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Financial and Accounting Issues


the accountants dilemma

stock holdings

Accountants worldwide understand that the holding of stocks is an expensive business. Organisations have switched to "Just in Time" methodologies precisely to avoid the costs of stockholding. However in the case of certain stocks, machine spares being a good example the "Just in Time" doctrine doesn't really work. 

In the case of stock purchased for production processes there is an element of certainty about volumes if not about delivery schedules thus allowing suppliers to make for stock or indeed to schedule their own production runs in anticipation of likely orders. Just in Time therefore, whilst primarily of benefit to buyers, also has certain advantages to suppliers.

In the case of machine spares however there is little certainty either about volumes or indeed delivery schedules and therefore suppliers cannot always guarantee immediate delivery as they may well not hold stocks themselves or where they do they are geographically difficult to access. 

Mindful of the effects of machine outages organisations hold a number of critical machine spares on a "Just in Case" basis and here is where the Accountant faces a dilemma and a potential conflict with Production Engineers and Stores Staff.

The engineer's view on the world will always be to eradicate the risk of outages through a number of strategies one of which will be keeping as many spares as might reasonably be required. This can become extreme when combined with the Stores Staffs view on the world, which is usually to have "a nice full stores" with stock ceiling high and never run out of anything. This is not a personality problem; it is how these staff are judged to be successful. Engineers who allow machines to break down for lengthy periods have failed and so have Storekeepers who run out of stock. All of this leads to the Accountants nightmare in respect of overstocking.

Whether using UK or US accounting rules, overstocking is a direct hit on the bottom line. The risk of obsolescence is also significant. How much rubbish is in UK stores which cannot be written off because of the effects on profitability. 

What is required is a system of working which allows the Engineer to feel confident that when parts are required they can be sourced quickly, Stores staff to never be seen to run out of anything and Accountants who have absolute minimum stockholdings. 

A situation where these three elements are in balance has never been possible until now. brite-sparks offers engineers the confidence that even the most obscure spares can be sourced quickly when required, removes the influence of storekeepers and reduces stockholdings to an absolute minimum.

What is unique about the brite-sparks product is that it allows organisations to co-operate with one another to maintain virtual inventories whilst at the same time not precluding them from competition. These organisations are not competing to supply spares but to manufacture and supply a whole range of diverse products, which may or may not occupy the same marketplace.

In short brite-sparks provides a sensible, co-operative inventory management system for spare parts which Internet technology makes available worldwide.

Neil Timms

For more information please contact Neil