Owing to increasing demand for improved quality and the availability of production operations across industry, metallurgical plant and equipment supplier SMS group provides consignment stock or warehousing facilities for operational and insurance spare parts and components.
“The service enables customers to reduce their capital spend on the holding of stock to ensure operational and financial improvements,” says SMS group key accounts manager Samuel Gounden.
He points out that the aim of warehousing optimisation is to help define and reflect the demand of spare parts, one of SMS group’s additional service offerings. Part of the offering is machine-specific equipment inspections. “Regular inspections and maintenance measures help ensure plant efficiency and detect potential weaknesses at an early stage.”
These potential weaknesses include excessive wear or damage to components on equipment, which can fail at any time. This creates inefficiency in the operational process, as components are not operating as originally designed, Gounden explains.
He adds that SMS group also offers a service which enables experts to execute failure-mode analysis. This information is then shared with the client who, in turn, conducts any recommended improvements or installation procedures of the spare part. These experts, who have global experience in the field of plant-manufacturing equipment, also assess other contributing factors that could cause the failure of spare parts, Gounden says.
SMS group employs the services of a refractory expert, and offers the consignment or warehousing concept for the supply of refractory material to the nonferrous and ferrous industries. The company currently has seven consignment stock contracts in place, three of which are based in Russia, two in Germany, and one each in the US and Africa.
SMS group also provides clients with the opportunity to keep specified spare parts, deemed necessary for plants, in stock at either their premises or at the premises of SMS group. “Spare parts are made available to the client on demand, in accordance with the ‘just-in-time’ principle – an inventory strategy to increase efficiency and decrease waste by receiving goods as they are needed.”
He explains that, if clients use their own warehouse, contractual costs will be less than if SMS group had to build a warehouse for them. Stock will belong to SMS group, but it will be stored in their warehouse. “The benefit of no initial capital commitment for this stock will still be realised by the client. This is just another model we are offering to assist our clients who have lower budgets than others,” Gounden says.
This eliminates capital commitment of spare parts in stock, with the only payment incurred by the client being a service fee at a rate charged by SMS group, which is determined by the volume and value of the parts to be stored, Gounden notes. Spare parts can be requested by customers 24/7 at previously agreed-upon fixed prices, whether parts are stocked at SMS group’s premises or the client’s.
“The idea is that the spare parts are available immediately, as there is no lead-time for manufacturing, and can, therefore, be used and accessed immediately.”
Clients who manage stock with their own resources do so in their warehouse facilities. However, SMS group takes over the supply chain management for the client, thereby not only reducing client working capital levels, but also client overhead costs associated with procurement and the management of the spare parts supply chain.
In addition to customers’ access to spare parts, SMS group also ensures short delivery time for all parts, as it holds a safety stock of all components, from mass-produced products to machine-specific parts, subsequently streamlining the plant operator’s processes.
SMS group and the client agree on safety stock levels, after which the SMS group takes over supply chain management, ensuring timeous deliveries of all stock, and the maintenance of minimum stock levels, Gounden explains.
He says that, in the long term, buying spare parts will become more transparent, as prices are adjusted only once a year.
Further, clients only pay after spare parts have been withdrawn from the warehouse facility and issued for use in the plant. This provides SMS group’s clients with a significant cash flow and working capital advantage. He says deliveries take place from warehouse to plant within one day, with on-demand express deliveries possible within 90 minutes.
“Customers can, therefore, focus on their core business without being concerned with logistics and warehouse management.”
He adds that procurement processes of goods within a company using SMS group’s service will also benefit, as a result of the reordering budget application and buying processes being eliminated. Time spent on managing warehouses and in-house administration costs will also decrease, allowing clients to realise benefits of outsourcing noncore logistics activities.
Gounden also explains that increased plant availability ensured by timeous delivery of components will, in addition to mitigating expenditure costs for late orders, also assist with companies’ efficiency and cost savings. Risks pertaining to long lead times on critical components and spare parts will also be mitigated, with originalequipment manufacturers taking full responsibility and accountability for the quality and efficient delivery of critical spare parts.
“Offering customised, client focused, service-centric consignment warehousing concepts to suit the requirements of individual clients looking to increase plant availability and reduce losses associated with unplanned stoppages, sees SMS group further prioritise its role as an integrated process technological business partner to our clients,” he points out.
Consignment warehousing is yet another example of SMS group – in partnership with its clients – continuously developing new service value propositions to add shareholder value for its clients, delivering on its commitment to be the leading partner in the world of metals, Gounden concludes.