volumes. Despite being low in value, their procurement is frequently time-consuming and expensive when you take into account having to find suppliers, select the goods and negotiate costs – and do this on a regular basis to ensure stock is always available.Lets 

Lets look at how automated inventory replenishment systems can help to manage lower-value items to ensure optimum productivity and keep order costs to a minimum.

Inventory is often split up via the A, B or C classification, with A referring to the most expensive and important parts, B for parts of mid-level importance and C for the least expensive and least important parts. Management of these parts often follows the same structure with more attention typically paid to managing A-parts compared with C-parts due to the individual value attributed to them.

C-parts, usually consumables, such as screws, nuts, bolts and washers, are lower value and easily replaceable items used in production facilities. Due to their lower value, these items are often maintained with looser control and are more easily accessed. C-parts are not always front of mind in an industrial environment, with more attention paid to more expensive items. Despite the greater focus being on parts deemed more important, a production line can still come to a stand-still if C-parts are unavailable.

Low-Priority Parts Can Lead to Procurement Inefficiencies
Where A-class items may be counted three times a year, C-part items are often only counted once a year – sometimes not even that often. They are usually restocked at a similar frequency and even then, this is based on a rough estimate rather than any accurate determination of the actual quantity required.

Consumable items tend to be handled in bulk and include a high amount of ‘safety stock’. A lack of knowledge of the supply and demand levels of each low-value item means items are frequently over-ordered to avoid running out of stock, with suppliers contacted on a regular basis to reorder. Despite this solving stock replenishment issues in the short term, it means more money than needed is being spent on inventory, and storeroom managers and procurement teams cannot see where money is being wasted.

On the other hand, too little safety stock could mean items run out and production is affected. If a consumable item is unavailable, this can result in unplanned production downtime, which in turn can lead to missed order deadlines, reputational damage and even an effect on potential repeat business. Although these consumables are lower value items, they should be readily available at all times so that productivity and efficiency are not affected and workers can get on with the tasks required of them. Ideally, a business needs to be able to predict usage, and an intelligent automated dispensing solution can do just that.

Automated dispensing solutions, based on smart bins, can provide the answer to stock replenishment. These intelligent Kanban/VMI systems are able to manage consumable stock by sending automated stock alerts and re-order notifications to suppliers to eliminate the need for regular counting trips, safety stock and emergency orders – cutting inventory costs by up to 30 percent and improving productivity.

Behind these replenishment systems is a cloud-based platform which monitors the smart bins to see when items need restocking based on the weight of the components it contains. Simultaneously, the software tracks usage patterns and trends through a reporting system. This allows procurement teams can establish which items are being used most frequently. The cloud-based platform can be accessed remotely via phone or email, ensuring stock levels can be monitored at all times.

With a low purchasing volume yet an extensive procurement process, C-parts represent a key opportunity to optimize management and reduce cost. Despite their low value, these small parts can be safety-critical and vital to production and maintenance, and their management should reflect this. Employing an automated dispensing system can take away the headaches of stock management, and ensure that time and money is not being wasted on sourcing these small yet essential items.

To learn more about the ACTYLUS Smart Bin System from Apex Supply Chain Technologies, visit www.apexsupplychain.com/feature/actylus/, email info@apexsupplychain.com, or call 800.229.7912.