Businesses spend roughly $110 billion on maintenance, repair, and operating (MRO) materials per year, according to a study conducted by Grainger. Of that $110 billion, approximately $12 billion are for parts that go unused. Additionally, Grainger notes that over 50% of U.S. businesses are not efficiently managing their MRO inventory. Read on to learn how to be a part of the 50% of businesses who efficiently take control of their MRO Inventory.
What is MRO Inventory?
Maintenance, repair, and operations (MRO) inventory include the supplies used to maintain facilities, plants, manufacturing lines, etc.
The three components of high inventory costs are the physical parts on the shelf (inventory costs), the time and energy put into the MRO environment (process costs), and parts purchasing. To break it down further, we outlined some common drivers of cost increases within each category, and how a Computerized Maintenance Management System can help spark improvements and cost savings.
The Causes of Ballooning MRO Inventory Costs
Without tracking parts usage, it is difficult to know how much inventory is being used in a given time period, and companies often end up purchasing in excess.
Buying Around Inventory
When an organization does not know what they have in stock or cannot find parts when they are needed, money might be wasted buying around inventory, especially in emergency situations.
A purchase is made for a sizable equipment or parts list for a particular project. When the project is completed, those parts get placed back into inventory, and are not used again. This inventory just sits on the shelf without any real return.
Hidden Costs of Maintenance Processes
Item search time
If an organization does not have optimal control over inventory within a CMMS or spreadsheets, trying to find particular parts can be a very time consuming process.
Downtime cost per hour
In a recent webinar survey conducted by eMaint, 60% of organizations said they do not track or measure the cost of downtime. For organizations looking to improve inventory management, process costs or purchasing spend, it is important to understand the metrics that drive daily activities.
Sourcing time includes how long a technician, mechanic or employee spends trying to find vendors and suppliers for new parts and other items. Without a catalog or a database to store contact information, including associated products and costs associated, this can be a lengthy and expensive process.
Purchasing Cost Considerations
Just In Case Buying
This method relies on purchasing with a “gut feeling” vs. usage based buying. When organizations are not tracking which parts they have on hand, maintenance teams will be left guessing.
Fragmented Supplier Base
Many companies buy supplies from upwards of 500 vendors or more. Spreading purchases across so many vendors weakens an organization’s buying power and leverage.
How CMMS Can Help
Computerized Maintenance Management Software (CMMS) such as eMaint can help organizations gain better control of their MRO inventory processes and costs.
Parts Inventory Management
Spare parts inventory software within a CMMS helps save time locating parts by providing access to all information in a listview, including location, on-hand amounts, unit cost and item number. It enables you to also attach images to part records for ease of identification. Organizations can track parts across work sites worldwide and avoid reordering parts on hand at another location.
CMMS software also allows you to account for special projects without the parts getting lost in inventory. CMMS users can generate reports detailing the completed work within the project such as resources used, and track material costs expended for each major renovation or overhaul project.
Reduce Lag Time
Reduce the time it takes for your technicians to find what they are looking for by relating parts to assets and PMs to automatically let them know what is typically used to repair an asset or perform a PM task. Sourcing time can be dramatically reduced by storing suppliers’ information in eMaint as a contact record that can be selected and auto-populated on a part record.
Additionally, CMMS systems can increase efficiency in cycle counting processes. With mobile CMMS maintenance services and barcoding technology, organizations can reduce the time required to complete cycle counts, and inventory accuracy can be greatly improved. For example, Crown Holdings, Inc., a multi-billion dollar supplier of packaging products, leveraged eMaint barcoding and saw a 75% reduction in cycle count time.
Organizations can view parts usage trends and track purchases on parts by asset for a better understanding where money is being spent. You can also set up inventory reorder points to track parts you need to order, or auto-generate a purchase order when on-hand amount falls below established levels.
Tracking Purchase Orders
With the purchasing and requisitioning tools within CMMS, you ensure the necessary parts are on hand by creating purchase orders based on reorder points. Administrators or managers can monitor purchase orders with a requisitioning tool by requiring approval prior for technicians before an order is created. You can also keep a log of purchase order receipts on information such as packing slip details, required date, item location, and more.
In order to leverage your supplier base, and avoid weakening your spending power, make data-driven decisions by tracking parts by supplier in a list view, showing the supplier’s name, part number, last part cost, last received date, and more.
Track and Measure MRO Inventory with Help From CMMS
Whether you know your MRO inventory inside and out or you feel inventory is totally out of control, it is important to see these costs as decisions made based on a strategy, and not a drain on resources. Begin by tracking metrics in places that might be causing increased spending, and optimize your processes to make improvements. An effective CMMS solution can help support and enforce these positive changes.
For more information about approaches to inventory management and tips to get started, visit eMaint’s Best Practices Webinar Recordings, with sessions hosted by industry professionals from around the globe.