Maintenance, Repair, and Operations (MRO) inventory spending accounts for a significant portion of an organization’s maintenance budget – in some cases as much as 45%! To minimize MRO inventory costs, organizations must understand what is happening to stock that is currently on hand. This article provides an overview of inventory control and its relationship to MRO inventory management.
What is MRO Inventory Control?
MRO inventory control, sometimes called stock control, can be defined as the process of tracking and regulating the level of MRO inventory within an organization, from the time it is received to the time it is consumed by maintenance work. It involves knowing what inventory items are available, how many are in stock, where they are located, and their condition (when applicable).
Why MRO Inventory Control is Important
Proper inventory control helps maintenance organizations in 4 key areas.
Through inventory control, maintenance organizations gain an accurate picture of how many units of an inventory item are in stock. Knowing these quantities helps identify which items are over or under stocked, thereby affecting replenishment decisions.
Maintaining accurate inventory levels also improve the maintenance planning process. When working from accurate stock counts, maintenance planners can schedule maintenance activities according to what parts are currently available or defer maintenance, if necessary.
Poor inventory control affects the production of finished goods or the delivery of services. If parts needed for a repair are out of stock, organizations incur unnecessary downtime costs related to asset downtime and idling employees.
In addition, tracking the location of inventory items, along with their quantities, ensures maintenance technicians spend less time searching for parts and more time performing maintenance work.
Procurement and Reordering
Inventory tracked through inventory control activities provides valuable information for making purchase decisions. Continuously counted MRO items reveal an item’s usage and inventory turnover rates, which is used to determine ideal stocking levels. From this, organization’s can set an appropriate reorder point and avoid over or under ordering.
Held Inventory Costs
When done correctly, MRO inventory control helps reduce the amount of money tied up in inventory by allowing organizations to operate on the least amount of inventory that is sufficient to meet maintenance needs. Strict inventory control reduces the number of obsolete items held in inventory, reduces over or under ordering, and minimizes the need for costly expedited shipping if stockouts occur.
Reducing the total cost of inventory keeps the maintenance budget in check, frees up money for other projects, and maximizes an organization’s profitability.
Components of Inventory Control
MRO inventory control involves knowing what items are carried in inventory, their quantities, their location(s), and conditions.
Tracking Inventory Items and Their Quantities
In order to control inventory, organizations need to know what items are in stock and their quantities. There are multiple ways in which organizations audit their stocked inventory:
One way is to utilize cycle counting, where small portions of inventory are counted at a time. Compared to a full physical inventory count, which requires significant manual labor and temporary suspension of inventory activity, cycle counting is less disruptive, requires less labor, and can be performed any time.
Another way to identify and count inventory items is to use an inventory tracking system that stores inventory records and automatically updates stock levels as parts are consumed. Though this approach is more timely and accurate, data entry errors and unaccounted for transactions can lead to inaccuracies from time to time. To remedy these issues, organizations perform occasional physical counts to validate inventory accuracy and implement a barcode system to reduce data entry errors.
Further Reading: What is a Barcode System?
During the identification and counting process, organizations may also identify obsolete inventory which can be scrapped, sold, or otherwise disposed of. Doing so reduces clutter and frees up space for storing necessary inventory items.
Tracking Inventory Item Locations
The inventory control process includes tracking where all inventory items are located. Depending on the size of the organization, inventory items may be stored in one or many locations.
For example, there may a single stockroom, or there may be multiple stockrooms within a facility. Within each storage location are a number of aisles, racks, shelves, and bins. Further, inventory may be kept in other storage locations including cabinets, shelves, carts, vending machines, and cribs.
Location data can also impact how to organize the maintenance storeroom. In an effort to make it easy for maintenance staff to locate parts, inventory items may be organized by type or by the asset(s) on which they are used. Other aspects of an inventory item, such as its weight or size, may dictate the storage solution.
When an inventory item’s location and quantities are known, organizations are better able to assemble kits, repack items into smaller or larger units, and move groups of items from one storage location to another.
Tracking Inventory Item Movement
In addition to tracking MRO inventory items’ stocking locations, the inventory control process also tracks changes in location. For example, it is common for technicians to maintain a “personal” stock of MRO items in a rolling cart, tool chest, or vehicle. If this stock goes unaccounted for, inventory accuracy suffers and leads to increased inventory costs.
Tracking inventory item movement is also important when it comes to tools. Technicians must know whether the tools are available before maintenance work can begin and “check out” tools from a central tool crib (or other storage location).
In either case mentioned above, thorough inventory control tracks where items are currently located and who is in possession of them.
At times, inventory items are moved from one storage location to another. For example, an organization may decide to move a quantity of filters from the main stockroom to another storage location to reduce employee travel time. The organization should track the new location of the filters and the quantity stored there in the inventory management system.
Tracking Inventory Item Condition
Just because inventory items are in stock does not necessarily mean they are fit for maintenance, repair, or operations. The condition of the location in which inventory is stored impacts the integrity of the items stored there. For example, humidity causes moisture to collect on the surface of parts, leading to corrosion and degradation. Damaged parts do not perform to specification, potentially causing more harm than good.
Inventory Control vs. Inventory Management
By now, you may notice some similarities between inventory control and inventory management, and that is true. Both functions involve tracking and managing stock, though there are some key differences.
Earlier in the MRO inventory control definition, it was established that inventory control tracks and regulates inventory that is currently in the facility. In our article What is MRO Inventory Management?, inventory management is defined as “the process of procuring, storing, using, and replenishing the materials and supplies used for maintaining assets at the lowest possible cost.”
As you can see, the scope of inventory control is smaller than that of inventory management. Inventory control is most related to the storage aspect of inventory management, and ignores purchasing and replenishment. It is concerned with stock that is already present in the facility.
By comparison, inventory management involves all aspects of inventory, from tracking item specifications, monitoring usage and forecasting demand, making strategic purchase decisions to replenish stock, and managing vendor relationships. It is concerned with what is currently in the facility, as well as from where and when new stock is ordered. Many inventory management decisions are informed by inventory control.
|Inventory Control||Inventory Management|
|Definition||The process of tracking and regulating the level of MRO inventory within an organization, from the time it is received to the time it is consumed by maintenance work.||The process of procuring, storing, using, and replenishing the materials and supplies used for maintaining assets at the lowest possible cost.|
|Scope||Operations-level daily tracking of MRO inventory that is currently in the facility.||Higher-level tracking of MRO inventory ordering, stocking, replenishment, vendor management, and reporting.|
|Purpose||Track the quantity, location, and condition of MRO inventory items within the facility.||Ensure the organization has the right amount of stock, in the right place, at the right time, and at the right cost.|
|Helpful Resources: Looking to become an expert in inventory control and management? The following professional organizations offer learning opportunities and certification programs:
MRO Inventory Control Tools
Historically, inventory control has been managed with spreadsheets, printed paper files, and modules in accounting software. However, a better and more comprehensive way to manage and improve MRO inventory control – and inventory management – is computerized maintenance management system (CMMS) software.
A CMMS offers robust maintenance inventory management software capabilities, and allows organizations to maintain visibility of all inventory items across the facility. A centralized system provides real-time inventory data and quick identification of an inventory item’s location, quantity, specification, cost, and more.
In regards to ordering and replenishment, CMMS software offers many benefits over manual systems. CMMS software automatically updates inventory count as inventory is consumed by work orders. Through maintenance reports, organizations can use inventory data to set appropriate reorder points and be notified when it’s time to reorder stock. Some CMMS platforms include purchasing functionality, providing an end-to-end inventory management solution.
Control Inventory More Effectively with FTMaintenance Select
FTMaintenance Select makes it easy to control your MRO inventory by allowing you to identify inventory items, track stock quantities, and track and manage inventory storage locations. Request a demo today to learn more about FTMaintenance Select.
|Learn more about MRO Inventory Management
MRO Inventory Management is an important aspect of maintenance management. Its complexity warrants in-depth coverage of the topic. Check out our other articles about MRO inventory management.