Optimizing inventory is about more than MIN/MAX
On the road, listening to clients and other MRO professionals, the big topic on everyone’s mind is reducing costs while improving service levels. The point is there’s much more to optimizing inventory than min/max levels.
It turns out the biggest MRO inventory challenges are fundamentally the same and faced in some form by all asset intensive companies, in every industry:
- Defining criticality - what’s critical, what’s not, what equipment is it supporting
- Segmenting MRO inventory
- Managing obsolescence - proactively
- Forecasting demand for slow / moderate / lumpy demand items
- Improving collaboration with business units (their internal customers)
Getting it right takes more than a “gut feel” approach supported by elaborate spreadsheets. ERP and EAM systems, primarily transactional in nature, have the data you need but lack the capabilities to analyze and package it appropriately. Effective management of MRO inventories seems near impossible.
And that’s just the beginning. Once you’ve optimized your inventory, continuous actions are required to ensure optimal levels are maintained.
The fact is, it is possible to achieve and maintain inventory optimization, and the benefits are very real. With a structured methodology and powerful analytical tools, MRO professionals can improve performance and reduce costs. And that helps create value for the enterprise.
MRO analytics solutions like Oniqua Analytics Solution (OAS) allow you to address the five big MRO inventory optimization challenges:
- Define what’s critical – Consider the costs resulting from a stock-out situation. What’s the business impact of a stockout? What are your work-around options? You need visibility to “where used” – even if there is no bill of materials (BOM) – and an accurate criticality code for each item.
- Inventory segmentation – Establish inventory control segments and set unique strategies for each. Consider work-around options, obsolescence management and alternatives to on-site inventory such as consignment arrangements, on-demand approaches and pooled inventory for high cost, high critical spares. Segmentation helps ensure that appropriate policies are applied consistently.
- Manage obsolescence for investment recovery – Why bear the cost of holding obsolete inventory? With visibility to upcoming or recent obsolescence of equipment, ECOs and related materials, you can identify materials related to obsolete assets at the moment of change – not years in the future.
- Forecast demand for slow / moderate / lumpy demand items – This is critical for optimizing MRO inventories, which are typically 90% slow or irregular-demand items. Special logic is needed to predicting material use for slow moving and “lumpy demand” spares.
- Improve collaboration with business units – And it all needs to be well-coordinated and integrated with supply and maintenance teams. That’s why support for business unit collaboration is a key element of successful MRO optimization.