8 Best Practices To Optimize Your MRO Inventory Strategy
Effectively managing maintenance, repair, and operations (MRO) inventory is one of the many significant challenges for asset-intensive enterprises. Companies often seek MRO improvements through a project-based lens, like hiring a third party to conduct a basic data cleanse or similar project, instead of elevating MRO management to a strategic level for the C-suite.
Sadly, these isolated efforts fail to address the root causes of MRO challenges, namely, heterogeneous data, misaligned incentives between procurement and operations, and changing priorities from organizational leadership. Failing to fix these causes can lead to these same issues of excess inventory, absence of visibility, growing risk, and more arising every few years.
For example, when companies acquire or merge with companies, they often have to deal with a massive amount of scattered, incomplete, or inconsistent data for hundreds of thousands of products and SKUs gained in an acquisition. This scenario may be compounded by the different naming conventions used by different suppliers and data partners.
Other operational MRO inventory challenges occur with misaligned incentives and operational differences between procurement and operations teams. Procurement teams face constant pressures to control costs, while operations teams want to minimize the risk of production downtime with higher inventory levels. Often, these sides butt heads on the same turf, causing more problems.
Evolving executive priorities can also throw a wrench into the operational gears of managing MRO inventory. It’s important to get C-suite buy-in on MRO as a vital corporate function rather than a support cost center. That’s the first step in a journey toward stronger MRO practices.
Here are 8 best practices to help you integrate MRO opportunities into your corporate success story. Let’s take a look.
Best Practice #1 – Organizational Commitment & Strategic Integration of MRO
The first step is to onboard your executives for a strategic integration of your company’s maintenance, repair, and operations. Without a strong endorsement from the top, MRO optimization efforts often struggle to gain traction, hindering efficiency and increasing costs.
When organizations integrate strategic MRO management into their core processes, it becomes a value driver rather than just a cost center. Businesses start to see suppliers sticking to contracts, spending goes down, maintenance needs are proactively fulfilled, and downtime is reduced.
CTA: Develop a comprehensive MRO policy that integrates with your enterprise initiatives. Show how MRO can achieve operational goals to boost efficiency and reduce waste.
Best Practice #2 – Data-Driven Decision-Making
Of course, making good decisions with strong data is crucial for effective MRO management. However, it’s a nightmare if inventory data is dispersed across multiple systems in varying formats. Simply aggregating this data to begin analysis can often take months, leading to misguided decisions based on outdated information.
Manual data extraction from ERP/EAM systems and manipulation in spreadsheets frequently cause inconsistencies, creating multiple versions of “the truth” across departments. This complicates decision-making and restricts effective cross-functional collaboration. But you can counter that when your MRO teams have essential data on inventory levels, demand forecasts, and maintenance schedules to make informed decisions.
CTA: Invest in MRO-specific optimizaton platforms that utilize AI and Machine Learning to analyze data for inventory optimization, predictive maintenance, and demand forecasting. Conduct regular data quality audits to extract valuable insights from existing data flows.
Best Practice #3 – Preventative Maintenance Strategies
When enterprises adopt a business culture of preventative maintenance over reactive maintenance, they find new operational benefits. Preventative maintenance helps companies identify and resolve potential equipment failures before they turn into deeper problems. By being proactive, companies can lower any production downtime (and related costs), and extend the machinery lifespan.
One electric power supply chain study reported that “a preventative maintenance program can reduce the risk of unplanned downtime by up to 60%.” That benefit can help organizations to optimize workflow and resource allocation, which increases productivity and overall operational reliability.
CTA: Incorporate predictive maintenance insights into your asset management strategy to extend asset life and improve reliability. With monitoring systems gathering real-time data across critical equipment, scheduling maintenance needs become optimized.
Best Practice #4 – Enhancing Collaboration Between Key Departments
Overcoming departmental conflict is a key goal to achieve higher MRO efficiencies. MRO maintenance and reliability teams prioritize minimizing downtime through larger inventories, while procurement aims for cost-efficiency via lower stock levels. This clash leads to disputes over inventory management.
By enhancing collaboration, enterprises will soon see benefits like synchronizing inventory needs with maintenance strategies balancing operational and financial goals. Interdepartmental alignment breaks down silos, increases transparency, and builds unified operational excellence commitment. The resulting efficient resource use, reduced risks, and improved decision-making contribute to overall business success and sustainability.
CTA: Bring your teams together more frequently to share insights, align on objectives, and develop joint performance metrics for higher efficiency throughout your MRO.
Best Practice #5 – Centralization & Standardization Across the Org
It’s time to centralize your MRO decision-making processes. When organizations use a decentralized or local approach, various parties often use their own distinct methods. This disparity between local site practices and enterprise-wide directives creates roadblocks to streamlining processes and operations.
Standardizing MRO decision-making helps to reduce redundancy, improve governance and compliance, and minimize oversight risks. Moving to a unified approach can also improve communication and training for maintenance staff while enhancing overall maintenance capability.
CTA: Create an audit and develop standardized specifications for common spare parts and maintenance procedures. Communicate closely with MRO suppliers about your standardized approach to spare parts procurement.
Best Practice #6 – Centralizing MRO Inventory Management
A centralized approach to MRO decision-making also involves centralizing inventory management. By centralizing inventory management, organizations can leverage economies of scale, reduce costs through bulk purchasing, and minimize redundancies across multiple facilities.
When organizations improve their MRO inventory visibility, it improves coordination across different manufacturing locations. This brings about more strategic resource allocation, faster response times to maintenance needs, and, ultimately, a better approach to managing MRO parts.
CTA: Establish virtual central storerooms and centralized MRO warehouses to serve multiple manufacturing sites. Thai helps to optimize inventory levels and reduce redundancy.
Best Practice #7 – Leveraging Vendor Partnerships
Many organizations struggle to leverage their vendor relationships regarding data and process, which often leads to inconsistent expectations and objectives. Without strong data frameworks, working with vendors to maintain consistent lead times, leverage inventory, and ensure service quality can be difficult.
Transform your supplier relationship into a partner relationship. When you leverage your vendor’s expertise, you’ll likely develop the adoption of new strategies, solutions, and improvements. Integrating your vendors’ wisdom into your organization’s supply chain is a recipe for better responses, agile operations, and proactive inventory management that is aligned with demand.
CTA: Consider implementing a Vendor Managed Inventory (VMI) program with key suppliers to optimize inventory levels and improve replenishment processes. Integrate new metrics into the relationship to calculate goals for collaborative planning, shared risk management, and joint innovation initiatives.
Best Practice #8 – Technological Advancements in MRO
We’ve all seen how technology is impacting everyone’s business. Is your organization staying ahead of the tech curve? Integrating technologies like AI, IoT, and collaboration capabilities into MRO management can be a work changer.
Adopting these technologies can bring about transformative shifts to maximize predictive analytics, real-time monitoring, digital twin simulations, and proactive internal/external communication. Leveraging AI-powered capabilities can lead to vastly improved MRO processes, setting the path forward for a more proactive approach to maintenance inventory purchasing and management.
CTA: Prioritize new investments in IoT-enabled devices and sensors and implement AI-driven analytics platforms to optimize your MRO inventory management.
When companies elevate their MRO practices to a higher strategic corporate priority connected to broader business objectives, it can result in a new shift in perspective, bringing 10X improvement to inventory resources and directly driving operational efficiency and cost optimization across the enterprise.
Paul Noble,
Founder & CSO of Verusen