MRO inventory Management levels are often hotly debated at companies, with some convinced that most of the inventory is dead stock, while others want to save everything for a rainy day! We believe that the answer for optimal inventory lies in a critical assessment, based on rock solid data.

Industry studies have estimated that about ~50% of the MRO inventory is little used, excess or obsolete – and our experience so far has been quite in line with this. And it’s never enough if you do a onetime fix – you really need to dive into a Root Cause Analysis to understand why this occurs, so measures can be put in place to prevent recurrence.

High inventory costs are triggered by different factors:

• While purchasing equipment, manufacturers recommend a list of parts to support that equipment, which are purchased; but over time, companies learn that many of those parts didn’t really need to be in stock.
• Unchecked inventory availability of parts across locations, where it may be possible that the part is not used at one location but is required at another location.
• ‘What if’ scenarios. What if the part is needed, and based on the idea that production can stop, a little of every part is stocked
• And many other such reasons that we are all familiar with.

Identifying the optimal stock levels for MRO (Maintenance, Repair, and Operations) spares is the foundation for any good inventory optimization program. An optimized MRO inventory management eliminates out of stock issues and finds the right balance between demand and supply while considering the criticality and risk factors for maintenance as well.

Related Links: MRO Supply Chain Optimization, Inventory Optimization, Procurement Cost Reduction, Supplier Rationalization, Spend Analytics

The key elements of our approach are:

• Analyze inventory: Analyze the current inventory and categorize, based on consumption and criticality (Critical spares which can cause stoppage of production process). Our analysis also brings out data quality issues, which may affect inventory optimization.

• Categorize the Inventory: Based on the analysis, identify obsolete items, slow moving inventory, excess stock and critical spare parts.

• Develop an accurate forecasting model: Define the order points and quantities based on criticality, usage patterns, cost and supplier lead time.

• Data Standardization: We create a golden database of spare parts, which enables better inventory decisions and improves spares forecasting and planning.

• MRO Parts Management Policy: Based on business needs and key stakeholder inputs, we develop guidelines and policies that improve MRO supply chain efficiency and make maintenance programs more reliable.