MRO inventory management: Definition, examples, and best practices

MRO inventory management is all about keeping your business running smoothly. It's how companies handle the maintenance, repair, and operating (MRO) supplies they need. Think of it this way: these aren't the parts that go into making a product you sell, but they're essential for keeping equipment running and facilities operational. 

Because these items don't directly generate revenue, they often receive less attention than the materials used in production. However, if you don't have them, your entire operation could grind to a halt. Poor MRO inventory optimization practices can lead to significant financial losses from rush shipping, idle workers, and missed production goals. 

To tackle these issues, businesses use data to understand what's being used, set up automatic reorder points, centralize how supplies are bought, and use software like ERP systems.

Regular checks of physical stock, managing relationships with suppliers, and training employees on proper procedures are also key. By taking a proactive approach to MRO inventory, businesses can strike a balance: having what they need without wasting money, which ultimately leads to better operations and cost savings.

What is MRO inventory?

How MRO inventory management works

MRO inventory and supply chain management

6 steps for managing MRO inventory

Common challenges in MRO inventory management

Best practices for MRO inventory management

Leverage technology for inventory reporting

What is MRO inventory? 

MRO stands for Maintenance, Repair, and Operations. It's a key term for all the things a business needs to run smoothly, even though these items aren't part of the final product or service it sells. Think of MRO inventory as the “behind the scenes” necessities that keep everything working correctly for continuous business efficiency and operations.

Another way to look at MRO inventory: you don’t make money from the gas in your business car or the WiFi you use to send emails—but without them, you wouldn’t get much done. Accordingly, you track them and maximize the value of their costs.

The range of MRO inventory is huge and touches almost every part of a company. Effective management ensures these items are available when needed. This prevents costly shutdowns and wasted time, while also avoiding excessive stock and tying up unnecessary cash.

Maintenance 

Maintenance is about keeping things in good shape with routine tasks. This includes things like lubricating machines, changing air filters, and regularly cleaning. The goal is to prevent problems and make sure equipment lasts longer, avoiding unexpected shutdowns.

Repair

Repair is what happens when something breaks. It's about fixing what's wrong quickly to get things back up and running. This could mean needing spare parts for a machine, welding supplies, or specific components to mend a faulty system.

Operations

Operations covers all the everyday supplies and items needed for the business and its employees. This is a wide category that includes everything from office supplies (like pens and paper) and safety gear (like gloves), to cleaning products and general tools used around the workplace.

How MRO inventory management works

MRO inventory management is all about smartly handling the supplies a business needs to keep running, like parts for machines, cleaning products, or office supplies. 

The main goal is to buy, store, use, and restock these items efficiently. You want to have the right supplies, at the right time, and for the right price. This way, you always have what you need without spending too much or having too much stuff sitting around.

5 types of MRO supplies

Some companies consider MRO a catch-all for the miscellaneous costs of running their operation. 

Here are some examples of costs commonly categorized as MRO: 

• Personal protective equipment (PPE): gloves, masks, safety glasses, hard hats, and earplugs
• Cleaning supplies: disinfectant, mops, brooms, brushes, and buckets
• Office supplies: notebooks, pens, papers, batteries, staplers, and folders
• Industrial equipment: valves, compressors, lubricants, motors, gears, and spare parts
• Technology and hardware: computers, printers, scanners, and paper shredders

Why good MRO management matters 

If you don't manage your MRO inventory well, it can cause big problems.

• Downtime and lost production: Imagine a car factory suddenly stopping because a tiny hose for a robot is missing. Every minute that line is down means lost money and wasted time. Or, if a special cleaning solution isn't available for an electronics company, the whole production could stop, costing a lot.
• Missed deadlines and unhappy customers: If a part needed to fix a client's equipment isn't in stock, it can delay projects, make customers unhappy, and hurt your business's reputation. This can lead to losing future sales.
• Wasted money (tied-up capital): Having too much MRO inventory means your money is sitting in a warehouse instead of being used for other things. You also pay for storage, insurance, and the people to manage all that extra stuff.
• Outdated items (obsolescence risk): Some MRO items can become old or useless if they sit for too long, turning a potential asset into a complete loss.

How MRO inventory impacts your supply chain management

The average MRO spend typically ranges from 5-10% of the cost of goods sold (COGS). This may not seem like much, which is why they often become an afterthought. But those costs quickly add up over time. Left unchecked, operations personnel are left to restock MRO inventory haphazardly, leading to rogue spending habits and missed opportunities.

For example, if your team unexpectedly has a PPE stockout, you’d have to halt your production line immediately. While your team waits for a restock, you fall behind your deadlines and lose revenue. Fortunately, you can mitigate risks like these with MRO inventory analysis.

6 steps for managing MRO inventory

Inventory analysis is often reserved for “traditional” types of inventory, such as raw materials, work in progress, or safety stock. These analyses involve cutting-edge demand forecasting and cost analysis.

MRO procurement might not be the star of the show, but proactively managing it will help you maximize productivity and improve your cash flow. 

1. Identify and prioritize critical MRO items

The first step in managing your MRO inventory effectively is to identify and prioritize the most critical items. You start by looking at all your MRO supplies—from spare parts to everyday consumables—to see which ones are truly vital for your business to operate. 

Once you have that list, you need to rank these items by how critical they are. A good starting point is to consider:

• What are the absolute 'must-have' supplies that would immediately stop production?
• What would seriously harm services if it were missing? 
• What would cause safety hazards if we didn’t have them? 

For instance, a one-of-a-kind part for a crucial machine on a production line would be critical, just like specific safety gear required by law would be. By focusing on these high-priority items, you can put your time, money, and effort into keeping enough of them in stock.

2. Conduct regular audits and physical counts

Regularly inspecting and physically counting your stock is key to managing your MRO inventory effectively. The goal is to make sure what your computer says you have matches what's actually on your shelves. 

Benefits of regular audits:

• It allows you to quickly spot mistakes, locate misplaced items, and identify old or unused stock that is still on the shelf.
• You get rid of "dead stock," which refers to items you don't need anymore that are taking up valuable storage space. 
• Having accurate inventory records also prevents expensive problems, like temporary shutdowns. You can make smart decisions about buying and restocking, keeping your business running smoothly, and saving money on MRO. 

3. Strategically select and consolidate suppliers

A smart way to improve how you manage MRO inventory is to carefully choose and combine your suppliers. This means examining closely who you currently buy MRO items from and identifying opportunities to source more from fewer suppliers. 

How to select and consolidate suppliers?

Instead of ordering from many different companies, focus on building strong, long-term relationships with just a few key suppliers. These partners should offer good prices, deliver reliably, and provide quality products and services.

Bringing your suppliers together has many big advantages. By buying more from fewer vendors, you can often get bigger discounts and better deals, saving you money directly. It also makes buying easier by reducing paperwork and the hassle of dealing with many different companies. Plus, it makes your supply chain more dependable. 

4. Implement robust demand forecasting

Another important part of smart MRO inventory management is predicting what you'll need. This means using clever ways to figure out when and how much of each MRO item you'll use in the future. 

You'll look at how much you've used in the past, what your production plans are, and even if demand changes with the seasons. 

• For example, if a machine needs more upkeep in summer heat, or if you use more office supplies during budget time, you'd factor that into your predictions.

By using data to make these accurate predictions, businesses can prepare for busy times and slow periods. This ability to foresee demand offers huge benefits. Good demand planning means you're less likely to run out of crucial items when you need them most, stopping costly shutdowns.

5. Educate and empower your employees

A significant part of managing your MRO inventory effectively is to educate and empower your employees. This means creating clear rules and thoroughly training everyone who deals with MRO items—from figuring out what's needed to ordering and tracking it. 

The key is making sure everyone understands how to:

• Request MRO items
• Order them correctly
• Keep track of what's used

It's also vital to build a sense of responsibility around MRO use, so employees know their part in controlling inventory efficiently. 

Investing in employee training offers two big benefits. First, it greatly cuts down on "maverick spending"—unapproved purchases made outside the usual system, which often cost more. It also prevents departments from accidentally purchasing the same items because they are unaware of what is already in stock.

Ultimately, when employees are well-informed and capable, they use MRO items correctly and efficiently, leading to overall savings, less waste, and smoother operations.

6. Explore vendor-managed inventory (VMI) solutions

To make MRO inventory management even smoother, companies should consider Vendor-Managed Inventory (VMI) solutions. This means checking if it makes sense to let a supplier handle some of your MRO items, especially those you use predictably or that are very important. 

In a VMI setup, your supplier takes charge of watching and refilling specific MRO items right in your facility, often by looking at your inventory data or even doing physical checks themselves.

Using VMI for the right MRO items offers big advantages. It dramatically cuts down on your team's paperwork, freeing up your staff from regular ordering and tracking. Also, VMI helps guarantee you always have critical supplies because the expert vendor is motivated to prevent you from running out. 

Common challenges in MRO inventory management

Managing MRO inventory can be tricky, often costing more and being less efficient than it should be. 

Administrative burden and cost 

A big problem is the heavy paperwork and cost for many small purchases.

Unlike big orders for production, MRO items are often bought frequently in small amounts. Each small purchase means a lot of steps—requests, approvals, orders, receiving, and paying bills—all of which take up valuable time and money, sometimes more than the item itself.

Cross-department buying

Another common issue is when different departments buy the same MRO items on their own, wasting money. Without a central plan or knowing what others have, teams might buy the same supplies, leading to extra stock and higher costs. 

Unknown stock levels 

On top of that, it's tough to know exactly how much MRO stock you have across different locations if you don't have a central tracking system. MRO items are often scattered, making it hard to get an accurate count. This can lead to having too much stock in some places and not enough in others.

Many companies also struggle to accurately predict future MRO needs without reliable information. Without looking at past usage or maintenance plans, guessing leads to either too much inventory or constant emergencies.

Best practices for MRO inventory management

MRO inventory might not stand out on a balance sheet, but those small costs add up over time, especially if you don’t keep a close eye on them.

Here are four tips to take control of your MRO inventory:

1. Prioritize essential items

Some MRO items are more important than others. Prioritizing critical items helps you determine what you should always have on hand. This is where ABC analysis comes in, which groups items into categories based on their level of value within your business. Using these insights, you can create a regulated replenishment cycle.

2. Stay lean

As your business grows, it also becomes more complex. This can lead to an abundance of redundant MRO inventory that takes up space and resources. Before you optimize anything, do an audit of your equipment and eliminate anything you don’t use.

3. Know your peak and low seasons

With a combination of demand forecasting and historical data, you can predict the busiest times of year for your business. Taking these metrics, you can dial your MRO purchase orders up or down to control costs and make the most of your stockroom space.

4. Use KPIs to guide decisions

Without standards, measuring performance can get messy. Setting key performance indicators (KPIs) like lead times and reorder points will get your team aligned on how much MRO inventory you should have at a given time and when it will be replenished. These KPIs will prevent rogue spending and risky purchases.

Leverage technology for inventory reporting

Good management of MRO Inventory isn't just about cutting costs—it's about keeping things running smoothly, avoiding expensive shutdowns, and making the best use of resources. 

To overcome these MRO inventory challenges, your company can implement a unified system for tracking and purchasing, fostering collaboration across departments.

With the help of an all-in-one business management solution like Intuit Enterprise Suite, MRO goes from being just another cost to a smart investment that helps the business run better and directly increases profits.