Tracking What You Don’t Own - Managing Customer and Repair Inventory

Over the past decade, Right to Repair movements have emerged around the world, challenging the long-standing manufacturing practice of built-in obsolescence and advocating for more sustainable production models. The goal is clear: to reduce the staggering 53 million tonnes of electronic waste generated globally each year, of which 1.5 million tonnes come from the UK alone.

In the UK, The Restart Project has been championing this cause since 2013 and even co-founded Right to Repair Europe to extend the movement across the EU. Similarly, in the United States, The Repair Association has worked to influence legislation in over twenty states. These efforts have produced tangible results: the EU introduced new repairability standards in March 2021, followed by the UK government’s matching standards in July 2021.

At its core, the movement supports the right of consumers to purchase products that can be repaired or upgraded, rather than discarded. This includes not just the external hardware, but also components like batteries, memory, and processing systems. Under the new EU requirements, manufacturers must ensure their products are built to last at least ten years, reversing the trend of shortening product lifespans for profit. They must also provide the necessary tools and repair information, although in many cases, this is still limited to basic materials.

The Five Key Benefits for Manufacturers

Manufacturers that align with the Right to Repair principles typically realize several advantages:

Higher customer satisfaction through longer-lasting, serviceable products.
Enhanced brand reputation as a responsible, customer-focused organization.
Improved ESG and sustainability reporting, reflecting responsible lifecycle management.
Greater product reliability and durability by design.
Opportunities to leverage digital tools such as augmented reality, “see-what-I-see” guidance, and digital twins to support customers in completing successful repairs.

Of course, enabling repairs requires one essential element: parts availability. Given today’s supply chain delays and disruptions, many MROs (Maintenance, Repair, and Overhaul providers) and repair centers have had to innovate to ensure parts are accessible when needed. This is where practices like Customer-Owned Inventory (COI), misclassified or “ghost” inventory, and spare parts management play an important role.

Let’s briefly clarify these terms as they’re often used differently across industries:

Customer-Owned Inventory (COI): In this model, a customer requests that the repair center hold certain critical parts in stock on their behalf. The repair center stores and uses those parts for that customer’s repairs, with accounting adjustments made accordingly.
Ghost Inventory: Sometimes referred to informally as the “mystery truck,” this involves acquiring a lot of untracked or surplus parts, often scrap or reclaimed materials, that can be refurbished and reused in other repairs.
Spare Parts: Anyone who has reassembled a machine and found a few “extra bolts” can relate. These leftover yet functional components often find new life in future repairs or replacements.

The Long Stay of Spare Parts

When customers purchase high-value equipment, they often buy extra parts to ensure quick repairs when something breaks down. Instead of keeping these parts on their own shelves, they send them to the manufacturer, who already has the tools and technicians to handle maintenance. Over time, these customer-owned parts accumulate in the manufacturer’s warehouse, sometimes staying there for months or even years. They occupy real space, require careful tracking, and yet remain invisible in the manufacturer’s financial records because they are not company assets.

The Visibility Problem

This arrangement might sound straightforward, but it rarely is. When hundreds of parts belonging to different customers are mixed into daily repair operations, visibility becomes a serious challenge. Warehouse teams must know exactly which customer owns what, what condition each part is in, and where it is stored. Without a clear system, parts can be misplaced or used incorrectly. For manufacturers working under tight regulatory and contractual requirements, even a small mistake can cause delays, financial disputes, or loss of trust.

When Tracking Turns into Compliance Risk

Beyond the operational difficulties lies a deeper issue of compliance. Auditors, insurers, and customers all expect accurate proof of how non-owned parts are received, stored, and used. If a part is consumed during a repair, it must be recorded correctly and billed in line with the customer’s agreement. Without a reliable tracking system, manufacturers risk billing errors, inconsistent reporting, and audit failures. What begins as a simple service to the customer can quickly become a source of financial and regulatory exposure if visibility and accountability are not maintained.

Where Traditional Systems Fall Short

Most enterprise systems are designed to manage assets that a company owns. They record value, depreciation, and cost but assume that every item in inventory belongs to the business itself. When customer-owned parts enter the picture, this logic starts to break down. The system does not know how to record items that must be stored, tracked, and used in operations without appearing as company assets. Many manufacturers end up using spreadsheets or manual workarounds to fill this gap, which leads to data inconsistency and limited control over traceability.

Building a Virtual Warehouse

To solve this, some organizations have begun creating virtual warehouses inside their ERP systems. These digital spaces act as holding areas where customer-owned inventory can be received, stored, and managed without affecting the company’s balance sheet. Each item is tagged with ownership details, serial numbers, and condition status so that teams can view and use it confidently without distorting financial records. The virtual warehouse provides the same level of operational visibility as standard inventory, while maintaining the necessary separation from financial accounting. This may cause some issues in areas such as average costing can be affected, tracking the non-assets versus the assets can be confusing. Having the ability to report on the value of what is in the virtual warehouse while not affecting the accounting can also be problematic.

How Epiphany Simplifies the Process

EpiphanyInc.net has extended this concept within NetSuite, creating a structured and automated way to handle customer-owned parts from intake to consumption. When a technician uses a customer-owned part, the system updates the record, logs where it was used in repair, both the repair work order and the equipment that received that part. The system will reveal warranties, coverages and/or entitlements for billing accuracy. This approach brings transparency and precision to an area that was once handled through manual oversight, helping manufacturers stay accurate, compliant, and efficient.

Aircraft Engine Repairs

In the aviation industry, repair timelines are critical. Airlines often send spare parts to the manufacturer long before an engine arrives for service. These prepositioned components, such as turbine blades or casing kits, wait in storage until needed for an overhaul. When the engine is disassembled, technicians draw from that customer-owned stock, ensuring repairs begin immediately rather than waiting for parts to arrive. The manufacturer does not own these items but must track them carefully, recording their serial numbers, conditions, and usage details to meet strict aviation compliance requirements.

Shared Inventory in Component Manufacturing

For manufacturers who also authorize third-party repair shops, customer-owned inventory introduces another layer of complexity. These repair centers may store parts provided by airlines or other customers, using them as needed for warranty or maintenance work. The manufacturer must still monitor the flow of each part, confirming it is used correctly and only by authorized technicians. Systems that track ownership and consumption across multiple sites make this collaboration possible, reducing disputes and improving accountability across the service network.

Server Refurbishment in Data Centers

In the technology sector, the same concept applies to server maintenance and refurbishment. Data service providers often reuse spare parts that have no remaining book value but still function perfectly. Instead of adding them back into financial inventory, these parts are tracked operationally as zero-value assets on a spreadsheet. Epiphany COI allows these technicians to track and use the parts as part of the work order process inside of NetSuite, eliminating the need to manage and track by spreadsheet. This also allows technicians to rebuild or upgrade systems efficiently while maintaining full traceability of component origin. The result is lower cost, better documentation, and sustainable reuse of valuable materials.

Getting the Accounting Right

Handling customer-owned inventory is not only an operational issue but also a financial one. Each organization must decide when and how to recognize the value of a part that it does not own but still uses in repair work. Some companies invoice customers only when a part is actually consumed, while others use prepaid models where payment is collected upfront but revenue is deferred until use. The goal is to align billing with real activity so that financial records stay accurate and compliant.

Automation for Accuracy and Control

With automated tracking and billing logic, the combination of the NetSuite platform and Epiphany’s COI subscription, make these processes smooth and reliable. When a customer-owned part is consumed, the system automatically updates the work order, records the usage, and triggers any billing or deferred revenue entries according to contract terms. Controllers can monitor balances, track deferred amounts, and review invoice histories without relying on manual calculations. The result is clear visibility across operations and finance, giving both teams confidence in the accuracy of their data.

The Role of Compliance and Transparency

Managing customer-owned inventory is about more than keeping shelves organized. It also demands full transparency for audits, insurance, and regulatory reviews. Every movement of a part, from receipt to consumption, must be logged with time, date, and responsible user. Auditors and customers expect this level of traceability to confirm that parts were stored safely and used according to agreement. Without detailed records, even minor discrepancies can create significant compliance concerns, especially in industries governed by strict standards.

Building Trust Through Documentation

Clear documentation not only satisfies auditors but also builds customer confidence. When clients can see exactly how their parts are handled, inspected, and used, they are more likely to continue long-term service agreements. Manufacturers that maintain accurate records can quickly resolve disputes about lost or damaged items and demonstrate accountability in every transaction. Insurance reporting also becomes easier when valuation reports list all non-owned parts, their condition, and their estimated replacement value.

Protecting the Business and the Relationship

Ultimately, compliance is not just a regulatory requirement but a business advantage. Companies that can prove their control over customer assets reduce risk and strengthen their reputation for reliability. Regular cycle counts, ownership tagging, and automated audit trails make it possible to manage non-owned inventory with the same precision as company assets. This consistency reassures customers that their materials are secure and helps manufacturers meet the growing expectations of modern service contracts.

Best Practices for Managing Customer-Owned Inventory

Effective management of customer-owned inventory depends on structure, visibility, and consistent processes. The following practices help manufacturers maintain control, ensure compliance, and build trust with their customers.

Keep Owned and Non-Owned Parts Separate

The first and most important step is to create clear separation. Customer-owned parts should always be stored in designated areas, both physically and digitally, to prevent confusion with company assets. With Epiphany COI, this means using Epiphany functionality called PLACE to clearly identify inventory as customer property. This will include labeling with barcoding to easily move and manage this Customer Inventory outside of the main inventory.

Maintain Complete Visibility

Every part should be tagged with ownership information, serial numbers, and condition details as soon as it is received. Even when multiple customers share the same facility, ownership must remain clear in both the physical and digital records. This visibility supports accurate planning, billing, and traceability during repairs. A simple, standardized tagging system can prevent errors and save time during reconciliations.

Integrate with Work Orders

Linking inventory management directly with repair work orders ensures that customer-owned parts are used correctly and recorded automatically. When a technician selects a part, the system should recognize its ownership and apply the proper billing or deferred revenue rules. This integration minimizes manual steps, maintains compliance, and captures a full record of usage including who used the part and when.

Align Billing with Contract Terms

Each customer agreement may define billing differently. Some prefer prepaid models while others choose to pay only when parts are used. Some have warranty on parts and repair. A strong system should accommodate both options seamlessly. Deferred revenue should move from liability to income automatically when a part is consumed. This keeps financial statements accurate and compliant without additional manual effort.

Track Value for Insurance and Risk Management

Even though customer-owned inventory is not recorded as a company asset, it still holds significant value. Maintaining updated valuation reports protects both the manufacturer and the customer in case of loss, damage, or theft. These reports also demonstrate sound internal control, which helps satisfy auditors and build client confidence.

Train Warehouse and Service Teams

Processes are only as strong as the people who follow them. Everyone involved in receiving, storing, and using customer-owned parts must understand the difference between owned and non-owned inventory. Consistent training and communication prevent most errors before they occur. When all teams follow the same standards, managing customer-owned inventory becomes routine rather than risky.

Closing Thought

Customer-owned inventory is now a defining feature of modern service operations. Manufacturers responsible for maintaining high-value assets can no longer depend on systems built only for their own stock. The ability to manage customer materials with precision and transparency is both a compliance requirement and a competitive strength. With clear separation, strong visibility, integrated processes, and well-trained teams, OEMs can turn a once complicated challenge into a smooth and trusted part of long-term service delivery.

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Tracking What You Don’t Own – Managing Customer and Repair Inventory