Everything You Must Know About MRO Inventory Management

MRO inventory consists of consumables, equipment, and supplies utilised in MRO tasks. In other words, you use cleaning supplies, tools, maintenance equipment, and other miscellaneous items daily to keep your business working.

Under inventory, thinking about the products you sell to customers is common. However, that’s only one part of the equation. Your business also requires proper maintenance, repair, and operations (MRO) supplies to function properly.

MRO items are essential for ensuring your company operates smoothly, allowing you to focus on serving your customers. These supplies include things like air conditioning maintenance, plumbing and lighting, cleaning services, manufacturing machinery and equipment, and general supplies.

MRO encompasses a range of tasks and services, such as regular maintenance and repairs, cleaning, and procurement of supplies. In some industries, MRO expenses can account for up to 10% of total expenditures, making it crucial to manage these costs effectively.

Examples of MRO Inventory

Here are a few examples of MRO inventory:

1. Supplies for maintenance and repair: This category includes oil, light bulbs, valves, and spare components. They are utilised to keep critical gear functioning so your company can continue producing.
2. Safety equipment: Safety gear includes masks, earplugs, face shields, safety glasses, respirators, and harnesses. This category contains anything required to maintain a safe working environment.
3. Office Supplies: The office supplies category includes computers, printers, phones, paper and pens, and other related things. Desks and chairs are also classified as office supplies. 

While your “typical” inventory management process may involve a few goods or supplies your company sells daily, MRO inventory might be pretty complicated. There may be hundreds of distinct objects that must be monitored and maintained.

What are the Different Types of MRO?

MRO can be classified into numerous categories, primarily based on the type of business it supports, such as

1. Infrastructure Repair and Maintenance

Maintenance tasks are essential for keeping your structures and services in good working condition. This category includes activities such as repairing roofs, power washing building exteriors, cleaning interiors, and other related operations.

2. Production Equipment Repair and Maintenance

Maintaining a sufficient inventory of supplies and conducting timely repairs and upkeep for manufacturing equipment is crucial for ensuring that your company can continue to produce items efficiently. This inventory plays a vital role in keeping your business operations running smoothly.

3. Material Handling Equipment and Maintenance

Maintaining equipment for transporting goods to and from your company’s production lines is crucial for ensuring efficient operations. This type of MRO includes vehicles that transfer finished items to a storage facility and other forms of transportation used within the company.

4. Tooling and Consumables

This MRO category includes your company’s most miniature equipment and supplies, ranging from cleaning solutions and paper towels to handheld tools.

Why is MRO Inventory Management Essential?

The things you manage with MRO are critical to your company’s infrastructure operation. Having them available in sufficient quantities is essential because they are vital to success. If your assembly line fails, you might face hours or even days of downtime if the necessary parts are unavailable.

Too much MRO inventory on hand may waste space and money, especially for pricey products like specialised components for an assembly line. Because they aren’t things you’ll be selling, you can’t rely on steep discounts and special offers to clear out surplus inventory. Finding the correct balance is essential for cost management.

What is the Procedure for Managing MRO Inventory?

Gaining control of your MRO inventory requires several steps. Let’s start at the beginning and work through each of the five phases one by one.

Audit MRO Inventory

When implementing a new inventory management procedure, the first step is to audit the existing inventory. This includes determining if each item is still necessary, whether you have enough or too much on hand, and whether it has expired or is still valid. Asking these questions helps you assess your current inventory status.

Organise MRO Products

After identifying your inventory, the next step is to organise it as efficiently as possible. An effective organisational system allows for quick access to items when needed and prevents unnecessary ordering of items. This system should be tailored to meet your company’s specific requirements.

Develop an MRO Purchasing Process

The next stage in managing your MRO inventory is establishing a concrete replenishment procedure. An effective ordering system ensures that your inventory meets your requirements with minimal waste. This procedure involves setting a replenishment threshold for each item, selecting a supplier for the product, and assigning employees to manage each stage.

Forecast Demand

Before placing any orders, take a moment to analyse your MRO inventory utilisation. Look for trends in which specific items are used more or less frequently. These projections can then be used to assist you in placing your initial orders.

Manage MRO Inventory Levels

Lastly, conduct regular evaluations of your purchasing process and projections, and perform additional audits to identify any weak spots. You can then adjust your strategy as needed.

What are the Challenges of Managing MRO Inventory?

Managing MRO inventory is challenging, much like any other necessary operation. It involves difficulties such as acquisition expenses, inventory tracking, and poor turnover. Some of these difficulties are discussed below.

High Acquisition Costs: Acquiring MRO inventory can be expensive due to the sheer volume and variety of products that some businesses may require, especially for extensive or highly specialised industrial operations.

Hidden Inventory Counts: MRO inventory is sometimes less apparent than conventional inventory. To maintain availability, discrete teams may store their supplies of products, which might complicate MRO inventory systems.

Slow MRO Inventory Turnover: MRO inventory can sometimes move slowly. For instance, you may need a spare component on hand if vital manufacturing equipment fails, but it may be years before you use it.

Inventory Tracking: A centralised inventory management system can be used to keep track of MRO inventory. Such a system is essential for understanding your current inventory and consumption patterns.

Best Practices for MRO Inventory Management: Managing MRO inventory may appear complicated, but it does not have to be. The following recommended practices can assist you in getting your process off to a good start.

Identify Mission-Critical MRO Items: Knowing which MRO items are essential to your business operations is essential. You must keep these items in stock at all times. When ordering and budgeting, these goods should be given priority.

Store MRO Inventory in a Central Location: Keeping a single, centralised storage location for MRO inventory can help reduce some of the visibility challenges associated with MRO inventory.

Perform Quarterly MRO Inventory Audits: Regular inventory audits help identify errors such as misrecorded numbers or misplaced items. Maintaining a regular auditing schedule can significantly ease this problem.

Build Strategic Supply Partnerships: Spend time thinking about the suppliers you use for MRO supplies. Having the proper relationships in place can help you expedite your ordering and administration processes while ensuring consistency in quality.

Use Data to Forecast Demand Accurately: Accurate forecasting of MRO demand is crucial. Relying on complex data wherever feasible provides more precise forecasting and controls your inventory.

Use Software to Manage MRO Inventory: Proper MRO inventory management software can significantly improve your process and efficiency. This programme can automatically arrange orders, track item usage and receipts, and provide real-time inventory information.

What MRO KPIs Should Your Company Monitor?

Below are the MRO KPIs your company must monitor:

1. MRO Spending: Keeping track of the percentage of your total purchases that go into MRO is crucial. You want to keep MRO spending as low as possible without compromising operations since it doesn’t directly impact the bottom line.
2. Stockouts: Tracking your stockouts and minimising them is important. A high stockout percentage indicates a breakdown in your MRO process at some point.
3. Days of Inventory on Hand: Aim to have 30 days of inventory on hand. Too much is wasteful, but too little can put your company in a bind.
4. Rush Orders to Replenishment Ratio: Rush orders can be expensive. While sometimes inevitable, paying for expedited shipment often indicates a failure in your demand forecasting.

Conclusion

Effective MRO inventory management is essential for businesses to operate smoothly, maintain their equipment, and prevent downtime. The key to successful MRO inventory management is to conduct regular audits, use efficient organisation and replenishment procedures, and adopt best practices such as identifying mission-critical items, centralising storage, and building strategic supply partnerships. By following these guidelines and closely monitoring MRO spend, stockouts, days inventory on hand, and rush orders to replenishment ratio, businesses can optimise their MRO inventory and keep costs low while ensuring equipment availability and reliability. With the right tools, software, and data-driven approaches, MRO inventory management need not be a daunting task but rather a strategic asset to your business operations.