Thursday, August 21, 2008

Effective MRO inventory management

Managing products that are going to be consumed internally by an organization is normally referred to as maintenance, repairs, and operations (MRO) inventory. Typical questions are:
* How do we decide what products we should stock to maintain our operations?
* What quantities of these products should be kept on hand?

Action plan for achieving effective MRO inventory management.
What Products Should be Stocked?
Many organizations have too much inventory in their maintenance and repairs inventory. Unlike inventory for resale, MRO inventory is not an investment; it is an expense of doing business. Make sure that you are not adding to this expense with unneeded items. Be sure that there is a valid need or justification for stocking every one of the products in your current MRO inventory:
* The product cannot be obtained in the time period necessary to fill a need once the need has been determined.
* The product must be purchased in a quantity greater than what is needed to fill a particular need.
* The cost of carrying a product in inventory is less than the procurement cost.

Often companies will have spare parts in stock for machinery that is no longer in service. When they retired a piece of equipment, no one bothered to check to be sure that all of the spares for the machine were removed from the parts room. That is why we recommend that once a year you examine each of the products currently in your MRO inventory that have not been used in the past 12 months. Question whether it is absolutely necessary to continue to maintain a quantity of each one of them. It is also a good idea to develop a spreadsheet listing each MRO product, the machine(s) or operation(s) it supports, and the quantity of the product normally needed for a repair or maintenance activity. That way, when you discontinue a process in the future, you can easily identify the replacement parts that can be removed from your MRO inventory.

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