Built-In Efficiencies: How Companies Lower Costs Through Inventory Management

Excess inventory in your MRO storerooms can quickly add up to thousands or millions of dollars in spend across your organization. When most companies are looking to lower the cost of ownership, optimizing your MRO supplies through inventory management is a straightforward way to see immediate results.

Carrying inventory is important to keep plant operations running, but not all inventory is critical and not all parts get used. It’s easy to end up with a storeroom packed with some combination of disorganized, surplus or outdated parts.

If parts don’t get used because you don’t need them, that’s waste. If you can’t find them when you need them, that’s waste too. There are costs to carrying inventory and if you’ve held onto a part for five years without using it, you’ve basically bought the part twice.

The first step is to treat your MRO inventory the same way you do with raw materials and other manufacturing inventory. If you’re like most companies, you probably have strict controls on inventory and can manage raw materials from receipt through production and shipping.

What do these controls look like with your electrical and lighting MRO supplies?

To get started, you need a reset of your storeroom. Review what you have—there’s a good chance the storeroom is hosting outdated equipment collecting dust, as well as caches of surplus supplies.

Your MRO supply partner will conduct a “crib crawl”—manually inspecting the contents of your storeroom. Working with your plant managers and engineers, your supplier can help determine which parts are critical (and thus need to be stored onsite) and which are not. Some parts are crucial to keeping the plant running, but many are not. Also, just because a part is important, doesn’t mean you need 20 replacements in your storeroom if you only use two of them a year.

As part of the crib crawl, your partner can recommend strategies to ensure your storerooms are optimally organized. Then going forward, maintain this with good organization hygiene—things like following the one SKU per bin rule, rather than mixing up different products in the same bin. This way, you’ll have a clear idea of what you have in inventory. Vendor managed inventory (VMI) is an effective tactic for this as well.

An MRO supplier with distributor locations near your plants is a critical part of your storeroom strategy. With a local partner, you can significantly reduce your carrying inventory and streamline inventory management. The local aspect is paramount because you need a partner who can deliver parts right away when they are needed. Downtime is not acceptable and working with a supplier with warehouses hours away may increase costly downtime. Plus, you’ll end up paying for expedited freight on a regular basis.

The next step is to look at purchase history, storeroom levels and usage reports. By analyzing these together, you and your supplier can set new min/max levels for parts. Your MRO supplier may be able to buy back excess or obsolete equipment, reducing your cost of ownership and giving you more space in your storeroom.

On an organizational level, your MRO partner will standardize product usage across all your plants and reduce the number of SKUs in your system for easier accounting. This standardization further reduces carrying inventory across all your plants.

Your MRO supplier can be your greatest ally in reducing the cost of ownership, reducing downtime, trimming your carrying inventory, and keeping it efficiently managed.