Establishing an MRO Best Practices Inventory Management Program

From a financial and productivity perspective, having an efficient and sustainable Maintenance Repair and Operations (MRO) Storeroom is essential. MRO supplies are consumed and extremely important in the production process, but they do not become part of the end product. In addition to providing the parts needed to maintain facility operations, many organizations want their storeroom to provide financial costs benefits, as well.

There are several ways to achieve an MRO Best Practice Inventory Management Program, and some factors are solely based on the organizations’ ability to adapt to change and enforce process improvements, such as:

Location – It is important that the location of the storeroom is centralized to the various production departments. Centralization will decrease the amount of equipment downtime when parts are needed in an emergency.

Procurement – Having an efficient MRO procurement policy will deliver considerable benefits. By establishing preferred supplier lists for MRO items, your organization can consolidate the MRO supply chain into a smaller number of professional suppliers that can guarantee product quality and continuity.

Inventory – Determining the correct stocking level is the basic fundamental of any storeroom operation, and this is typically performed by Storeroom, Production, Maintenance and Financial management teams. Assessing your current inventory first is critical to determining what should be stocked and how much. Once stock items are identified, Min/Max levels must also be established, but these levels can change over time based on various factors, including usage, equipment downtime and lead time. Carefully consider the items critical to production, and standardize classification naming, attributes, part numbers formats, unit of measures, manufacturer and supplier names.

Consignment – Many organizations embrace the idea of consignment to reduce inventory carrying cost. By only paying for spares that are being used, rather than adding unnecessary inventory, organizations are able to reduce purchasing and working capital costs. Through comprehensive inventory management reporting and data analysis, consignment also helps MRO inventory suppliers track usage, establish transparency and provide the basis for optimizing inventory levels, targeting reductions in redundant stock profiles.

Metrics – To measure inventory usage, savings, costs, obsolescence, etc., Key Performance Indicators (KPIs) must be established and included in monthly reporting. Some of the most useful KPIs are:

  • Inventory Accuracy – the percent of accurate cycle counts of inventory
  • Carrying Cost of Inventory – how much it costs your organization to store inventory over a period of time
  • Inventory Turnover – how many times a year your organization is able to sell its entire inventory

MRO Personnel – The MRO team is responsible for resolving wasteful storeroom practices, so members should be comfortable brainstorming continuous improvement ideas.

Although this post may not include every factor needed to implement an MRO Best Practices Inventory Program, it is a starting point in improving business processes. By establishing this program, your organization will see improvements in identifying critical spares, strategic spare parts purchasing and warehousing, just to name a few.

AssetPoint Author:
Sammy Rice, EAM Functional Consultant