Hydrocarbon Processing - February 2021 - 71

Supply Chain
K. R. IYER, M/s Indorama India Private Ltd.,
Haldia, India

Avoid costly stockouts through inventory sharing
Inventory sharing, per se, is not a new
concept; rather, it is a popular practice in
the wholesale and distribution business.
However, the collaborative arrangement
of inventory sharing among manufacturing industries is a new concept and not
widespread. The author was involved in
a successful inventory sharing project
among neighboring industries, and this
article details how it can be accomplished
with minimal time and effort.
Inventory sharing among group companies located in multiple geographical
locations or among neighboring industries can prevent costly stockouts, improve uptime, reduce emergency purchases, prevent obsolescence and dispose
of surplus inventory-truly a synergistic,
win-win situation for all collaborating
companies. Contrary to the common
apprehension of how inventory can be
shared when participating companies
have different enterprise resource planning (ERP) systems, end products, manufacturing processes, technologies, etc., it
is simple and once operational, requires
very little or zero maintenance.
Manufacturing industries must stock
various classes of spares, such as operational spare parts and generic items like
pipes and pipe fittings, electrical fixtures,
fuses, cables, valves, conveyor components, lubes, etc. Since line managers want
to avoid stockouts at any cost, they tend to
stockpile inventory; over time, 8%-10%
of these get damaged, become obsolete or
remain unused. Despite stocking so much
inventory, costly stockouts are not uncommon. In the event of a stockout crisis, line
managers and the purchasing department
often struggle to acquire the required part
in the least possible time to minimize the
plant outage. Consider that a neighboring
company may have the required spare or
component and could easily share or loan
it, avoiding a long unit shutdown.

Inventory is capital idling in storage
and is considered a sunk cost. Despite a
continuous management focus on inventory control, the inventory value keeps
mounting year-on-year. Many continuous
process industries are situated in industrial zones and are close to each other. Many
large companies have units in more than
one geographical location, often manufacturing the same product. Some equipment
or machinery are common across industry, even if the product is different (e.g.,
a gas turbine for a captive power plant, a
diesel engine set for emergency power, air
compressors for plant and instrument air,
fire water systems, belt conveyors).
Among generic items (valves, pipes and
pipe fittings, fasteners, fuses, cables, etc.),
the degree of interchangeability among industries is significant. Most urea/ammonia plants in India utilize the same technologies and have almost the same nameplate
capacities for each train. For critical equipment, industry tends to focus on only one
or two preferred manufacturers. However,
it is advantageous in most stockout cases
to consider and use substitutes.
Inventory sharing can help optimize
inventory and keep critical and insurance
spares at one location rather than all locations or factories stocking the same

interchangeable insurance spares. By
their very nature, insurance spares may
not be required during the entire lifetime of equipment, yet companies must
keep them-in the unfortunate event of
equipment damage or failure, securing
the needed insurance spare may take several months, and stockouts can drive the
company out of business.
Avoiding missteps. During an inventory sharing project in Qatar in which the
author participated, team members from
the participating companies met weekly
to decide the modalities of the project.
The team realized that differences existed in the way the item master was being
maintained by the companies:
* Companies were using different
ERP systems
* Different levels of maturity existed
in the upkeep of the item master
* There were discrepancies in
units of measurement when
specifying sizes (e.g., in. vs. mm)
* Some companies used ASTM
designations for materials while
others used BS or other standards.
The team consensus was to devise a
common codification logic and instate a
uniform way of describing the items. This

FIG. 1. Inventory sharing application developed by the author.
Hydrocarbon Processing | FEBRUARY 2021 71

Hydrocarbon Processing - February 2021

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