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Managing
MRO Inventory
By John M. Donnelly
John M. Donnelly is the materials
manager at ITW/Hobarts Weigh Wrap
Group. He can be reached at john.
donnelly@hobartcorp.com.
In many organizations,
maintenance, repair, and
operations (MRO) inventory
accounts for a significant
sliceas much as 40 percent
of the annual procurement
budget. Yet it is still not
managed with the level of rigor
typically applied to production
inventory. There are five basic
practices that can quickly close
the gap with best practices in
MRO inventory management.
18
n an earlier job, I was the materials manager in a manufacturing facility. A tool crib was the repository for
office supplies and safety supplies; the bulk of the
maintenance, repair, and operations (MRO) inventory
was controlled by the maintenance department and was
stocked all over the plant. My group set out to bring
best practice in inventory management to the MRO
supply chain.
Fasteners were the first MRO component category that we
addressed. We selected a supplier to come in and regularly
replenish the fasteners in a central stocking area. The supplier
inventoried and stocked the bins and invoiced us monthly. This
simple process change eliminated the multitude of purchase
orders and the associated costs that had been typical of the previous arrangement; it was also designed to ensure that maintenance staff always knew where to get the fasteners they needed
for their tasks.
However, there was continued resistance to the idea of the
materials management function taking control of all MRO supply. The turning point came when the stock of foundry tapping
conesused to control the flow of molten metal from a furnace
ladlewas allowed to run out and the purchasing team had to
source and expedite replenishment on a Sunday. It became clear
to everyone that it made more business sense to stock foundry
supplies in the tool crib. Soon after, additional supplies of tapping cones were moved into the crib. Not only were MRO centrally maintained and ordered after that, but the foundry maintenance areas housekeeping improved because there were no
longer skids of materials sitting around as maintenance stuff.
As this scenario demonstrates, it is possible to streamline
MRO inventory management practices and produce significant
benefits for the organization as a result. This article will address
several of the basic steps that organizations can take to improve
their MRO supply chain activities.
March/April 2013
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March/April 2013
19
MRO Inventory
EXHIBIT 1
10%
20%
30%
40%
50%
60%
March/April 2013
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21
MRO Inventory
22
$1.5
Total Purchase Order Cost
($ Millions)
March/April 2013
Original Cost
Utilizing VMI
$1.0
$0.5
$0
3,500
5,000
7,500
10,000
www.scmr.com
MRO Inventory
Getting Started
I dont pretend that reorganization of MRO inventory
activities is a snap-of-the-fingers exercisesomething
that is one and done with a simple e-mail from top management. There are many cultural imperatives that sustain
the status quo, not least of which are the defense of turf
by managers and heel-dragging by the many who fear loss
of control and the many more who are distrustful of any
different ways of doing things because they want proof
that the new way will be that much better.
Change has to start somewhere. The best place to
begin is with data showing how subpar MRO activities
actually are when compared with inventory management
norms. It can be a real eye-opener for senior management
to review the annual maintenance expenditures on parts
24
or to see the costs of expedited freight charged to maintenance. These two items alone may be enough for top
management to begin asking questions. And with senior
executives engaged, real change can start to happen.
As noted earlier, one of the easiest areas to begin an
MRO inventory overhaul is with fastenersubiquitous,
low-cost components whose mainstream supply chain
processes are very mature. Many leading suppliers of
fasteners offer very advantageous VMI programs. Once
such processes are in place for fasteners, it is a fairly
easy step to start moving other simple maintenance supplies into a tool crib or some other method of inventory
control. Another simple and practical method is the use
of vending machines to dispense basic supplies. The
machines feature a code that is keyed inwork order
number or employee number, for instanceor they
accept the employees ID when they swipe their ID card.
MRO efficiencies are within sight. In fact, they
have been so for decades. No high-level meetings, no
large-scale consulting programs, and no management
task forces are needed to justify the savings that can be
realized. I hope that this article gives you some of the
impetus that your organization may need to get its MRO
supply chain operating to its full potential.
Endnotes:
1 InventoryOps.com; MRO-The Last Bastion of Uncontrolled
Expense by George Krauter, Supply & Demand Executives,
March, 2011, Vol. 12, Issue 1, pp. 44.
2 Budgeting & Maintenance, Conklin & de Decker (www.
conklindd.com), Brandon Battles.
3 The $12 Billion Question: How is Your Facility Managing
Inventory? by Deb Oler (VP&GM, Grainger Brand),
Industrial Maintenance & Plant Operations, July, 2011, Vol.
72, Issue 6, pp. 24-25.
4 MRO Restructuring in Full Swing by Nicole Beauclair,
Interavia Business & Technology, Winter, 2006, Issue 686, pp.
22-26.
5 Making MRO Inventories Play by the Rules by Steve
Mehltretter, Industry Week, August, 2009, pp. 40.
6 MRO-The Last Bastion of Uncontrolled Expense by
George Krauter, Supply & Demand Executives, March,
2011, Vol. 12, Issue 1, pp. 44.
7 2006 APQC Report showed the range to be $35.88
- $506.52; Supply Management Handbook range is
$100.00++ to as high as $300.00; CAPS Research range is
$59.00 - $741.00 with an average of $217.00
8 The Three-Stage Implementation Model for Supply Chain
Collaboration by Stanley E. Fawcett, Gregory M. Magnan
& Matthew W. McCarter, Journal of Business Logistics, Vol.
29, No.1, 2008.
March/April 2013
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