Managing inventory levels of Maintenance, Repair, and Operating Supplies (MRO) is a major challenge for any business. MRO usually refers to any product or service that is used in a manufacturing facility to support production and keep the business running. It will include industrial supplies, tools, personal protective equipment (PPE) and all types of consumables. It could also include items needed for the physical maintenance of the factory and systems support. Without MRO, the business would grind to a halt.
Stock-outs and the erratic and unplanned demand for MRO items create supply chain disruptions. For procurement, getting the balance right is difficult. Shortages mean:
- stoppages and downtime of machinery, even total shutdown
- frustration for users and other stakeholders
- loss of productivity
Alternatively, thousands of $$$s may be tied up in unused inventory. Overstocking and obsolescence are expensive, also dead stock takes up space.
"You spend a lot more on the part than just the initial cost. Typical carrying costs are between 12 to 20% of the purchase cost." - Reliable Plant
There are 3 critical issues in managing MRO:
INACCURATE OR INCOMPLETE DATA
Problems in inventory management are compounded where master data and usage information are unreliable. Stockholding accuracy is critical. Incorrect and error-ridden data leads to a misleading picture causing over or understocking, waste, and unnecessary emergency purchases. Tracking the stock levels of hundreds or thousands of items manually using spreadsheets is not reliable or efficient.
"Nearly 68% of all SKUs purchased on an annual basis will never be used." - ReliabilityWeb.Com
POOR INTERNAL COMMUNICATION
Each internal function has its own goals and performance targets – the needs of procurement, finance and operations may not be aligned. Finance aims to contain operational budgets and improve asset performance, sourcing and procurement must reduce costs, and operations just wants the stock to be available when required.
"Properly managing MRO inventory has proven time after time to save 10 – 30% of annual inventory dollars." - MRO Magazine
LONG LEAD TIMES
Lead time is the period from processing an order until the shipment arrives. Lead times are critical in calculating safety stock levels and for establishing the correct reorder points. Reducing lead times means reduced carrying costs, streamlined operations, and improved productivity.
Many procurement organizations are not adequately resourced to be the driving force for ensuring that stocks are kept at the optimum level. It may be that the systems in place and the performance measures do not support inventory management adequately. It may also be that other priorities take precedence.
What are Best Practices in Managing MRO?
Engaging with MRO suppliers to manage your inventory takes the guesswork out of it. The benefits are:
- Reliable and accurate master data and transactional data. Using suitable tried-and-tested systems and processes leads to clear insights into stockholdings. Analytical tools help to predict demand that may be subject to fluctuations. Data tracking and line of sight help reduce complexity.
- Improved operational efficiency within your procurement team by freeing people up for more productive tasks. Dedicated staff at your MRO suppliers specialize in optimizing stock levels on your behalf. No more rush orders and fewer errors.
- Shorter and more accurate lead times. Outsourcing the task of MRO inventory management to trusted partners means having the right items available at the right time while lessening the administrative load.
The Role of Your GPO in Vendor Managed Inventory
Your group purchasing organization (GPO) helps manage the relationship and makes sure you are getting the most out of your supply contract. We hold vendors accountable for providing the best inventory data tracking and management available. A vendor managed inventory solution is an option for businesses that are looking for a cost-efficient and hassle-free way of handling MRO.
Leveraging your supplier for vendor managed MRO inventory will reduce spend waste, consumption and overall cost. Engaging your GPO partner will further streamline and increase savings and value. OMNIA Partners connects member companies to the right MRO and Industrial Supplies program offering based on their specific needs.
To learn more about the vendor managed inventory solutions offered in our MRO & Industrial Supplies program click on the supplier logo below to view their specific offering!