Firms need to keep spare parts stock and supplies to keep their business running. Manufacturers require components and tools to repair and maintain production lines and machines. Service organizations and retailers require essential items such as light bulbs, cleaning supplies, and office supplies. These items collectively are called maintenance, repair, and operations (MRO) inventory.
Maintenance, repair, and operations inventory can make up a large portion of a company's total procurement spending. Therefore, it is important to use efficient MRO management processes to minimize costs. You will then ensure that you have enough stock to meet requirements.
What is MRO? It refers to the process and activities required to maintain a facility or plant in good condition. However, it also includes the maintenance of the building and the systems in it.
A business or facility can be made up of many operations and activities. The MRO System is part of these sets of exercises. The production lines transport all raw materials to the assembly line, where they produce the desired output.
All these processes cannot be grouped together. Maintaining a facility requires complex techniques. Engineers and plant managers divide these tasks to make them easier. These activities are now divided into four distinct regions. Each region focuses on a specific activity niche.
MRO is often viewed as a catch-all for miscellaneous operating costs. Here are some examples.
MRO spending typically amounts to 5-10% of the average cost of goods sold. Although this may seem small, it also means businesses overlook it more often. These costs add up quickly. If you do not control this, operations personnel can restock MRO inventory in a haphazard manner. Therefore, leading to poor spending habits and missed opportunities.
If your team suddenly has a PPE shortage, your production has to stop immediately. Your team will need to wait for a restock, and you'll lose revenue. Regular MRO inventory analysis can help you mitigate these risks.
MRO inventory management involves the purchase, storage, use, and replenishment of all MRO inventory. As with all types of inventory management, the goal of MRO inventory management is to complete each activity as efficiently as possible and at a reasonable cost. This means the company will have the correct MRO inventory at the right time. This can be time-consuming and difficult as companies might need to store thousands or hundreds of items.
MRO inventory management is crucial for the success of a business. For instance, the entire manufacturing process will stop if a critical component of factory machinery breaks down during a production run. The impact of a failure in a critical component can cause downtime that can last for hours or even days.
Employees will have to wait, order, and then wait for the part to arrive. If the business then misses the delivery deadlines for contract work, it can lose revenue and jeopardize customer relationships. It is easy to see how poor management of MRO items can significantly impact your supply chain.
Stockpiling MRO inventory to prevent running out of stock can cause problems as well. Capital that could be used to finance business growth is tied down by purchasing and storing excess inventory. If they are kept too long, some items can become obsolete.
MRO inventory management includes several core components. However, the implementation of these components can differ widely.
Identify all components and supplies that the company requires, along with their specifications and current stock. Some items are unique to certain production groups or processes, while multiple groups can use others within the company. Keeping track of the details of each item allows groups to determine if it is what they require. It is crucial to be able to quickly identify what items are available in case of production problems.
To make it easy for workers to locate items, it is essential that you have a system in place to organize them. Many companies store all their items in one central location. However, it might be more efficient to keep items close to the people who will use them in some cases.
Make sure you have a process for purchasing maintenance, repair, and operations inventory. A well-designed procurement process allows the company to always have what it needs to purchase the correct quantity of MRO products at a reasonable price. This includes identifying the items you need, selecting suppliers, creating requisitions, approvals, and tracking orders.
Inventory control includes inventory monitoring, forecasting demand, and timely replenishment.
Many businesses fail to realize the importance of maintenance, repair, and operations inventory until too late. Proactive management is key to avoiding extra overhead expenses. This starts with the right inventory software.