Inventory Management in MRO Category Remains a Big Challenge

Companies in mature regions like North America and Western Europe from various industries such as pharmaceutical, automotive, CPG, aerospace, food and beverage tend to follow end-to-end MRO spare part management. Many of them now outsource end-to-end inventory management processes to MRO integrators. However, for those who do not, inventory management in the MRO category remains a big challenge. 

"Every manufacturing plant function must follow a cross-functional approach that can create synergies and deliver objectives of Inventory Management, ensuring optimum plant reliability and productivity. A responsibility matrix defining the correct function for MRO spare parts management and inventory optimization is the need of the hour; many top companies from multiple industries are steadily moving toward that goal," said Vijith Bhargavan, Senior Domain Analyst at Beroe. "With Inventory Management becoming a key opportunity for achieving cost savings, cost avoidance, and other objectives, it becomes a significant focal point for building an overall strategy; but for implementation, it is important to comprehend a holistic MRO plant structure".

The major challenge in Inventory Management in the MRO category is demand forecasting. It is a complex process even for product-based enterprises, especially in the MRO companies where demand for spares and consumables is completely erratic, which makes it even difficult to forecast consumption on an accurate basis. But accuracy in forecasting becomes the major avenue for the improvement in MRO inventory. Since the MRO landscape is becoming competitive by the day, reduced working capital and investment become the need of the hour. 

The next big challenge is to identify the function of ownership and accountability of the MRO Inventory Management process. Taking absolute care of this process is a tedious task as one needs to have a clearer idea of the critical spare parts and on-site availability. Special care needs to be given to ensure there is a minimum halt to the production line as it may cause a loss of market share and customer goodwill. One should be able to determine accurate MRO budgets and create smart processes and FTEs for managing MRO spare part inventory.

For the companies focussing on outsourcing over in-house teams, they prefer outsourcing transactional and operational activities. Here, the power to make policies and norms rests with the in-house team, so there is a narrow scope of strategic activities. As a strategy that needs regular monitoring, Inventory Management and Optimization lies within the Procure-to-Pay (P2P) cycle. In these times, it is recommended to outsource the P2P cycle to MRO Integrators who implement the inventory optimization as a part of an agreed Vendor Managed Inventory (VMI) program. Thus, the in-house group can focus on other critical cycles, which affect an organization's primary concern than MRO; for instance, putting more spotlight on capital equipment methodologies and production processes.

"One needs to adopt a strategic procurement approach in MRO inventory management. After all, inventory management is a lot about data that includes forecasting and transactions," said Vijith Bhargavan, Senior Domain Analyst at Beroe. "Even when companies hire MRO integrators, many of who are doing it already, the reporting and control should remain with technical service function to ensure maximum uptime across multiple regional sites. In any case, companies must keep an eye on the technical aspects and needs of the production line irrespective of the approach they take up for MRO inventory management".