One client, a large national delivery organization, had 21 processing plants for parcels and a central warehouse for spare parts that served all those plants. They felt they had too much invested in MRO materials inventory. They wanted to reduce the inventory by at least $2M to align with benchmark figures they had found. An review of MRO materials management practises at a sampling of their plants revealed that indeed they were buying too much material and storing as much as 3 times the quantity required - far in excess of the $2M reduction they were seeking.
They were storing MRO materials near plant equipment for quick access and use in the event of breakdowns in order to minimize breakdown times. One finding was that instead of tackling the reliability problems they were minimizing repair times to keep availability up. The practise of having parts near their end usage points is a good one, but those parts were re-supplied by a storeroom on site. The point of use parts were off the books so inventory values on site were nearly double what was truly required to service the equipment. Compounding that was their use of a centralized warehouse to stock common parts used among all the plants. Those parts again added to the overall inventory. Shipping costs for those parts were in most cases almost double what they needed to be because of the double handling involved in moving them around the country.
Sparing practises were driven by OEM recommendations, their own usage and a healthy dose of "just-in-case" thinking. Introduction of a spares modelling technique driven by system availability reduced both initial spares purchases for new equipment and spares stocking quantities for existing equipment. Elimination of the central warehouse reduced material inventory, shipping costs and warehousing costs. A change to operational performance measures and introduction of maintenance planning practises reduced the need for duplicate spares at each plant. Overall savings exceeded initial targets by a factor of 5 times over the first two years.
Get an independent and impartial review of your MRO management practises.
The benefits in reduced inventory, shipping costs, initial sparing costs and system availability can help deliver more uptime even with vastly reduced MRO inventory costs.
