Industry driven by spare parts

This report was generated based on a survey that the company had done once previously, back in 2016, and now did again. ERIKS’ aim is to raise awareness of the unaddressed issue of availability of spare parts within the industry.

“Our company strapline is ‘let’s make industry work better’. When I talk to my colleagues about this, I try and boil that down to our reason for getting out of bed in the mornings, which is to protect UK and Irish manufacturing jobs. And we do that by bringing a technical and an engineering perspective to the products and services that we supply,” Paul said.

Availability of parts 

The first headline from the report stated that more than 50% of the manufacturers that ERIKS surveyed admitted to having downtime driven by parts availability. “The downtime is the unseen and unspoken threat to UK manufacturing – and the amount of waste involved is huge,” he said. By companies not having the spare parts that they require to keep machinery running, half are incurring downtime.

Depending on the industry that you’re in, there is both a financial and a much larger effect from downtime, overall. Paul used Warburtons as an example: “If that company were to have some unplanned downtime, as a consumer shopping at your local supermarket, you might not be able to buy a loaf of bread. That might annoy you, but more so, it would be costing Warburtons £1,000’s of pounds an hour to have that machinery out of action.”

Alternatively, if you compare that scenario to a company like GSK, any downtime could be worth millions, due to the products it is producing – batch pharmaceuticals. If the product doesn’t move from process A to process B, GSK has to throw it away. An incident of downtime could now result in a loved one going to the chemist and not being able to get a prescription fulfilled. “Which could be slightly more important than not being able to make some toast,” Pauls added.

People and skills

ERIKS looked at five different areas of manufacturing businesses – people and skills, financial, procurement, performance and the impact on the business.

Paul began by addressing people in skills. “When it comes to managing spare parts, how big are your teams and why should it matter? We saw from the survey that it was predominantly one to three people who were managing this activity. This makes it difficult because there could be a time throughout the year where nobody’s managing this critical part of the manufacturing process.”

Another challenge that companies face with small teams  is that if you visit the HR departments of large manufacturing organisations and ask to be taken through plans for the sales force, the engineering force or finance, they will be able to provide development plans.

However, this is not the same for the upskilling of engineering stores. “The first question would be, what’s an engineering store? So that’s a challenge in that the stores tend to be a forgotten function,” Paul said.

One of the common responses seen from the survey was that manufacturers were outsourcing this function because costs are escalating, they want operational efficiency and want to focus on core tasks. “Interestingly, the fact that the inventory manufacturers have on their books is either wrong or they have to write it off is actually the lowest reason for outsourcing it,” he added.

Financial

When ERIKS did the survey and report back in 2016, it asked how frequently manufacturers check engineering store inventory? “In 2016, 12% of the respondents said that they never check. They were merely relying on the fact that when they go to the store, the spare part they need to keep the production running will be there.”

However, the data in 2023 shows that 30% are now saying that checks are never undertaken. Paul stated that the average factory will have circa £1-£1.5m pounds tied up in spare parts which are not being checked, even though one of the lowest reasons for outsourcing is stock accuracy.

Many of ERIKS respondents said that they didn’t know the average value of engineering inventories written off in an average year. “In my experience, the actual answer is that they’re not doing anything about it, making it a ticking time bomb. They’ve ultimately got a big write off coming their way,” said Paul.

In this survey alone, ERIKS calculated around £12.5m worth of admissions. There are products manufactured where ore is removed from the ground, steel gets made, it gets manufactured into a product and then shipped around the world. It then gets put on a shelf, and then five years later, it gets thrown in the bin. “Ignoring the financial aspect, a major issue here is sustainability.”

Procurement

ERIKS then looked at the procurement aspect and the process that manufacturers go through when they need a spare part.

What the survey and report found is that the people in the engineering stores were doing the least when it comes to procurement, which didn’t make sense. “This means that engineers are spending a lot of time trying to figure out what the part is that they haven’t changed for 20 years, and where they are going to buy it from,” said Paul. This inevitably results in the engineers buying the part from the first place they can find it, which is not always the most cost-effective way of running operations.

“Worryingly, 55% of respondents said that they have rogue spending or secret stashes, off book, that they use for the procurement process to get the vital components they need to keep their factory running,” he added.

Industry performance

In terms of the different maintenance practices that organisations use, ERIKS saw that a number are still operating a ‘run to fail’ strategy. They will keep that factory or machine running until it breaks, and when it breaks, they will fix it. However, the most prevalent method seen is preventative maintenance where it’s done on a schedule.

“There are two options here; they are either going to perform maintenance on a regular basis or when a machine fails. And both these options place expectation on to the engineering stores and how they run,” Pauls explained.

Ideally, the engineer would go to the store and collect the item within a few minutes. Or, if it is preventative maintenance, they would know they had to make a change tomorrow, so would collect the part beforehand with zero downtime. “Those scenarios occur 60% of the time, but companies are still leaving themselves open to the 40% when the item is not in stock and it takes hours, or days, to get a part. If you marry that with the ‘run to fail’ scenario – waiting for the machine to break before its fixed – and the stock accuracy problem, with manufacturers simply not knowing what they have, and just hoping it’s going to be there, then there is potential for a lot of downtime and loss of profit.”

Impact on business

Ultimately, companies have a function and a problem that they don’t really understand. “This is causing them a huge degree of downtime and is one of the biggest risks to UK manufacturing – organisations failing to meet production demands due to failing machinery. These companies then face the head office moving production to Spain, Poland or Italy, because the UK factory is completely inefficient.

“The reality is it’s driven by spare parts availability, which seems to be an incredibly easy thing to fix. But something that the manufacturing community in the UK and Ireland don’t seem to be fully aware of,” said Paul.

The report showcased an opportunity to strengthen the overall profitability and resilience of manufacturing businesses through the improvement of the engineering stores function, procurement and the supply chain.