Maintenance, Repair and Operations (MRO) are the day to day activities for ensuring your systems and equipment are online and your facility is producing oil, chemical products, plastics, medicines and similar as relevant to you.
MRO inventory management covers procurement, storing, transport, and replenishment of spare parts inventory needed for operation and maintenance activities.
To be able to operate your facility you need to have, ready onsite, an inventory of;
Which items are required depends on what type, model and brand of equipment is to be repaired, maintained or commissioned.
MRO inventory management is the process of ensuring your stocks of equipment, parts, materials, chemicals, tools and any other consumables required, are ready and available on site, at the right time, for your technicians to use.
Optimisation of MRO inventories is focused on improving efficiency in the inventory management process to minimise the amount of items bought and stored, and the time sitting in the warehouse to as low as possible without impacting production as this frees up working capital.
"Inventory optimisation is more than just an operational tweak; it's a strategic imperative that directly impacts your bottom line, freeing up resources for investment in growth and innovation”.
Due to the cost and complexity of the production facilities in complex and heavy industries, ineffective MRO inventory optimisation can have extreme effects on working capital and expenditure that can build into the hundreds of millions of dollars.
Excess inventory is dragging down your operations:
Effective MRO inventory management is crucial for reliable operations.
Having sufficient stock of critical materials is a key mitigation for the risk of production downtime due to planned and unplanned shutdowns which result in costly delays and lost business. Often MRO stock that is urgently needed is not available and has to be obtained via expedited, last-minute or on-the-spot purchasing that has higher purchasing and delivery costs.
The safety of your personnel and plants are also dependent on maintenance being carried out at the right time. Without available parts, tools and protective equipment, necessary maintenance is delayed which increases risks of catastrophic failures and incidents, and may also violate safety regulations leading to fines.
Investing in inventory optimisation isn't just good practice; it's an essential component of a resilient business strategy.
Because, MRO inventory is normally a sizeable portion of total procurement each year and a major element of operating budgets.
Inventory Optimisation delivers: Reduced Cost, Increased Productivity & Improved Sustainability
For example: The European energy major, Equinor, presented in November 2023 that they have $2.5bn USD of inventory and an ambition to reduce this by 50% (NORWEP - International Energy Forum 2023).
For any improvement campaign, clear goals should be defined to measure against. The following are a some of the typical goals in inventory optimisation to help you consider where you can improve your organisation:
Goal 1 - Rate of stockouts
This is the percentage of times that an item is not available in your inventory when there is a requirement for it. The goal to aim for is to be under 1%.
Goal 2 - Days inventory on hand
This measure how quickly you are using your inventory. This for operational items (i.e. not insurance spares) less than 60 days is often a common goal in complex and heavy industries.
Goal 3 - Emergency spending
As a percentage of total procurement spending. How much are you spending, as a percentage of your total MRO expenditure, to buy expedited items due to insufficient stock. This should be below 2%.
Inventory optimisation requires detailed analysis of data that delivers concrete output. Thanks to powerful MRO IO software this can, to a large degree, be automated including the use of artificial intelligence.
However, without reliable structured data even experienced analysts and the most powerful MRO IO software cannot deliver results.
This data for your facilities, equipment and their associated parts and tools required is too often siloed, incomplete and inaccurate across your CMMS, EAM and/or ERP systems.
Having a source of reliable, accurate and complete data within your CMMS, ERP and EAM systems is the key starting point for inventory optimisation. It also is the foundation that enables your teams and operations systems to perform at their best while reducing the load of regulatory obligations.
Efficient MRO inventory management requires the following steps:
Step 1 - Identifying what equipment is critical for safe and reliable production
Step 2 - Defining the maintenance, repair and operational (MRO) tasks and schedules for your critical equipment
Step 3 - Collecting spares and parts information from suppliers, including lead times
Step 4 - Building bill of materials connected to equipment in EAM, CMMS and ERP systems
Step 5 - Establishing required minimum and maximum stocking levels of parts
Step 6 - Tracking and reviewing how frequently and in what quantities each item is used, to achieve the right balance between having sufficient, but not excessive stock.
Step 7 - Forward planning for peaks linked to major activities such as periodic major maintenance, planned shutdowns and turnarounds.
Steps 1 through to 5 are steps focused on building a sufficiently detailed data foundation, so that the analysis and decision making can be conducted only in steps 6 and 7.
Strong asset data is the key that will provide revenue growth, improve profit margins and mitigate risk across organisations, but, it is all too common to prioritise investing in software over data with the hope that software can fix all issues.
Adopting an inventory optimisation strategy, including data management activities such as cleansing, enrichment and cataloguing, builds and reinforces a culture of continuous improvement.
To be a great operator you don't just adjust once and forget; the process should evolve, learning from trends eeping your operations agile, building a considerable competitive edge in today's fast-pacedmarket where lean production is always important.
Inventory Optimisation can fall short of delivering the improvement expected, but why?
The following table gives some common issues that can be blocking your inventory optimisation efforts:
Inventory management software facilitates effective inventory control, enabling organisations to have the right MRO inventory available at the time it is needed, but, which software solutions available are best suited for the challenges in oil and gas, chemical and process, pharmaceuticals or utilities?
As a data service provider, we come across many different tools in the market, and the following list are some of the options available that are well suited for helping companies in complex and heavy industries with inventory optimisation in MRO, so long as a solid foundation of data is available:
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