It’s often easy to assume that direct materials are all that matters for a company’s bottom line. They’re highly visible on the production line and essential to the manufacturing of finished goods.
But beyond the raw materials and equipment needed for production, a whole host of other services and materials are needed to keep the supply chain running. Facilities need to be cleaned, trucks regularly maintained, and workers are given personal protective equipment (PPE) to wear on the production floor.
Collectively known as Maintenance, Repair, and Operations (MRO) supplies, these tools, spare parts, equipment, and services are used to keep the supply chain running smoothly. They include everything from floor cleaners to protective gloves to forklift repair services.
According to some studies, MRO can make up anywhere from 5% to 30% of a manufacturing company’s spending. Because MRO items aren’t always needed during production, companies may stock up on essential MRO items and not use them for a year or more. This can result in duplicate purchases or even obsolete and expired MRO supplies.
To prevent these problems, many firms have sought to optimize their MRO inventory. With the help of AI-enabled supply chain management software, these firms have been able to centralize their MRO inventory data and predict machinery downtimes and spare parts stockouts, saving them cost and time.
In this article, we’ll explore some of the most useful MRO optimization best practices your team can employ in 2022.
The importance of MRO optimization
MRO items are essential for repairing broken machines and conducting general maintenance works on equipment and vehicles. A good MRO strategy ensures that your facilities, systems, and equipment are always working and safe to use.
Yet despite their importance, MRO items are often considered an afterthought by operations managers who place most of their focus on direct materials.
This leads operations teams in many companies to procure their supply of MRO items outside the purview of the wider inventory management structure. As a result, when MRO outages occur, they compound throughout your supply network and hinder the safety and productivity of workers and machines.
Fortunately, most businesses have woken up to these risks. Firms are digitizing their MRO process to optimize inventory levels across facilities, streamline the procurement of indirect materials, and be ready for equipment failures.
Benefits of MRO optimization
Using a proper MRO optimization system can help your firm lower costs and increase productivity.
With better visibility into your MRO stock levels, your operations personnel no longer need to buy spare parts on an ad hoc basis. Instead, they can create strategic MRO procurement plans that take into account daily workplace needs and emergency repair situations.
Your operations personnel will also be able to create more accurate budgets for MRO supplies with these plans. MRO supplies can be expensive, so optimizing the procurement process to maintain adequate stock at all times can help you prevent overstocking or understocking.
Once your company’s MRO supplies are managed with the same level of care as your direct materials, particularly through the centralization of all MRO data, you will experience fewer problems with duplicate materials and waste.
Challenges of MRO optimization
Disorganized inventory management remains to be one of the biggest challenges for MRO optimization efforts.
In firms with weak inventory management systems, individual teams and local plants tend to make their own purchasing decisions for MRO items. They may procure their own MRO supplies without the knowledge of upper management, leading to hidden, private inventories that complicate MRO optimization processes.
In addition, an existing manual inventory tracking system for MRO supplies can make the MRO optimization process significantly challenging. Many small and medium enterprises experience this problem when trying to digitally transform their inventory systems.
Manual inventory tracking systems often come with bad data caused by human error that can distort overall stock numbers. Also, MRO supplies are not updated instantly in these systems, which may create outdated and inaccurate inventory reports.
MRO optimization best practices for 2022
To help you overcome MRO inventory stock-outs and private hoarding by teams in your organization, we’ve put together a list of the 5 most useful MRO optimization best practices. These best practices will help you consolidate your MRO data and maintain adequate MRO supplies to keep your operations running smoothly.
Establish greater visibility of your MRO inventory
If your firm’s inventory looks scattered and disorganized, you could benefit from conducting regular audits of your entire inventory. Identify all the databases, reports, and documents used to record your inventory data and define the MRO items that are business-critical.
Doing so will help you gain an overview of your current inventory processes and stock levels. If you find similar or duplicate MRO items in your inventory, communicate that to your teams and establish a comprehensive inventory management system that will prevent such duplicate orders.
The use of real-time AI-enabled inventory management software is a good way to achieve this. This software tracks the flow and usage patterns of your MRO supplies and enables you to accurately identify duplicate MRO items as well as those about to become obsolete.
Centralize your MRO inventory data
The use of data-driven inventory management solutions can also help you store all of your MRO inventory in a central, controlled database. Having your MRO inventory data in one place helps prevent siloed data and discourages the use of private inventories.
Centralized inventory data allows your operations personnel to check the latest inventory levels in real-time without having to email or call colleagues in other facilities.
Employees can run instant reports to identify the locations of MRO items and analyze supplier performance. The supply chain management software can also automatically alert them to MRO items that are about to expire.
Predict your MRO needs with the help of data
There’s a common misconception that demand for MRO items is difficult to predict because they don’t have the same type of explicit customer demand as direct materials.
But what this view overlooks is the fact that internal customers, such as production line workers and supply chain managers, rely on MRO items to keep operations running. These operations personnel are constantly using MRO items to repair machinery and keep themselves protected.
Over time, their usage patterns become rich sources of data for predicting the rate at which MRO items are consumed. The patterns can help reveal peak and low usage seasons, which can be used to maintain adequate MRO inventories and plan for customer deliveries.
Also, with the help of AI-enabled inventory management software, you can analyze usage patterns with critical performance metrics such as replenishment lead times and equipment age to schedule proactive maintenance checks. Preventative maintenance helps mitigate downtime events and save management time.
Monitoring maintenance needs with IoT technologies
Firms can further enhance their preventative maintenance plans by adding advanced sensors to equipment and machinery on the factory floor. These sensors can collect data on parts that are malfunctioning or showing signs of wear and send alerts to operations personnel via the MRO maintenance software.
These same sensors can also deliver production data to the AI-enabled data management systems to run visual reports on material flows and potential bottlenecks.
Firms that adopt AI technologies to analyze and manage their MRO needs are much likelier to gain a competitive advantage over other firms. They can also plan better, keep operations running smoothly during peak order seasons, and repair faulty equipment before they can cause harm to employees.
Forge relationships with reliable MRO suppliers
It’s not enough to optimize MRO with just technology alone. Building trustworthy relationships with MRO suppliers is also essential to securing a healthy supply of MRO materials at a reasonable price.
Good supplier relationships can help you get the right spare parts and repair services to your plant on time and resolve maintenance and problems quickly.
Some manufacturing companies use what’s known as a Vendor Management Inventory (VMI) agreement, which is a hybrid MRO approach that offloads your MRO inventory management to trusted suppliers. The vendor restocks your MRO inventories and services your equipment based on the inventory data you share with them.
VMI agreements can free your operations personnel up to more strategic tasks and help them focus on critical business objectives. It can also help you plan orders more efficiently and receive volume order discounts. Instead of keeping your own MRO stock, you’re just paying for materials you use.
How to optimize MRO using supply chain management software
The cost-effective, productivity benefits of using supply chain management software to optimize your MRO may be clear, but it can be difficult to know where to start with the transition.
Most supply chain managers may feel the urge to start by cleansing their data by recategorizing materials and removing bad data. While this temporarily tidies up your inventory records, it doesn’t bring context to your data.
A better way to start is to focus on defining the purpose and function of each MRO spare part, tool, equipment, and service in your inventory. It helps you remove unnecessary MRO items and only keep the ones that your firm really needs.
If you have access to lead times and supplier prices for each item, add them to your software’s database to give your inventory items more context.
Once you’ve done this, the AI-enabled data management software can automatically identify the same asset regardless of part number, name, or description. It will notify you of any duplicates, obsolete items, or overstocked items within the system.
After everything has been set up, the AI system will integrate your inventory data across all your plants. It will then analyze your current and historical production data to give you continuous insights into your MRO inventory usage patterns and stock levels.
Get started with MRO optimization today
Optimizing your MRO inventory levels in today’s complex supply chain environment requires powerful digital tools that can organize massive volumes of materials data. With Verusen’s cloud-based AI-driven materials management platform, you can harmonize your data automatically and reduce costs across your entire supply network.
Our unique data management tool can identify MRO duplicates in your inventory and leverage new spend visibility insights in real-time for you to action. Whether you’re in manufacturing, CPG, oil and gas, or pulp and paper, our intelligent, self-learning materials solution could be what you need to digitally transform your future supply network.