6 Proven Strategies to Optimize Your MRO Inventory Management

The average company in the U.S. spends over $6 million per year on maintenance, repair, and operating (MRO) expenses. These expenses represent vital costs that are necessary to maintain a facility, warehouse, or factory and keep it in good operating condition. To help streamline their costs, many companies are managing MRO inventory by implementing automation technologies that can assist with logistics, production, and fulfillment activities.

In this post, we’ll explore 6 tips for managing MRO inventory. These tips can be applied to nearly any business, including retail and service organizations. Managing essential inventory items in a more streamlined way can reduce costs while further improving your existing maintenance and upkeep efforts. You’ll find that many of these best practices can add significant value to your inventory and asset management programs.

1. Choose a Clear Approach to MRO Inventory

The industrial supplier Grainger highlights two main approaches to defining MRO inventory – managed and leveraged. The managed approach focuses on the use of data to understand how inventory is being used. This helps key stakeholders identify process improvements that can eliminate bottlenecks and reduce costs while optimizing inventory stocking levels. The leveraged MRO inventory approach takes a more strategic perspective by defining individual or team accountability for improvements. If done effectively, this will incentivize employees who work most closely with MRO inventory to improve processes.

2. Minimize Inventory on Hand

An efficient operation should hold just enough inventory to manage day-to-day activities with periodic and scheduled orders for replenishment. This creates a reliable flow for inventory, but it can only be achieved with accurate and timely demand forecasting. Many companies use electronic systems and automated alerts to help protect MRO inventory levels from a potential stock-out. These inventory management platforms can often use analytics to help recommend minimum inventory levels and ordering amounts.

3. Solicit Ideas from Your Vendors

Just as you desire to create a stronger relationship with your customers, your own suppliers may be able to add additional value to your MRO inventory planning. For example, a vendor may be willing to increase their own level of safety stock to satisfy an upcoming spike in demand for a particular part. You may also be able to work together to reduce particularly long lead times or identify other areas of improvement.

4. Define a Method for Labeling Critical Components

A labeling and tagging procedure should be the central component of your MRO inventory management process. If inventory tags or asset labels are inaccurate or missing it will be very difficult to maintain accurate inventory counts. One common approach is to label and categorize MRO inventory items based on their variability of demand. This will allow you to place high-demand parts in a convenient and easy-to-access area while storing less frequently used items elsewhere.

5. Invest in an Inventory Management System

Regardless of your industry or areas of focus, a dedicated inventory management system is often a must-have resource. There are many options available in the market that have capabilities for managing MRO inventory including Enterprise Asset Management (EAM) systems, Computerized Maintenance Management Systems (CMMS), and Facility Management (FM) software. When possible, it’s usually best to choose a centralized management platform that consolidates separate systems into a single interface. Many software programs also support third-party integrations through an API, allowing you to create a truly customized solution.

6. Develop MRO Inventory KPIs

Reporting tools for analyzing metrics can bring visibility to complex processes. One of the best ways to improve MRO inventory management practices is to define a suite of key performance indicators (KPIs) that represent the current state in your facility, warehouse, or factory. The following examples are some of the most common KPIs that are used for managing MRO inventory.

• Inventory Turnover. This is a standard metric for any situation where inventory must be managed. The turnover rate is defined as the number of inventory items used over a set period of time. Measuring inventory turnover on a monthly basis is often a great place to start.
• Backorders. It may also be helpful to measure the number of inventory items currently on backorder with your suppliers. The number of backorders should ideally represent less than 5% of your total inventory items tracked.
• Inventory Accuracy. This metric is calculated by performing regular, routine cycle counts where a physical count is made to verify inventory numbers on the floor. A good benchmark to use is 95% and many operations strive for much higher levels of accuracy.
• Stockouts. A stockout is recorded when an item is showing an inventory quantity available, but the part cannot be located. This is a serious issue, and many companies may choose to implement a continuous improvement plan to find and correct the sources of these errors.

Your approach to MRO inventory management should be defined based on your operational needs, management style, and desired level of productivity. The best practices from this post can help you create an inventory program that is streamlined and easy to maintain. Standardized inventory management also makes it easier to track and reduce costs for each item in the facility.