Determining proper levels of stock for MRO is an important thing. However, for most organizations, this represents a tough numbers game. The inventory managers generally are faced with this challenge of managing plenty of items, and each with their characteristics, needing complex & time-consuming calculations.
Hence, without the structured methodology & powerful analytical tools, proactive management of the large inventories becomes one impossible task and resulting in a fast increase of the inventory levels that are combined with the critical shortages of spare parts. Let us go ahead and learn more about some inventory optimization best practices in this blog.
What’s MRO Inventory Management?
Inventory management controls & practices that optimize the MRO inventory replenishment. The expertise of traditional inventory management is generally brought to bear over what is known as “traditional inventory.” WIP inventory, raw materials inventory, merchandise inventory, manufacturing inventory, and other types of inventory are generally subjected to cutting-edge forecasting & costing analysis. However, MRO inventory generally isn’t and MRO inventory is hardly on-hand and usage measured. Hence, rarely optimized.
1. Demand Forecasting
Any additional equipment commissioning is expected to raise the demand for some of the inventory items. The demand forecasting capabilities must include:
- Automatic algorithms selection for every stock item
- Appropriate selection of the forecasting algorithms
- Clipping & filtering methods to manage any kind of abnormal data
- Use of statistical and forecasting distributions appropriate for various spares items that include lumpy demand and slow-moving
- Capabilities of using the right knowledge of the expected future events and trends for applying the demand profiles for future forecasts
- An ability to isolate the planned maintenance & project demand from the unplanned demand
2. Define MRO inventory items.
There’re a few things that generally fall in the MRO inventory that will not cripple the business in case they are missing. Hence, you need to identify such items, all along with the usage rate & minimum reorder points. So whatever you do, never let replenishment of such items slip through any cracks.
3. Central MRO inventory location
It’s invariably highly efficient for storing the MRO supplies in a central location for every facility instead of keeping this in different unidentified locations. It’s important to have computer systems for tracking, controlling, and managing inventory. Armed with the usage data & transaction costs, the organization will “right-size” MRO inventory with the supply chain performance.
In Tier One suppliers, we have moved the maintenance products to the controlled area. An inventory was assigned and catalogued part numbers as well as located on the shelves, which were identified with the location ID. Inventory was capitalized and boosting the balance sheet as well as allowing costs of the routine equipment maintenance to get tracked rightly.
The new “stockroom” was staffed with the experienced supply chain who have established their relationships with the suppliers as well as understood the concept to partner with the suppliers that will help to drive down the costs.
4. Optimization Of the Reordering Parameters
Reordering parameters that are minimum & maximum levels that are used by MRO and Airlines plays a very important role in Optimizing the Inventory Levels. The enterprise-level management system can generate replenishment orders as primary determinants of inventory outcomes. The enterprises must think of optimization of reordering any parameters that will reflect several changes in the usage, lead time and various other factors. Optimization procedure addresses.
- Choosing suitable algorithms that will improve maximum and minimum stock levels
- Using an economic cost model that considers costs of replenishment, holding inventory, expediting as well as stock-outs.
- Analysing a group of items instead of doing it one by one.
- An ability to execute” modelling & compare optimized outcomes against the current inventory
- Consideration of the “real-world” constraints that include: higher bin capacity, pack sizes, set sizes and capacity
5. Supply chain management learning
Continuing education efforts like a seminar series on inventory management may allow people involved in the MRO to know the importance of adhering to the best practice. The exposure to these supply chain organizations will be of huge help; planners, buyers, and other categories of the supply chain experts benefit from the ongoing education programs that are offered by these organizations & from certification programs they run.
There are some other benefits of these programs: the supply chain managers also indicated they saw the training programs as an important sign of companies’ commitment.