Published: June 08, 2022  Updated: May 15, 2025

Managing the Money: Addressing Inventory Spending in Manufacturing

Welcome to the fourth installment of our series on manufacturing stockroom challenges. As we approach the final stages of our discussion, the focus shifts to addressing inventory spending in manufacturing. Even with a seemingly organized stockroom, unseen costs related to purchasing habits, stock levels, and uncontrolled usage can significantly impact a manufacturing facility's bottom line. This article delves into these financial challenges and demonstrates how a CMMS can provide the necessary oversight and control.

The Challenge of Uncontrolled Spending

Consider a manufacturing operation where parts and supplies are purchased without a clear understanding of overall spending. Maintenance and repair activities require ongoing expenditures, but without a system to track these costs over time, it becomes difficult to determine if spending is within budget or if cutbacks are necessary. The lack of visibility into purchasing history hinders informed decision-making and can lead to overspending on inventory.

The Purchasing Dilemma: Balancing Need and Waste

Maintaining an adequate supply of inventory helps to minimize downtime in a manufacturing environment. However, determining the optimal stock levels can be challenging. Overstocking ties up capital and consumes valuable storage space, while understocking can lead to delays when critical parts are needed. Furthermore, variations in equipment reliability can create imbalances, with some classifications of inventory being consumed rapidly while others sit unused for extended periods. Without a system to track usage and equipment performance, striking the right balance becomes a guessing game.

< h2 class="blog1">The Impact of Unauthorized Substitutions

In some manufacturing settings, workers may deviate from the specified bill of materials and use alternative stock without proper authorization or documentation. While the intention may be to expedite a repair, this practice can have negative consequences for inventory accuracy. Unused, incorrect parts may be left unaccounted for, while the intended parts may become out of stock prematurely. This lack of control over usage can lead to inaccurate inventory records and difficulties in planning future maintenance.

Tracking Purchase Orders and Invoices with a CMMS

A CMMS offers a powerful solution for managing inventory costs by integrating purchase order and invoice reconciliation functionalities. Every purchase is recorded within the system, providing a comprehensive history of expenditures over any specified period. Management can generate reports detailing the cost of inventory purchases, enabling better budget control and informed decisions about future spending. Furthermore, a CMMS can often integrate with Enterprise Resource Planning (ERP) systems, facilitating the seamless transfer of financial data.

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Monitoring Inventory Usage and Equipment Health

As discussed in previous articles, a CMMS tracks the usage of inventory, providing valuable insights into which items are consumed frequently and which remain in stock for extended periods. This data helps determine appropriate levels and identify potential overstocking.

Additionally, a CMMS can track equipment meter readings and gauge data, often as part of preventative maintenance cycles. This historical data on equipment health provides valuable context for consumption patterns, allowing for more accurate forecasting and planning.

Enforcing the Issue/Return Process for Better Inventory Control

To address the issue of unauthorized parts substitutions, a CMMS enforces a strict issue/return process. When a worker requires an itemfor a task, the system generates an issue ticket, documenting the specific items being used. If alternative parts are needed during the job, the unused items are returned, and a new issue ticket is created for the correct stock. This process ensures accurate inventory quantities are maintained and provides a clear record of everything used for each maintenance task.

Putting the CMMS to Work

The true benefits of a CMMS for managing inventory costs and usage are realized once the system is actively implemented and used daily. After the initial setup and training, integrating the CMMS into the daily workflow will provide the data and control needed to address these financial challenges. While initial questions or unexpected issues may arise, a reputable CMMS vendor will offer ongoing support to ensure the system functions as intended and delivers the desired results.

Effectively managing inventory costs and usage in a manufacturing stockroom requires a comprehensive approach that integrates purchasing, inventory tracking, and usage control. By leveraging the capabilities of a CMMS, manufacturing facilities can gain the visibility and control needed to optimize inventory spending, maintain appropriate quantities, and ensure accurate consumption, ultimately contributing to improved financial performance.

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