MRO inventory management: everything you need to know
When you think of inventory, you might imagine products you’ll be selling to your customers. But that’s only half the equation — your business also needs certain products to sustain operations.
Called maintenance, repair and operations (MRO) these items ensure smooth operations for your business so you can focus on serving your customers.
In this guide, we’ll dive into everything you need to know about MRO inventory management.
MRO includes things like:
air conditioning maintenance
lighting and plumbing
machinery and equipment used in manufacturing
tools and supplies.
MRO also typically includes activities and services like routine maintenance and repairs, cleaning and purchasing supplies. MRO can make up as much as 10% of costs in some industries, so keeping these expenses under control is important.
What is MRO inventory?
MRO inventory is made up of the consumables, equipment and supplies used to carry out MRO activities. In other words, it’s the cleaning supplies, tools, maintenance gear and other sundries you use to keep your business running every day.
Examples of MRO inventory
Maintenance and repair supplies
This category covers supplies like oil, lightbulbs, valves and spare parts. They’re used to keep essential machinery running so that your business can continue production.
Safety equipment includes items such as masks, ear plugs, safety glasses and face shields, respirators and harnesses. Anything that’s essential to maintaining a safe work environment falls into this category.
The office supplies category covers computers, printers, telephones, paper and pens and other similar items. Furniture like desks and chairs are also considered an office supply.
While your “normal” inventory management process might only deal with a handful of products or supplies that your business sells regularly, MRO inventory can be extremely complex. There can potentially be thousands of different items that need to be tracked and managed.
What are the different types of MRO?
MRO falls into several categories, separated primarily by the area of the business they support.
Infrastructure repair and maintenance
Maintenance activities that help keep your buildings and essential utilities functioning. Roofing repairs, power washing of building exteriors, cleaning inside your buildings and other similar activities make up this category.
Production equipment repair and maintenance
Supplies, repairs and maintenance for production equipment in manufacturing. This inventory works to make sure your business can continue to manufacture its products and operate efficiently.
Material handling equipment and maintenance
Maintenance for the equipment you use to transport items to and from your business' production lines. If you have trucks that deliver finished products to a storage facility, they'd fall under this category of MRO.
Tooling and consumables
This final MRO category covers all of the smaller equipment and supplies used in your business — everything from cleaning solutions and paper towels to handheld tools.
Why is MRO inventory management important?
The items you’re managing with MRO are involved in keeping the infrastructure of your business functioning. Having them available in proper quantities is absolutely critical — they’re essential to success. If your assembly line goes down, you could be looking at hours or even days of downtime without the right parts on hand.
Just like any other inventory, having too much MRO inventory on hand can become a waste of space and money — particularly for expensive items like specialised parts for an assembly line. Since these aren’t items that you’ll be selling, you can’t rely on heavy discounts and special deals to clear out excess products. Striking the right balance is key to managing your costs.
What are the main steps in managing MRO inventory?
Getting control of your MRO inventory is a multi-step process. Let’s start from the beginning and work through each of the 5 phases one by one.
1. Audit MRO inventory
The first thing you should do when starting a new inventory management process is to audit existing inventory.
Go through your entire stock and consider whether each item is still necessary. If it is, do you have enough on hand, or too much? Is it still usable, or has it expired? These questions can help you get an idea of where you stand currently.
2. Organise MRO items
Once you’ve determined what you have, you’ll want to organise it in the most efficient way possible. A strong organisation system ensures easy access to items when you need them and prevents over-ordering things that you don’t need. This system should be customised to your business' unique needs.
3. Develop an MRO purchasing process
The next step to managing your MRO inventory is to put together a concrete process for replenishing your inventory.
Having an effective ordering system in place helps make sure that you have what you need when you need it, without excess waste. This process involves determining a threshold to replenish each item, selecting the supplier for the product and assigning individuals to be in charge of each step.
4. Forecast demand
Before ordering anything, take some time to evaluate the ups and downs of your MRO inventory use. Look for patterns where certain items are used more or less heavily. You can then use these forecasts to help with your initial orders.
5. Manage MRO inventory levels
Finally, evaluate your purchasing process and forecasts periodically and conduct additional audits to find weak points. You can then adjust your plan as needed.[TM7]
What are the challenges of managing MRO inventory?
As with any major process, MRO inventory management has some challenges associated with it. These include acquisition costs, inventory tracking and slow turnover.
High acquisition costs
Considering the sheer amount and scope of MRO stock that some companies will need to invest in, the cost can be quite high. This is especially true for large facilities or highly specialised manufacturing.
Hidden inventory counts
MRO inventory isn’t always as visible as “traditional” inventory. Discrete teams may keep their own stocks of items to ensure availability, which can complicate MRO inventory processes.
Slow MRO inventory turnover
MRO inventory is often (though not always) slow-moving. You may need a part on-hand in the chance that a piece of critical manufacturing equipment goes down, but it may be years before you actually have to use the part.
Unless you’re using a centralised inventory management system, keeping track of MRO items can be tricky. Such a system is important for having visibility into your current stock and usage trends.
What are the best practices for MRO inventory management?
Managing MRO inventory can seem daunting, but it doesn’t have to be. These best practices will help you get your process off to a smooth start.
Identify mission-critical MRO items
It’s important to have an idea of what your absolute must-have MRO items are. If there is something that'll bring your business to a halt, you need to make sure you always have it in stock. These items should be the top priority when ordering and budgeting.
Store MRO inventory in a central location
By maintaining a single, centralised storage spot, you can help cut down on some of the visibility issues around MRO inventory. Ensure that all departments are aware of this location and have the access they need.
Perform quarterly MRO inventory audits
Continue to conduct inventory audits regularly. Best practices can help a lot, but we’re all human — mistakes are bound to happen. Numbers get entered incorrectly or an item gets misplaced and before you know it, your counts are off again. Regular audits help alleviate this issue.
Build strategic supply partnerships
Take some time to carefully consider the vendors you use for MRO supplies. Having the right partnerships in place can help streamline your ordering and management process and ensure consistent quality.
Use data to accurately forecast demand
When creating your MRO demand forecasts, don’t just guess. Rely on hard data wherever possible. This ensures more accurate forecasting and helps keep your inventory manageable.
Use software to manage MRO inventory
In a similar vein — don’t rely on spreadsheets (or worse, written records) for inventory management. Proper MRO inventory management software can make a huge difference in your process and efficiency. This software can automatically place orders and track use and receipts of items, among other highly useful functions.[TM11]
What MRO KPIs should your business be tracking?
It’s important to track the percentage of your total purchasing that's going towards MRO. Since MRO doesn’t directly contribute to the bottom line, you want to keep it as low as possible without negatively impacting operations.
Keep track of your stockouts and aim to keep this number as low as possible. A high stockout percentage indicates a failure at some point in your MRO process.
Days inventory on hand
Aim for about 30 days of stock on hand. Too much is wasteful, but too little can leave your business in a tight spot.
Rush orders to replenishment ratio
Rush shipping is expensive. While it can’t always be avoided, if you find you’re paying for expedited shipping often, it likely indicates a failure in your demand forecasting.
Improve MRO inventory management with MYOB
MRO is an important factor in a successful business, and managing your MRO inventory is a critical aspect of it. However, it can be a daunting job if you’re approaching it for the first time.
The right inventory management software can help. MYOB’s powerful inventory management features can help streamline your inventory process and guarantee you have just the stock you need when you need it.
Disclaimer: Information provided in this article is of a general nature and does not consider your personal situation. It does not constitute legal, financial, or other professional advice and should not be relied upon as a statement of law, policy or advice. You should consider whether this information is appropriate to your needs and, if necessary, seek independent advice. This information is only accurate at the time of publication. Although every effort has been made to verify the accuracy of the information contained on this webpage, MYOB disclaims, to the extent permitted by law, all liability for the information contained on this webpage or any loss or damage suffered by any person directly or indirectly through relying on this information.