MRO Optimization and Best Practices to follow in 2024

Kerrie Kennedy

March 15, 2024

Optimizing Maintenance, Repair, and Operations (MRO) processes is crucial for businesses in today's competitive landscape. However, traditional methods often lack efficiency, transparency, and cost-effectiveness. To prevent these issues, businesses should consider MRO Optimization.

This article will discuss the importance of MRO optimization, the challenges faced by businesses, and Keelvar's approach to procurement and supply chain management.

  • What is MRO?
  • Importance of MRO Optimization in Procurement
  • Challenges of managing MRO supply
  • Implementing MRO Optimization Strategies
  • Key Features of Keelvar's MRO Sourcing Optimization and Automation
  • MRO Optimization Success Stories

What is MRO?

Understanding the intricacies of MRO is key to ensuring the seamless operation of any company. Effective MRO inventory management is crucial, aiming to balance the availability of necessary parts and materials for maintenance activities against the financial burdens of excess inventory costs.

MRO encompasses a broad range of activities and items, from the routine maintenance of machinery and equipment to the repair or replacement of necessary parts and operations supplies. These can include everything from lubricants for machinery, spare parts for repairs, tools for maintenance tasks, and safety gear for the workforce. The essence of MRO lies in its ability to keep operations running smoothly, prevent downtime, and ensure the longevity and efficiency of equipment.

MRO encompasses a broad range of activities and items, from the routine maintenance of machinery and equipment to the repair or replacement of necessary parts and operations supplies

The strategic management of MRO inventory directly impacts a company's operational efficiency and financial health. Properly executed, MRO optimization strategies can lead to significant cost savings by reducing unnecessary inventory, leveraging just-in-time procurement to minimize storage costs, and ensuring that parts and materials are available when needed to avoid operational disruptions.

Importance of MRO Optimization in Procurement

The optimization of MRO supply and procurement plays a crucial role in enhancing a company's operational efficiency, reducing costs, and saving time. In the competitive landscape of modern business, managing MRO effectively can make a significant difference in maintaining smooth production processes and ensuring the reliability of operations.

Cost Savings: One of the primary benefits of optimizing MRO procurement is the potential for substantial cost savings. By carefully managing inventory levels, companies can avoid overstocking, which ties up capital that could be used more effectively elsewhere. Additionally, strategic relationships with suppliers can lead to negotiated discounts and better terms, further reducing procurement costs.

Time Efficiency: Effective MRO management also contributes to time savings. Automated inventory systems and streamlined procurement processes reduce the time spent on administrative tasks, allowing staff to focus on more strategic activities. Moreover, having a well-organized MRO supply chain minimizes downtime due to equipment failures or lack of necessary repair components.

Businesses looking to thrive in today's market should prioritize efficient MRO management as a core aspect of their operational strategy

Operational Efficiency: A well-optimized MRO supply chain ensures that necessary parts and supplies are available when needed, without delays. This availability is crucial for maintaining continuous production lines and services, directly impacting a company's ability to meet customer demand and maintain high service levels.

Risk Reduction: Proper MRO management helps in identifying and mitigating risks associated with inventory shortage, obsolete stock, and supply chain disruptions. By employing predictive analytics and inventory forecasting, companies can anticipate potential issues and take preemptive action, thereby minimizing the impact on operations.

MRO optimization in procurement directly influences a company's financial health, operational stability, and competitive edge. Businesses looking to thrive in today's market should prioritize efficient MRO management as a core aspect of their operational strategy.

Challenges of managing MRO supply

Managing MRO supply and inventory presents many challenges that can significantly impact a company's operational efficiency and cost management:

Complexity in Tracking and Managing Inventory: One of the primary challenges in MRO management is the complexity of tracking a wide variety of items that are critical to operations but do not directly contribute to production. This diversity requires sophisticated inventory management systems to ensure the right parts are available at the right time, without resorting to excessive stock levels that tie up capital unnecessarily.

Predicting Demand: Accurately predicting the demand for MRO items is inherently challenging due to the unpredictable nature of maintenance and repair needs. Unexpected equipment failures can suddenly increase demand for specific parts, while changes in production processes or upgrades can render other parts obsolete​​.

Maintaining Cost Efficiency: Keeping costs low while ensuring the availability of necessary MRO supplies is a delicate balance. Overstocking to avoid downtime can lead to increased inventory holding costs, while understocking can result in production delays and expedited shipping costs. Companies must navigate these trade-offs to maintain cost efficiency​​.

Emphasizing collaboration across departments and with suppliers, as well as leveraging technology for real-time inventory tracking and automated procurement processes, are key strategies for successful MRO management

Supplier Management and Optimization: Developing and maintaining strategic relationships with suppliers is crucial for effective MRO management. Companies face the challenge of selecting suppliers that can provide reliable, timely deliveries of quality parts and materials. Additionally, optimizing the supplier base to reduce the number of vendors and leverage volume discounts without compromising on supply chain resilience is a complex task​​.

Integration with Overall Operations: Integrating MRO procurement and inventory management with broader operational processes is vital but challenging. MRO activities must be aligned with production schedules, maintenance planning, and overall business objectives to optimize operational efficiency and cost-effectiveness​​.

Adapting to Technological Advances: The rapid pace of technological change presents both opportunities and challenges for MRO management. Adopting new technologies, such as IoT devices for predictive maintenance or advanced analytics for inventory optimization, requires investment and adaptation but can significantly improve MRO management processes​​.

To address these challenges, companies are adopting advanced inventory management solutions, predictive analytics for demand forecasting, and strategic sourcing practices. Emphasizing collaboration across departments and with suppliers, as well as leveraging technology for real-time inventory tracking and automated procurement processes, are key strategies for successful MRO management.

For example, Keelvar customers like Mars, Novartis and JCI use Keelvar for MRO procurement to help buyers arrive at optimal supplier award decisions more efficiently. Read more about how Keelvar can lead to better sourcing outcomes for MRO procurement here.

Implementing MRO Inventory Optimization Strategies

Implementing MRO inventory optimization strategies effectively is crucial for enhancing operational efficiency and cost savings. Here are several tips drawn from industry practices and expert insights that can guide you in successfully optimizing your MRO inventory management:

  1. Leverage Technology for Inventory Management: Utilize advanced inventory management systems to gain real-time visibility into your MRO inventory. These systems can track inventory levels, predict replenishment needs, and automate procurement processes, significantly reducing manual efforts and errors​​.
  2. Adopt a Predictive Maintenance Approach: Shift from reactive to predictive maintenance by using IoT sensors and data analytics. This approach helps in predicting equipment failures before they occur, allowing for timely procurement of necessary MRO items and reducing unplanned downtime​​.
  3. Implement Vendor Managed Inventory (VMI): Collaborate with suppliers to manage your inventory levels directly. This strategy reduces the administrative burden on your team, ensures timely replenishment of essential MRO items, and can often result in better pricing and terms due to strengthened supplier relationships​​.
  4. Apply ABC Analysis: Classify MRO items into categories based on their criticality and consumption value (A for most critical, B for medium, and C for least critical). Focus on optimizing the management of 'A' category items, as they have the most significant impact on operational efficiency and cost​​.
  5. Optimize Inventory Levels with Just-In-Time (JIT) Ordering: Implement JIT ordering to minimize inventory holding costs by ordering MRO items only as needed. While challenging, it's effective in reducing excess inventory and freeing up capital that can be used elsewhere in the business​​.
  6. Standardize and Consolidate MRO Items: Where possible, standardize parts and materials across equipment and processes. This simplification allows for volume discounts, reduces inventory complexity, and simplifies procurement and management processes​​.
  7. Continuous Improvement and Training: Invest in continuous training for your procurement and maintenance teams to stay updated on best practices and new technologies in MRO management. Encourage a culture of continuous improvement, where processes are regularly reviewed and optimized based on performance data and feedback​​.

By incorporating these strategies, companies can significantly improve their MRO inventory management, leading to reduced costs, improved operational efficiency, and enhanced reliability.

Key Features of Keelvar's MRO Sourcing Optimization and Automation

Keelvar's sourcing optimization and automation is ideal for enhancing the efficiency and outcomes of MRO procurement processes. Trusted by leading companies worldwide, including Mars, Novartis, and JCI, our solution caters to a wide range of MRO purchasing needs, from large annual tenders for consumables to urgent repair requests.

The platform provides an array of features to simplify and improve MRO procurement:

  • Ease of Event Creation: Streamlines the setup of sourcing events, making it straightforward for buyers to initiate and manage.
  • Event Auto-Piloting: Automates repetitive tasks within the sourcing process, enabling procurement teams to focus on strategic decisions.
  • Flexible Bid Data Collection: Offers versatility in gathering bid information, accommodating various supplier formats and requirements.
  • Supplier Bid Data Validation: Ensures accuracy and completeness of supplier proposals, enhancing the reliability of bid evaluations.
  • Real-Time Bid Feedback: Provides instant feedback to suppliers on their bids, fostering a competitive and transparent bidding environment.
  • Robust Cost Modeling: Employs comprehensive cost analysis tools to evaluate total costs accurately, beyond just the price bid.
  • Award Scenario Reviews: Allows procurement teams to assess different awarding scenarios based on multiple criteria, ensuring the best outcomes.
  • Speedy Spot Buys: Facilitates quick sourcing of urgent MRO needs, improving response times to immediate requirements.

By leveraging Keelvar's solution, MRO procurement professionals can manage the complexity and high volume of bids more effectively, driving better sourcing outcomes across all MRO sourcing events.

MRO Optimization Success Stories

The transformative impact of MRO optimization through Keelvar's solutions is exemplified in the success story of a client who significantly elevated their procurement processes for Maintenance, Repair, and Operations (MRO). This narrative underscores the strategic advantage of deploying advanced sourcing tools in navigating the complexities of MRO procurement.

Customer Background and Challenge

A notable company, already versed in the benefits of sourcing optimization across various complex spend categories, turned its focus towards MRO. The objective was clear: to explore whether enhancing competition among suppliers could yield substantial, enduring savings while curbing value leakage. Given the intricate nature of their MRO needs, which are vital for the seamless operation of their multiple processing plants, the challenge was formidable.

The procurement involved an extensive array of parts—motors, chains, bearings, tools—each essential for maintaining global operations without a hitch. The process was marked by its complexity, competitive edge due to numerous SKUs, and the requirement for nuanced negotiation tactics across multiple bidding rounds, coupled with a need for integrated supplier feedback.

The Keelvar Solution

Leveraging Keelvar's Sourcing Optimizer tool, the company embarked on a journey to redefine their MRO procurement strategy. The platform's intuitive interface and innovative "traffic-light" feedback mechanism on supplier bids were instrumental in navigating through the multifaceted negotiation process.

This approach not only streamlined event creation but also enabled the efficient handling of bid data, ensuring real-time feedback and robust cost modeling that informed decision-making.

Outcomes Achieved

The results were remarkable, with the company realizing approximately 6% savings in MRO costs. More than just cost reduction, the implementation facilitated the centralization of category data and consolidation of supplier information, fostering a more cohesive internal database.

Additionally, the platform enhanced supplier performance through streamlined feedback mechanisms, allowing for more effective communication and adjustments. The multi-round negotiation process also saw marked improvements, with more strategic price negotiations contributing to the overall savings.

For a deeper exploration of how Keelvar supports MRO procurement and to request a demo, visit our MRO page.

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