Executive summary: Plan for Every Part is a single governed record for every part number in your operation, covering usage, lead time, sourcing risk, packaging, storage location, and replenishment rule. It exists because uniform inventory policy is the fastest way to tie up cash in the wrong parts while starving the ones that protect your constraint. This guide covers what belongs in a PFEP record, how to segment parts into tiers, how to build one in six steps, and how to keep it from going stale.
- What is a Plan for Every Part?
- What belongs in a PFEP record?
- How do you segment parts into tiers?
- How do you build a PFEP in six steps?
- How does PFEP protect the constraint?
- How do you keep a PFEP from going stale?
- What are the most common PFEP mistakes?
- Plan for Every Part: operator FAQ
- About the Stagnation Assassin
What is a Plan for Every Part?
A Plan for Every Part is one governed record per part number capturing how it is used, sourced, packaged, stored, and replenished. It replaces uniform inventory policy with a deliberate decision for each part. That matters because treating every part identically is what ties up cash in commodities while starving the components that protect your output.
The discipline came out of Lean material handling practice, where the question was deceptively simple: for every single part in this plant, does someone actually know how much we should hold, where it lives, who supplies it, how long replenishment takes, and what happens if it does not arrive? In most operations the honest answer is no. There is a policy, usually something like a blanket weeks-of-cover rule, applied identically to a fastener that arrives next day from four suppliers and to a custom casting with a sixteen week lead time from one source.
I have led transformations at Berkshire Hathaway, Illinois Tool Works, and Whirlpool, and this is one of the least glamorous and most reliably profitable things you can do in an operation. It produces no press release. It just quietly returns cash that was doing nothing and simultaneously removes the material shortages that were stopping production.
Here is the framing that makes it click. Inventory is not one decision. It is thousands of individual decisions that most companies make once, badly, and then never revisit. A PFEP forces each of those decisions to be made deliberately, on the basis of that specific part’s behavior. And the ones that matter most are not the expensive parts. They are the parts that can stop your constraint, regardless of what they cost.
What belongs in a PFEP record?
A useful record covers five categories: identity and usage, sourcing and lead time, packaging and handling, storage and location, and the replenishment rule with its trigger points. The last category is the one most teams omit, and without it the PFEP is a description of the present rather than an instruction for what to do next.
Here is the field set I use. Adapt it, but do not thin it out before you have run it once, because the fields people cut first are usually the ones that turn out to matter.
Identity and usage
Part number, description, where used and on which products, annual usage volume, demand variability, and whether the part touches a constraint operation. That last flag is the one most PFEP templates lack and the one that changes the most decisions.
Sourcing and lead time
Supplier, number of qualified alternate suppliers, quoted lead time, actual measured lead time, lead time variability, minimum order quantity, and unit cost. Quoted and actual lead time belong in separate fields, because the gap between them is precisely the risk you are managing.
Packaging and handling
Container type, quantity per container, weight, and any special handling. This is the section people skip as clerical detail, and then discover that their replenishment quantities are impossible because the part ships in fixed pallet quantities that do not divide into the reorder point they calculated.
Storage and location
Where the part lives, point of use location, and footprint consumed. Storage location connects the PFEP to the physical floor, which is what stops it from becoming a spreadsheet exercise disconnected from where work happens.
Replenishment rule
Days of cover, reorder point, order quantity, replenishment method, and the tier assignment. This is the output of the whole exercise. Every other field exists to justify this one, and a PFEP without an explicit replenishment rule per part has not actually decided anything.
How do you segment parts into tiers?
Segment on two axes rather than one: supply risk, meaning lead time plus sourcing concentration, and consequence, meaning what happens to your constraint if the part is unavailable. Classic value-based ABC analysis misses the second axis entirely, which is how plants end up well stocked on expensive parts and short on cheap critical ones.
The traditional approach ranks parts by annual spend. High-value parts get attention, low-value parts get ignored. It is intuitive and it is dangerous, because a two dollar component with a sixteen week lead time from a single source can shut down a line just as completely as a thousand dollar casting, and the value-based method will never flag it.
I have seen manufacturers carrying six months of commodity fasteners while continuously running out of a custom electronic component with a sixteen week lead time from a single supplier. That is backwards in both directions at once, and it destroys working capital efficiency while causing the exact shortages the inventory was supposed to prevent. Value ranking produced that outcome. Risk and consequence ranking prevents it.
The four tiers are not arbitrary. Each one carries a different replenishment philosophy, and the days of cover follow from the risk, not from a company-wide rule. Tier 1 strategic parts carry ninety days minimum and justify a qualified backup supplier even at a premium price, because the premium is trivial next to the cost of a stopped constraint. Tier 2 tactical parts carry around forty-five days with active supplier relationships maintained. Tier 3 commodity parts carry fifteen days at most, with consignment negotiated wherever a supplier will agree to it. Tier 4 spot-buy items carry nothing at all and get purchased per job.
How do you build a PFEP in six steps?
Build it in this order: extract the part master, measure actual lead times rather than quoted ones, flag every part that touches a constraint, score supply risk and consequence, assign tiers and replenishment rules, then implement in waves. Expect the measurement step to consume most of the effort and to produce most of the surprises.
Step 1: extract and clean the part master
Pull every active part number with usage history. Expect obsolete parts still flagged active, duplicates under different numbers, and parts with no usage in years still carrying stock. Cleaning this list is unglamorous and it typically finds cash before you have analyzed anything.
Step 2: measure actual lead times
Do not use quoted lead times. Pull receipt history and calculate the real distribution: median, worst case, and variability. Quoted lead time is a sales number. Actual lead time is what you have to survive. The gap between them is frequently large enough to change every tier assignment downstream.
Step 3: flag constraint-touching parts
Identify every part consumed by or feeding the constraint operation. This flag overrides value-based intuition throughout the rest of the exercise. A cheap part that can stop the constraint gets treated as critical regardless of its price, because the loss is measured in constraint hours, not in part cost.
Step 4: score risk and consequence
Score each part on supply risk, combining lead time, lead time variability, and number of qualified suppliers, and on consequence, meaning what stops if it is unavailable. Two simple scores are enough. Elaborate weighting models add precision you do not have and delay a decision you could make today.
Step 5: assign tiers and replenishment rules
Place each part in a tier and write the explicit rule: days of cover, reorder point, order quantity, and method. This is where the analysis becomes an instruction. A tier assignment without a replenishment rule attached is a label, and labels do not release cash or prevent shortages.
Step 6: implement in waves
Start with constraint-touching parts and the highest-risk tier, because that is where both the shortage risk and the release opportunity concentrate. Then work outward. Attempting to reset every part number simultaneously produces chaos and a credible argument from procurement that the whole thing is unworkable.
How does PFEP protect the constraint?
It redirects inventory investment toward the parts whose absence would stop your constraint and away from parts you can replace next day. Since constraint downtime is throughput the system never recovers, holding deep cover on constraint-critical parts is cheap insurance, while deep cover on easily sourced commodities is pure cost.
This is the connection that makes PFEP more than a materials housekeeping project. Your constraint sets your output. Every hour it sits idle waiting for a part is throughput gone permanently, not deferred. So the question for any part is not what it costs to hold, but what it costs when the constraint stops for want of it.
Run the comparison. A constraint hour at many manufacturers is worth roughly ten thousand dollars of throughput. A single day of constraint downtime on two shifts is therefore in the neighborhood of a hundred and sixty thousand dollars. Against that, carrying an extra sixty days of a critical component, even one costing a few thousand dollars, is trivially cheap. Meanwhile the same sixty days of cover on a fastener you can source next day from four suppliers protects against nothing and costs real cash.
When I helped scale a custom manufacturing business from fifty million to sixty-seven million in revenue over twenty-six months, working capital became the hidden constraint that nearly derailed the whole thing. The four-tier strategy released roughly 4.2 million dollars of working capital, which we redeployed into strategic Tier 1 components. That combination eliminated our material-shortage production delays while volume rose twenty-five percent, and total working capital investment actually declined. Same cash, radically better allocated.
Applying a four-tier inventory strategy released roughly $4.2M of working capital, which was redeployed into strategic long-lead components. Material shortage delays disappeared while production volume rose 25 percent, and total working capital investment declined. The cash did not increase. It stopped sitting in commodity parts that protected nothing.
How do you keep a PFEP from going stale?
Assign explicit ownership, set a review cadence tied to part criticality, and add trigger events that force an off-cycle update. A PFEP built once and never maintained is worse than none, because people trust numbers that quietly stopped being true a year ago and stop verifying them.
Three mechanisms keep it alive.
Ownership by tier, not by department. Tier 1 strategic parts get a named owner who reviews them quarterly at minimum. Tier 3 and 4 can run on annual review. Assigning ownership to “procurement” as a function guarantees nobody does it, because a responsibility everybody holds is a responsibility nobody holds. Use named accountability, not departmental accountability.
Trigger events that force a review. Certain events invalidate a PFEP record immediately and should force an off-cycle update: a supplier change, a lead time miss beyond a set threshold, an engineering change to the part, a constraint migration to a different operation, or a material demand shift. The constraint migration trigger is the one people forget, and it is the most consequential. When your constraint moves, the entire set of constraint-touching flags changes, which changes tier assignments across the board.
A measured cadence, not a calendar reminder. Track lead time performance continuously against what the PFEP claims. When actuals drift from the record, that is your signal to review, and it arrives long before an annual review would catch it.
What are the most common PFEP mistakes?
Four failures dominate: using quoted lead times instead of measured ones, segmenting by part value instead of by risk and consequence, building a beautiful database with no replenishment rules attached, and letting it decay after the initial project because nobody owns it.
Mistake 1: trusting quoted lead times
Quoted lead time is what a supplier hopes to achieve. Actual lead time, measured from your own receipt history, is what you have to plan against. I have seen twelve week quoted lead times run nineteen weeks in practice with heavy variability. Every tier assignment built on the quoted number was wrong, and the shortages that followed looked mysterious until somebody pulled the receipt data.
Mistake 2: segmenting by value alone
Classic ABC ranking by annual spend is the default, and it systematically misses cheap critical parts. The result is a plant with excellent coverage on expensive items and recurring shortages on inexpensive ones that happen to be single-sourced with long lead times. Add the consequence axis or you will keep reproducing this pattern.
Mistake 3: a database with no decisions in it
Teams build an impressive PFEP with dozens of fields per part and no explicit replenishment rule. It documents the present rather than instructing the future. If someone cannot open the record and read what to order, when, and how much, the exercise produced a report, not a system.
Mistake 4: treating it as a project
The team builds it, presents results, disbands, and moves on. Eighteen months later suppliers have changed, lead times have drifted, the constraint has migrated, and the PFEP describes a plant that no longer exists. Assign ownership and a cadence at the start, or accept that you are buying a one-time cash release rather than a capability.
The mistake I made personally was sequencing. I once built a full PFEP before confirming where the constraint actually was, which meant the constraint-touching flags were applied to the wrong operation. All the analysis was competent and the tier assignments were wrong, because the single most decision-relevant field in the whole record was populated from an assumption. Confirm the constraint first. Everything in a PFEP that matters hangs off that flag.
A constraint hour worth roughly $10,000 of throughput makes a day of constraint downtime on two shifts cost around $160,000. Against that, sixty extra days of cover on a critical long-lead component is trivially cheap insurance. The same sixty days on a next-day commodity fastener protects against nothing and consumes real cash.
Plan for Every Part: operator FAQ
What is a Plan for Every Part?
A single governed record for every part number covering usage, sourcing and lead time, packaging, storage location, and an explicit replenishment rule. It replaces uniform inventory policy with a deliberate decision per part, which stops cash from accumulating in easily sourced commodities while critical long-lead components run short.
How is PFEP different from ABC analysis?
ABC analysis ranks parts by annual spend, which sees only value. PFEP segments on supply risk and on consequence to the constraint, which catches the cheap single-sourced long-lead part that can stop production. Value ranking is why plants end up overstocked on expensive items and short on inexpensive critical ones.
How many days of inventory should each tier carry?
Days of cover should follow risk, not a company-wide rule. Strategic single-source long-lead parts commonly justify ninety days plus a qualified backup supplier. Tactical parts with multiple qualified suppliers sit near forty-five days. Commodity parts cap around fifteen days, and readily available spot-buy items carry no stock at all.
How long does it take to build a PFEP?
Most of the effort goes into measuring actual lead times from receipt history rather than using quoted figures. A focused build covering constraint-touching parts and the highest-risk tier first delivers cash release and shortage reduction well before the full part master is complete. Implement in waves rather than resetting every part at once.
About the Stagnation Assassin
Todd Hagopian is a Fortune 500 transformation executive who has generated $3B+ in shareholder value across Berkshire Hathaway, Illinois Tool Works, Whirlpool, and JBT Marel, where he serves as VP of Global Product Strategy. Known as The Stagnation Assassin, he is the author of two published books: The Unfair Advantage: Weaponizing the Hypomanic Toolbox and Stagnation Assassin: The Anti-Consultant Manifesto. His blog is published in 15+ languages and read by operators worldwide. Bring him to your stage via the speaking page or connect with him on LinkedIn.
Next step: an inventory tiering review
You are almost certainly holding months of parts you could buy tomorrow while running short on the ones that stop your line. Book a 20 minute inventory review and I will help you find the cash sitting in the wrong tiers, then show you how to redeploy it toward the parts that actually protect your output. Start the review here.