Maintenance, repair, and operations (MRO) refer to the departments and tasks that support a company’s product or service provision. While not involved in creating the good or service, MRO actions are crucial for cost-effectiveness and efficiency. They comprise many disciplines, including maintenance, facility management, warehousing, and cleaning.
Tools, spare parts, consumables, protective equipment, furniture, office equipment, and stationery are all part of the inventory required to support MRO functions. While production inventory gets considerable attention, MRO items often get little despite comprising 40% of a company's annual procurement budget. Given the criticality of the MRO role, the inadequate management of MRO inventory risks production stoppages, reduced service quality, accidents, regulatory breaches, reduced revenue, and wasted capital.
Strong MRO inventory management coupled with technology adds meaningful gains to a company's bottom line while better managing capital use and allocation. Here are six critical areas for management focus.
What's in this article
Real-Time Inventory Tracking
Improved Accuracy
Efficient Inventory Audits
Better Inventory Planning and Forecasting
Waste Reduction and Cost Savings
Streamlined Operations
Health
Safety
Environment
Quality
Correct identification and specification
Proscribed actions
Defect control
1. Inventory Efficiency and Risk Management
Imagine you're a film producer on location, and key assets like a custom prop or a specialized camera rig are unavailable. Your production is halted, your budget burn rate increases, and you face the specter of penalty fees.
Or maybe you're an equipment manufacturer in production paralysis due to a critical machinery failure. The required spare is unavailable, and you're facing inflated costs for expedited sourcing plus liquidated damages for violating your service level agreement with a key supplier.
Stockouts (out-of-stock events) happen when the item you need is unavailable, either because of a poorly designed reorder point, poor record-keeping, or another department having it. While many companies try to avoid stockouts by carrying excess inventory, this only delays the inevitable, ties up capital unnecessarily, and encourages spoilage, theft, and obsolescence.
Efficient inventory management requires understanding an item's criticality for service or product delivery. You should know each item’s usage frequency and the order lead time or the time taken to receive an item after placing an order. Such knowledge comes from in-service data.
The simplest method for capturing and tracking usage data is by applying a QR code or barcode to the bin or stock location. Scan the code with a mobile device each time an item is removed, and the cloud-based software updates stock numbers while capturing the time, date, and person requisitioning the item. When the stock levels reach pre-set limits, a reorder alert is sent to trigger a purchase order to the supplier.
Over time, the accumulated usage reveals a wealth of information, including the frequency of use, seasonal demand, and supplier lead times for delivery. Best of all, it prevents being caught without a critical component.
Yet the functionality and benefits go deeper. Modern QR-code-based systems use nested logic, allowing warehouse staff to assemble multiple items needed for a task under a kit number. Spares kitting refers to bundling together a number of components needed to complete a specific job. Inventory systems still track each item individually, but by scanning and withdrawing the QR-coded kit, MRO personnel know they're receiving all items required for a job without searching for each item or suffering stockouts. It's a cost-effective and time-efficient benefit of QR-tracked inventory management.
2. Supplier Management
How often do you monitor the suppliers of your MRO inventory? Do you compare multiple suppliers to understand whether one product lasts longer, works better, or is cheaper than another? What is the lead time for supply when a purchase order is sent?
Longer restock times mean higher inventories and greater holding costs. Shorter product lives mean higher restocking costs. Can you consolidate products and suppliers to gain volume discounts from one supplier?
You can manage these issues and more when you track your MRO inventory. Contemporary asset management systems capture usage frequencies, reorder times, and supplier lead times into reports or a database. This data can be output into spreadsheets for review and analysis or collated with purchasing data to gain powerful insights into how well your suppliers are servicing you.
When you sit down each year to review a supplier's service-level agreement (SLA), it can be difficult to support your negotiating position without evidence. With reports or spreadsheets showing the past 12 months' performance, you'll have empirical data to refer to rather than subjectivity and emotion. A simple asset management system allows you to organize and track supplier performance, weed out underperformers, and partner with like-minded organizations, shaving percentage points off your operating costs while freeing up capital and floor space.
3. Efficient capital management
Organizations are good at tracking production inventory, work-in-progress, and finished stock but are often less diligent with MRO inventory. Yet because MRO inventory can form between a quarter and half of annual procurement costs, companies leave a lot of money on the table by ignoring MRO inventory. Idle, excessive, damaged, obsolete, or incorrect assets tie up invested capital without providing a return.
When a company's financial resources are invested in inventory that is not generating revenue or profit, it’s referred to as having a high "inventory carrying cost." These costs include storage, insurance, depreciation, and opportunity costs. They reduce company liquidity and potentially impact the company's ability to invest in other areas of the business. High inventory carrying costs can significantly affect a business's financial health by reducing cash flow and profitability.
A simple QR code-based asset management system significantly reduces excess inventory in six ways by providing enhanced visibility, accurate tracking, and efficient asset management:
Real-Time Inventory Tracking
QR codes store detailed information about each item in inventory, including its description, location, quantity, and status. Scanning QR codes with smartphones or tablets allows for near real-time tracking of inventory levels, enabling immediate knowledge of stock levels.
Improved Accuracy
Manual inventory tracking is prone to errors, leading to excess stock or stockouts. A QR code system automates tracking, reduces human errors, and ensures optimal and accurate inventory records.
Efficient Inventory Audits
Regular inventory audits are crucial for identifying damaged, idle, or excess stock. QR code system audits are quick and efficient, with necessary information readily accessible by scanning the codes and identifying overstocked or idle items.
Better Inventory Planning and Forecasting
A QR code system can enhance forecasting and planning by providing detailed reports on inventory usage patterns. Businesses can analyze this data for trends, predict future inventory needs, and adjust procurement to reduce the likelihood of overstocking.
Waste Reduction and Cost Savings
Accurate inventory management reduces waste from spoilage, obsolescence, or damage due to prolonged storage. By keeping inventory levels aligned with actual demand, companies avoid unnecessary storage costs and reduce tied-up capital.
Streamlined Operations
Integrating QR code systems with ERP or supply chain management systems streamlines operations, improves order fulfillment processes, and enhances employee and customer satisfaction by ensuring that products are available when needed.
4. Traceability Using Geolocation
A business operating across multiple locations or with assets moving between departments, buildings, or states can optimize asset allocation through geolocation tracking. Personnel can check items out of one department and receive them into another to greatly reduce instances of lost or misplaced equipment. Monitoring asset movement provides insights into utilization patterns, ensures assets are in the right place at the right time, and enhances operational efficiency.
Regularly moved equipment often requires additional servicing and maintenance. With tracking capabilities, the asset management system can alert the relevant manager when equipment reaches a usage threshold requiring maintenance. This proactive approach can extend the lifespan of assets, reduce downtime due to equipment failure, and save costs associated with urgent repairs or replacements. Additionally, by knowing the exact location of equipment, maintenance teams can be dispatched more efficiently, reducing downtime and operational disruptions.
5. Calibration and Serviceability
Most industries have equipment that needs regular testing and calibration. For example, regulations require calibration of weighing scales in food premises or torque wrenches in aircraft manufacture, or quality standards demand testing of film production camera lenses for sharpness, distortion, and chromatic aberration.
Failure to meet these standards can have serious implications. Witness the 2010 Deepwater Horizon oil spill in the Gulf of Mexico, where investigations highlighted inadequate testing of the blowout preventer (BOP) designed to prevent the uncontrolled release of crude oil. The US federal government suspended BP from new contracts, and the company incurred over $65 billion in costs related to cleanup efforts, fines, and compensation for economic damage.
While the example is extreme, the repercussions for small to medium-sized companies that fail to test or calibrate can be severe, including temporary closure by regulators, lost clients or reputation, product or service failure, and reduced earnings.
A simple asset management and tracking system removes the risk of non-compliance. Let's illustrate the point using a surveyor's theodolite and the Scanlily asset management system. By issuing the theodolite its own QR code, anybody in the company can find who is using it, its location, make, model number, and all uploaded supporting data, including instruction manuals or illustrated parts catalogs.
Scanlily functionality allows setting alerts or flags for significant events. The equipment manager can set an alert one week before calibration to flag the need for the theodolite to be retrieved, packed, and sent to the test laboratory.
Additional functionality of the Scanlily system allows employees to reserve equipment, check it out, and check it back in once they've finished using it. This booking system enables the equipment manager to reserve the theodolite for the planned duration of the calibration process, making it unavailable for use by others and avoiding the use of non-compliant or unsafe equipment.
Once the calibrated theodolite is returned, the equipment manager can append the calibration certificate and deviation card to its QR register. They will then release the item back into the equipment pool, allowing it to be reserved and checked out by the survey team, secure in the knowledge that the equipment meets regulatory and quality standards.
6. HSEQ
A company's focus on health, safety, quality, and the environment is designed to protect its employees and customers while minimizing environmental impacts and maintaining the quality of its products or services. This focus includes the myriad lubricants, cleaning products, and production fluids used in workplaces. Their incorrect identification, handling, and disposal can have wide-ranging implications.
Health
Misidentifying hazardous chemicals can expose employees to hazardous substances without the appropriate personal protective equipment (PPE), risking acute or chronic health issues.
Incorrect chemical use could result in poisoning (if ingested) or chemical burns on the skin or eyes.
Vapor inhalation from improperly identified chemicals can cause respiratory issues, including asthma or chemical pneumonitis.
Safety
Incorrect mixing of fluids or cleaning products increases the risk of accidents such as fires, explosions, or chemical spills.
Misidentification can delay emergency responses, as first responders may not immediately know the correct procedures or antidotes for exposure to misidentified chemicals.
Environment
Inappropriate disposal of misidentified chemicals can contaminate soil, water, or air.
Environmental contamination by toxic substances can harm local wildlife and ecosystems, even entering the food chain or water sources.
Quality
Incorrect production fluid or cleaning product use can contaminate manufactured products, leading to quality issues and potential recalls.
Misidentified chemicals inappropriate for certain machinery may corrode or damage equipment, causing operational downtime.
Quality control standards and regulations often specify particular substances for production or cleaning processes. Misidentification can result in non-compliance, legal issues, and loss of certifications.
For these and many other reasons, organizations implement rigorous HSEQ management systems that include proper labeling, training, and procedures for handling and storing all chemicals and production materials to mitigate personal harm, financial costs, and reputational damage that may arise from breaches.
Managing compliance is a mammoth task but is made easier by using a simple asset management system. Here are three examples:
1) Correct identification and specification
Modern QR or barcode-powered asset management systems use the universal product codes (UPC) attached to most products to retrieve important information about an item. The automotive, manufacturing, chemical processing, and healthcare industries all use UPC scanning.
The system directly retrieves the specific product information from a database, eliminating the risk of human error in manual entry or selection. The information includes product-specific information, including the fluid's composition, intended use, compatibility with other substances or materials, and safety data sheets (SDS).
2) Proscribed actions
UPC scanning is an effective tool in preventing proscribed or prohibited actions. Scanning chemical or hazardous material codes provides handling and safety information, ensuring that employees follow proper safety protocols and helping to prevent accidents or health hazards. In recycling or waste disposal settings, UPC scanning can identify products and materials that require special handling or disposal methods, preventing improper disposal that could harm the environment.
3) Defect control
The quarantine system for inbound inventory is a critical supply chain and inventory management process. It ensures that materials, components, or products arriving at a facility are not released for use or distribution until inspected against specified quality, safety, and compliance standards. An asset management system tracks inbound inventory, with warehouse personnel using their mobile device to scan and receive the goods into quarantine for evaluation.
While in quarantine, the goods are reserved and unavailable for requisition or use. Following a successful inspection and documentation review, the warehouse personnel release the goods into general inventory for access by organization personnel. Similarly, employees can use the quarantine system for any product or tool in general use that may be damaged or suspected; placing the item in quarantine removes it from use, allowing personnel to review the item and determine the next steps.
7. Parting Thoughts on Managing MRO Inventory
We can trace asset management systems back to ancient civilizations, which is where many companies remain with their legacy asset management systems, using old desktop technology powered by centralized servers. At Scanlily, we've changed that. We've designed a simple, cost-competitive, contemporary QR code-based asset management system that leverages the following technology:
Cloud-based databases and services that store and manage your data to allow scalable, secure, and remote access to asset information - anywhere at any time.
Mobile technology enables on-the-go scanning of QR codes, offering user-friendly interfaces using clients' preferred operating systems and mobile platforms.
GPS data is integrated with QR codes to allow real-time asset location tracking, enhancing asset visibility across different sites or facilities.
Reporting and spreadsheet functionality, including export capability to interface with Enterprise Resource Planning (ERP) and Customer Relationship Management (CRM) systems, synchronizing asset data across all organizational systems.
Maintenance and workflow management to automate maintenance alerts, asset reservation, check-out, check-in, work orders, and operational workflows based on asset status or usage data.
Data analytics and reporting tools to process and visualize asset data, identify trends, optimize asset utilization, and make data-driven decisions.
The dynamic nature of modern business demands modern mobile technologies to inform management decisions that will dramatically improve customer satisfaction, operating margins, equipment uptime, and product or service quality.
When your company chooses to take the competitive lead in your industry, Scanlily stands ready to help. Book a Demo today to view Scanlily in action and discuss how we can become your trusted technology partner in managing your MRO inventory effectively and efficiently.
About the Author David Yeoman
Following a 40-year career in the aviation, construction, and mining industries, David started his company, Intelligent Content, to write technical, engineering, and business content for sophisticated, professional audiences. He is a qualified maintenance engineer with an MBA.
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