Sales and Fulfillment

How to Optimise MRO Inventory for Efficiency and Savings in Supply Chains

Enhancing service levels, reducing working capital, finding spare parts, and cutting downtime —maintenance, repairs, and operations (MRO) teams have plenty of challenges in the aftermarket supply chain. But common challenges, such as inventory management, can add to productivity woes in MRO.

A recent survey showed that inventory tracking is only second to downtime when it comes to spare parts inventory problems. To reduce wastage and misplacements as well as losses to a bare minimum, MRO inventory needs to combine organised structure and accurate monitoring.

Often overlooked is the fact that proper management of MRO inventory can lead to significant benefits compared with production inventory. When consumables are managed efficiently, unaccounted-for or idle MRO inventory can be avoided, as can stockouts.

Inventory optimisation challenges in MRO and aftersales

Here is a quick look at common difficulties MRO organisations, warehouse managers, and teams face while managing MRO inventory.

• Managing the fragmented and extensive vendor networks

  Consolidating the network of suppliers to align with the unplanned/reactive demand of the varied consumables can be a challenge if strategic vendor relationships are not nurtured.

• Segmenting the inventory

  Classification of MRO inventory becomes difficult due to their consumable nature because they are classified as secondary to production inventory. Hence, tracking and monitoring them becomes an issue.

• Keeping the excessive inventory levels under check

  Maintenance of higher safety stocks signifies higher holding costs and the chance of inventory going obsolete.

• Managing obsolete inventory

  Identifying outdated inventory is not easy because these items are not stored at locations that are easily accessible. Out of sight is out of mind, but that’s bad for businesses’ MRO optimisation strategy. Yet, the cost of maintaining these does impact savings.

• Predicting demand and supply

  Because the need for maintenance and repair can be irregular and job specific, predicting their demand is difficult. Hence, managing their timely supply becomes a huge challenge, often leading to wastage of time.
  Apart from the aforementioned issues, high TCO of inventory optimisation tools, excess of slow moving units, and limited availability of relevant skill sets also are impediments in an efficient MRO operations. Despite these challenges, it is possible to track MRO inventory efficiently for maximised benefits. Here are some ways inventory anagers can optimise MRO inventory in supply chains.

How to improve MRO inventory management

Use ABC classification

Set a standard format for classification to simplify the segmentation of all the required consumables. This would make it possible to track these items. For example, a low-value but high-usage accessory can be appropriately classified so that businesses can identify which items need special attention for tracking wastage and losses.

Set and monitor KPIs

Identify KPIs to monitor results that are being achieved from the current inventory management system. They can indicate whether the savings are sizeable as against the efforts.

Maintain EBOM

Maintenance of equipment BOM is necessary to compare the actual quantity of materials against the bill. This will track wastage, misplacement, and theft. Every time an old part is replaced with a new one, the EBOM must be updated. Old spares or accessories, if not reusable, should be classified as obsolete and records must be updated. Pay meticulous attention to generating formal requests even when smaller items are used.

Leverage outsourcing and managed MRO services

Hiring a third party has simplified inventory management. Done right, managed services and consulting for MRO inventory management allows teams to focus on their core areas. Involvement of experts will ensure diligent tracking of MRO consumables.

Store MRO inventory efficiently

Storing parts and accessories in a secured place is important for proper record maintenance and timely availability. It should be noted that manual errors, such as accidentally dropping items, while stocking or using them, should be accounted for. Identify components that need special care for handling and assign appropriate storage space for them.

Identify critical components

Identify critical components and ensure that they are always in stock. Unavailability of a high-usage repair item can result in downtime and heavy losses. Hence, warehouse managers need to be vigilant when storing such parts and must track their usage regularly.

Enhance communication between business units

The transfer of materials between different business units is quite common. However, this movement of items must be documented to avoid losses caused by theft or misplacement. Use Kanban cards or set up an efficient inventory movement system.

Use a robust ERP system

An integrated ERP system, in combination with scientific inventory models, will save time and effort in tracking and ensures that timely supply is maintained and gaps are filled.

Manage "hidden" inventory

Often, “hidden” inventory gets shoved into toolboxes, shelves, and closets, where they are difficult to locate. Hence, it is crucial that a proper storage process is implemented to make them available on time. Instead of storing them at multiple unidentified locations, it is advisable to store them at central locations.

Train MRO teams

Training MRO team members periodically about the importance of adhering to standardised practices for inventory management is an excellent practice.

Leverage MRO analytical tools

Analytical tools for data management tracks usage patterns and assists in forecasting demand for MRO parts. Though their demand is irregular, analytics can locate variations in pricing and duplication of records, as well as enable comparison of metrics to drive down costs. Analytical tools can bring to light newer findings that traditional record management systems cannot unearth easily.

To ensure supply chain efficiency, businesses should maintain a disciplined and methodical MRO inventory strategy that exploits seasoned MRO expertise, as well as best practices like innovative pricing models and analytics to gain actionable insights.

MRO leaders need to identify inventory optimisation areas to benefit the business. It is also critical for them to ensure the availability of the right skill sets across their teams to handle the optimisation of MRO inventory, a job that might feel thankless and daunting.