Maintenance, Repair, and Operations (MRO) inventory spending accounts for a significant portion of an organization’s maintenance budget – in some cases as much as 45%! To minimize MRO inventory costs, organizations must understand what is happening to stock that is currently on hand. This article provides an overview of inventory control and its relationship to MRO inventory management.
Why is MRO inventory important?
MRO inventory is important because although it has an indirect role in the manufacturing process, its important for ensuring efficiency, quality and consistency. For example, a forklift an employee uses to move raw materials closer to production equipment saves time and labor costs. Companies sometimes make large investments in MRO inventory because it typically provides a high return on investment. Those that minimize their MRO inventory to reduce costs may find that it costs more to operate without certain items and may determine the initial purchase price is worth it to keep operations precise and consistent.
What are MRO inventories?
MRO inventories are items that a company requires to operate but dont have direct involvement with the manufacturing process. MRO, which stands for maintenance, repairs and operating, includes a broad range of items that vary by manufacturer. These inventories include tools and equipment used to maintain the facility and keep it safe, devices used to operate systems and store company data, machinery used to streamline manufacturing processes and basic necessities such as office and cleaning supplies.
Examples of MRO inventories
Companies often have several categories of items within their MRO inventories, depending on their production level and business needs. They maintain and replenish these items based on how often they use them and how critical the items are to the companys processes. Here are some common MRO inventory categories and examples of the items they include:
Tips for managing MRO inventory
Here are some tips for managing your MRO inventory:
Invest in what the company requires
Each company has different MRO inventory needs that depend on what they manufacture, their processes and how much they produce. If youre establishing an MRO inventory for the first time, consider your budget and estimate how much you can allocate for each MRO category based on company requirements. For example, if the company has a small office area with few administrative employees and manufactures automotive engines, you may find it more reasonable to spend a significant amount on material handling equipment and a relatively small amount on office supplies.
Evaluate your processes
After making an investment in an MRO inventory, inspect it regularly to determine if you have any overlap in processes that you can eliminate. When businesses grow, management often finds that different teams unknowingly work toward the same tasks. This can lead to inefficiency, but you can minimize redundant work by delegating new tasks to some team members. This reduces the need for additional MRO inventory items for that project or department, which can decrease the costs associated with purchasing new equipment.
Identify your most important MRO items
Monitoring your MRO inventory can help you identify your most important items so you can ensure you have the resources to invest in their maintenance. It also allows you to track which items you replace or replenish frequently so you can estimate order amounts for those items more accurately. Recognizing the items you need the most and those you rarely use enables you to manage funding for your MRO inventory effectively.
Minimize inventory during low production
If you have periods of high and low production, consider adjusting your MRO inventory accordingly. During your busiest seasons, you may want to spend more time on the inspection and maintenance of MRO equipment and make larger orders of necessary items such as tools, safety equipment and cleaning supplies. You can balance this increase in spending by decreasing MRO inventory purchases during low-production periods.
MRO inventory FAQs
Here are some frequently asked questions and answers about MRO inventories:
How can I record and monitor my MRO inventory?
Some manufacturers, particularly small or new companies, use spreadsheets to monitor their MRO inventory and its associated expenses. Until recently, this was the most advanced option available for inventory management. Today, many companies use computerized maintenance management systems (CMMS), which incorporate a vendor-managed inventory (VMI) system. This system allows your vendors to monitor your inventory and replenish it based on your needs. Some benefits of CMMS and VMI include:
How can I reduce MRO inventory costs?
Besides adjusting your budget and order amounts according to the companys needs and busy periods, you can take a few other steps to reduce MRO inventory costs. First, consider buying generic products if theyre available. You may find saving money even on small items, such as notepads and pens, can add up to significant savings over time. Just be sure to consider quality also, as you may find name-brand more beneficial for certain products. You can also purchase items with a long shelf-life in bulk if your supplier offers a discount on larger orders.
What is an MRO inventory strategy?
An MRO inventory strategy is a plan for maintaining the right amount of each item at all times. Companies based these strategies on their MRO inventory budget and the demand for each item. To develop a strategy, they predict how much of each item the company needs for the year and the costs associated with maintaining or replacing each one. If youre developing an MRO inventory strategy, remember to plan for what the company needs regularly and in rare or urgent circumstances. That way, your team can always have the resources they need to keep manufacturing processes efficient.
What is meant by MRO?
What does MRO stand for in purchasing?
What is MRO in accounting?