Reliability Tip:
Right-Sizing MRO Inventory
Many plants are under pressure to reduce storeroom inventory, and with good reason. Inventory represents working capital that is not producing anything, and the cost to carry that inventory is high. However, many organizations reduce inventory based on usage – if the part has not been used in a while, it is eliminated. This is the wrong approach!
To
understand how to reduce inventory levels and associated costs, we need to understand the purpose of MRO Inventory. That purpose is to mitigate risk of an asset’s failure and the time it will take to get that asset back in service. Having the correct parts and in the correct quantities without over-stocking is always the challenge. One tool in determining what parts to stock is determining criticality of the asset and therefore the associated MRO parts. The higher the asset criticality, the more likely the parts should be stocked. Unfortunately, in a highly-reactive maintenance environment the criticality is often unknown or only known to the maintenance personnel as tribal knowledge. For this reason, highly-reactive maintenance environments require over-stocking of almost every conceivable MRO part as a mitigation strategy against failure.
The road from reactive to proactive maintenance has many steps. One of those steps is managing the MRO Inventory which may actually include increasing select parts in inventory while reducing other parts. This is known as “right-sizing”. Right-sizing is a continuous improvement program and does not end with the implementation of an enterprise-wide reliability program.
Sustainable inventory reductions, while supporting maintenance reliability goals and ultimately the company’s bottom line will take a great deal of strategic planning. As mentioned, defining criticality of the production assets and therefore the MRO parts is a step in right-sizing direction but there are many prerequisite steps before criticality is viable. To name only but a few:
- Enterprise adoption of how materials will be managed and classified.
- MRO Data Standardization – a normalizing of naming conventions and descriptions.
- De-duplication of Inventory – the process of removing duplicate parts and standardizing the descriptions.
- Remove Obsolete Parts – Obsolescence has several definitions. Obsolete from the manufacturer, obsolete at a particular plant or obsolete from the entire organization. Proper definitions and reductions should be considered at the SKU.
- Centralized control of the Material Master with trained and dedicated resources.
- Re-evaluation of purchasing history, usage history and lead times.
- Align metrics with organizational goals.
There are many steps in this continuous improvement process and right-sizing inventory is just one of those steps. There is no finish line.
|