MRO inventory stands for maintenance, repair, and operations inventory. In general it is used to maintain or repair items that are used in operations. This can include all the supplies an organization uses for its production processes that do not become a part of an end product or finished goods.
MRO inventory is not a Raw Material, it is not Work in Progress and it is not a finished product. MRO forms of inventory can include equipment, spare parts for production, consumables, office supplies, janitorial supplies, technology and safety equipment. As you can see from these examples MRO is used to support the production and operations and keep things running. Another key difference between MRO inventory and other types of inventory is that MRO items do not generate revenue. Instead, they support the generation of revenue.
Neglecting MRO Inventory?
To put it simply, MRO inventory should not be neglected. Even though it does not directly contribute to revenue, if MRO inventory is not monitored it can cause big problems for a company. Issues like not meeting deadlines, frustrated customers and downtime are some of the more common examples. These may not seem like a big impact but let’s put the impact into perspective.
Now, Let’s say your company uses fluids like coolant and oil to run machines. Without it Employees can not do their work. Now let’s imagine that the coolant and oil is neglected and employees discover there is a stock out. Now, in addition to the cost of ordering the fluids, your line that can not run is losing money.
Preventing Catastrophic Losses
Preventing excessive and wasteful spending with regards to MRO inventory is not much different from other types of inventory. Monitoring levels with cycle counting or a periodic approach helps keep an eye on things, but these are not the only methods. When managing MRO inventory in house methods such as Just-In-Time and regular ABC Analysis are very effective. While these methods require resources to perform they allow internal employees to stay in the loop, provide input and learn as they manage MRO levels. Another very effective way to manage inventory is through a Vendor Managed Inventory or VMI. Vendor Managed Inventory programs are a powerful way to leverage an organization's strengths and focus on your core competencies. This hybrid approach to managing MRO items allows an organization to either offload it all or utilize only the internal resources needed to monitor and manage supplies. Of course, from a more strategic approach companies need to ensure that they prioritize essential items, measure with key performance indicators and keep things as lean as can be and you will have all the MRO you need while not draining resources on stockpiles of inventory.
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