Subject Area: MRO and Spare Parts Inventory
MRO and spare parts inventory management is different so is it any wonder why you can’t seem to get your MRO and spare parts inventory consistently under control while other inventory types appear to be well managed?
Are you challenged by the spare parts management dilemma?
People from finance, procurement, storerooms, engineering, maintenance, and even supply chain constantly ask: Why can’t we, as good inventory managers who understand both the theory and practice, get this type of inventory under consistent control?
While each department blames another for this problem the real issue is that they haven’t recognized the root cause: MRO and spare parts inventories are fundamentally different to other inventory types.
This means that many of the standard supply chain and inventory management tools and techniques just do not apply. This includes some of the supply chain and inventory management techniques that have been successfully applied to regular, direct inventories for decades, such as the concept of supply chain velocity (that is, speeding up the flow of an item through the entire supply chain from source to user), Just-In-Time (JIT), ABC analysis, and even managing for profit per unit.
Not only do these techniques not work with MRO and spare parts inventory, their application can actually be damaging. This is because with MRO and spare parts inventory you need to:
- Balance both supply chain and technical requirements, which can result in confusing, sometime unpredictable, and complicated demand patterns
- Stock items that you actually don’t want to use but that you absolutely must hold
- Manage items of small value that are critically important
- Deal with stockout costs that can be disproportionately high compared to the value of the item
- Manage the behavior of users who are part of your team but not accountable for their impact on inventory levels
- Beware of accumulating large holdings of obsolete stock that you won’t be able to sell
Plus, the small ‘market’ that this inventory services (being your plant and equipment) means that you don’t get the leveling effect that happens with the larger, more homogenous, markets experienced by goods for production and sale and on which most inventory and supply chain practice is based.
When you take these issues into account there is no doubt that MRO and spare parts inventory management requires a different approach to regular inventory.
So, when you next consider what to do to better manage your MRO and spare parts inventories, ask yourself if you are falling into the trap of applying generic solutions to a specialist problem.
If the answer to that is ‘yes’, then stop before you waste too much time and money. If someone in your company is pushing for solutions that don’t suit, then forward this web post to them.
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Posted by: Phillip Slater