Saving costs and downtime with optimised MRO inventory

Maintenance, Repair and Operations (MRO) inventory costs can soar to millions of dollars per year for asset intensive organisations especially in sectors like utilities, mining, and oil & gas. These businesses typically face the following challenges towards MRO optimisation:

• Many unique MRO parts, tools and other consumables
• Extensive input variables, like lead time, criticality, location of parts, and supplier type
• Variations in supply and demand due to process and production changes, acquisitions, changes to ERP or EAM software and processes, and decommissions
• The need to accurately factor in critical costs, such as procurement, downtime and holding
• Collaboration issues across functional areas

These headwinds can saddle the organisation with bloated inventory levels, high storage and logistical costs, a larger carbon footprint, and increased equipment downtime. They can also tie up precious capital in obsolete parts and raise the headcount of the organisation. Statistics suggest that around 40% of capital costs are tied up in MRO inventory and 50% of unplanned downtimes experienced by these organisations are due to a lack of parts.

An effective MRO inventory optimisation strategy saves costs for organisations and reduces the input variables. Such a strategy calls for technology to harness an organisation’s data and policies by using statistical analyses, prescriptive analytics and optimisation algorithms.

However, getting these solutions must begin with an inventory optimisation opportunity assessment that can identify inefficiencies and opportunities to leverage the strength of an organisation’s inventory management operations and strategies. Through the assessment process provided by SAP partners like COSOL, an organisation can understand the opportunity and cost savings that can be achieved through inventory optimisation and how to approach the inventory optimisation project.

COSOL’s MRO optimisation assessment is done in three phases:

Phase 1: A benchmark assessment to determine the value to an organisation optimising its MRO inventory based on peer organisation benchmarks. It includes looking at MRO inventory values and segmentation to establish the ‘best-in-class’ practices adopted by industry leaders and what ‘average’ inventory optimisation looks like for a business.

Phase 2: Stakeholder workshops as part of the current inventory strategy and practices review that helps to qualify the inventory optimisation opportunities available for the organisation.

Phase 3: Deep analysis of inventory data to provide value validation of the opportunity by diving deeper into a sample of the organisation’s data for an accurate understanding of the opportunity and the pathway to realise the benefits of MRO inventory optimisation.

Organisations can then utilise inventory optimisation solutions like SAP partner IBM’s MRO Inventory Optimization (MRO IO) that use the latest technology and integrate with a company’s existing SAP ERP or EAM systems for clear visibility of the company’s MRO inventory.  With these solutions, companies can cut their inventory costs by 40%, reduce inventory downtime by half, boost maintenance budget savings by 35% and raise service levels by 25%.