Resource intensive operations across manufacturing, oil & gas exploration, mining and extraction rely heavily on MRO processes to ensure undisrupted maintenance operations.
The primarily goal of these processes are to ensure that production downtime is kept to a minimum and upkeep processes of critical machinery runs smoothly – Availability of the right spare parts for the right equipment, mapping their obsolescence status and access to critical data points for uninterrupted workflows are key to build excellence in these operations.
Conversely, overstocking of inventory due to poor data quality, unsynchronized information and lack of context about the nature of the spare part can also lead to excessively high carrying costs – directly inflating overheads and reducing profitability.
This is why it is critical for Procurement Teams, Category Managers, Master Data Specialists and asset management professionals to align with IT and build centrally managed and cost-efficient processes for MRO inventory management as per industry standards and one that drives profitability
Understanding MRO Inventory
To craft an MRO inventory process and to devise a strategy that balances lower procurement costs and minimal downtime, it is important to understand the various types of MRO inventories; how they are classified and how their management differs.
While the fundamentals are straightforward, the execution of an MRO inventory process can get complex very quickly
This is why, it is important to understand the various pieces of technologies, software, modules and disciplines that are in-use at manufacturing and production-intensive companies and the role they play to build excellence in MRO inventory management.
So in this article, we will cover
1. Relevant Master Data Models in ERP for MRO processes
2. Bifurcation of MRO spare parts based on their characteristics
3. Digital BOM records in the ERP for fixed assets
4. Work Order Management Processes and their Implication of MRO Inventories
5. Inventory Management
6. How Autonomous Inventory Management Systems, like MRO 360 can drive tangible results through MRO Inventory optimization strategies
The reason for outlining the inner workings of such systems is to build a solid understanding of MRO inventory optimization software systems work, and what sort of prerequisites are necessary before they are deployed
Relevant Statistics for MRO Inventory..
A recent study by GEP worldwide estimates that on average about 50% – 60% of MRO inventory at a manufacturing or production operation is excess, obsolete or slow moving, directly inflating overheads.
This slightly dated, but still very relevant study by Mckinsey also strongly suggests that overstocking of slow moving parts and holding obsolete parts is a teething challenge that is an untapped opportunity
Folks over at MasteringSAP have also found that instances of production downtime can be slashed by as much as 50% with a well-thought out inventory management process specifically for MRO
Types of MRO Spare Parts
Spare Parts are bifurcated into several different buckets depending on various aspects, depending on their criticality, the criticality of the equipment that that are mapped to, obsolescence status, nature of the spare part etc.
Based on Criticality
Criticality of equipment and spare parts are the cornerstone of a well-planned MRO inventory management solution.
The goal of a well executed criticality study is to ensure that a healthy buffer stock is maintained for spare parts that are critical and to prevent overstocking of MRO parts that are non-criticial.
Following the execution of a criticality study, a spare part may be bucketed into any of the following;
1. Critical Spare Parts – Best practices dictate that these parts should meet a certain minimum inventory level + a buffer
2. Semi-Critical Parts – These should meet a certain minimum inventory level and a longer lead-time for semi-critical spares can be tolerated.
3. Non-Critical Parts – The safety stock levels for these parts can be quite low, in many cases a Just in Time inventory purchasing schedule is ideal for these spare parts
Based on the Nature of the Spare Part
Based on the consumption patterns, and obsolescence status, a spare part can be categorized into buckets that have a direct implication on what their minimum inventory levels should be.
Some of them are:
Slow Moving Spare Parts
Slow Moving spares typically have a far slower turnover cycle, their requirement is based on the occurrence of an extremely rare event and, only if the spares are also critical, a healthy buffer for these spares need to be maintained.
One of the goals of optimizing MRO inventories is to prevent overstocking of these slow moving spares, that needlessly balloon holding costs.
As mentioned earlier, slow moving spares along with obsolete spare parts (detailed below) can together account for anywhere between 10% – 30% of the total stock, inflating carrying costs significantly
Fast Moving Spare Parts
These are spares that have a high inventory turnover and they fly off the shelves with even routine maintenance activities.
It is important to ascertain consumption patterns based on historical trends for these spares and set inventory thresholds after taking into account the criticality of the spares.
This will ensure that routine spares are available at all times and maintenance activities are unaffected.
Obsolete Spare Parts
Several spare parts go obsolete either due to misaligned procurement or between their procurement and their consumption.
Organizations typically struggle to ascertain if a given spare part is still “active” or if it has been discontinued or inactive.
It is important to weed these spare parts out of the Master Data as well OR to cross-reference them with an alternate spare that is “Active”
Obsolete parts can seriously have cost implications for any given operation since holding them results in serious cost-overruns and depending on an obsolete part for critical equipment maintenance can result in prolonged downtime.
The 1st video below details how a software solution, that is powered by AI can identify and flag obsolete spare parts from the spare parts master. The second video details how spare parts information can be enriched in-bulk and updated into the ERP master or any other source system.
SpareSeek AI
AutoEnrich AI
Dead Stock
Spares that haven’t been used at all in the past 12-24 months are typically tagged as “dead stock”.
Depending on their criticality and requirement assessment, the inventory levels of dead spares can be slashed or culled altogether.
Digital BOMs
A bill of material, in the context of MRO, is simply a list of all the spare parts and consumables along with their quantities that are required for the upkeep of any given piece of machinery.
A robust MRO inventory management system relies heavily on digital BOMs to synchronize spare parts data from the material master and equipment data in the Asset master.
The success of this exercise depends heavily on efficient management of Bills of Materials. Generating digital records of bills of materials has historically been quite labor intensive.
Thanks to AI-driven document data extraction, agentic models are now context-aware and they can extract structured BOMs for every piece of equipment in a highly structured format.
The video below details how spare part data for any piece of fixed asset can be extracted from unstructured technical documents and create a digital BOM in seconds
Digital Bills of Materials for fixed equipment are critical to ensure seamless maintenance operations and they’re the foundation to deploy a well-thought our inventory strategy for MRO spares., we have covered this topic in detail here.
The video below details how Auto Doc AI, our solution for extracting a structured bill of materials from a physical, unstructured document.
Data Domains Relevant to MRO
There are a few data domains that are particularly relevant to Maintenance, Repairs and Operations – these data domains may be defined distinctly in different ERP systems, but they store pretty much the same information;
Spare Parts Master
This is the data pertaining to all the spare parts that are in-use across different facilities of a given organization.
In SAP, this is stored in what is typically referred to as a Material Master Data model and in Oracle, this data is stored in what is referred to as an Item Master Data model.
A spare parts master captures several data points such as;
- Part ID/Material ID/Item ID
- Short Description
- Long Description
- Spare Part Category
- Data Sheets for each of the categories
- Specifications & Attributes specific to each category
- Manufacturer Name
- Manufacturer Part Number
Spare Parts data management are easily one of the tricker aspects to solve within an overarching MRO data management strategy, simply because the quantum of spare parts in-use at any given org is massive and prone to several inconsistencies, duplicates and errors.
When companies refer to “MRO Data Cleansing”, they generally refer to normalization of MRO spare parts data which may entail several aspects such as data enrichment, deduplication, standardization and so on.
Equipment or Asset Data
An equipment master is simply the raw data pertaining to every fixed asset or equipment that is in-use at a given concern, across plants and facilities.
A typical equipment master dataset will include;
1. Asset ID/Number
2. Asset Class/Category
3. Description/Name
4. Asset Status
5. Manufacturer Serial Number
6. BOM Code
In our experience at Verdantis, we’ve observed that only larger companies with their mainstay in manufacturing and with $5 Billion+ in annual revenue, are the ones that need management solutions for their asset master data.
However, for seamless management of spare parts with the right equipment, it is quite critical to synchronize spare parts data with asset master data – we discussed the role that digital BOMs play in this in the section above.
We will cover this in more detail below.
Supplier Data
This data domain is loosely related to Maintenance operations and is relevant only if an organization is truly leveraging a Multi Domain Master Data approach.
Through this, the synchronization of spare parts and equipment records as discussed above, can be made with the vendor master to ascertain the best procurement and cost-saving opportunities.
This page covers all aspects specific to supplier data management and how organizations can deploy one.
Location Data
Organizations with several manufacturing facilities, distribution centres, warehouses, showrooms and related physical locations typically also maintain a location master data.
Data Stewards, or material requestors typically extent the same MRO part of equipment to a different plant location if an identical part of equipment is already in-use at another facility.
As far as MRO data management is concerned, location data and its management is confined only to this tiny detail
Synchronization of Spare Parts & Equipment Data
The digital BOM, when created for all the fixed assets contained in the asset master, can be used as the starting point for synchronizing fixed assets with dependent spare parts.
In the spare parts master, this is indicated mapped in a field called “linked equipment“
This field captures all the dependent fixed equipment for a spare part – multiple equipment are separated by commas.
Inventory Management Modules
Unlike popular belief, the actual inventory levels, their value and their status is not tracked the materials/item master data.
In almost all popular ERP & EAM systems, the actual details of the inventory like the quantities in stock, inspection status, POs linked to them, locations and value-related data.
Data from the inventory management module is also pulled into an spare parts management software to ascertain the inventory levels of any given piece of Machinery.
We have covered MRO inventory management in SAP specifically in this article.
What does an MRO Inventory Management Software Do?
Now that we have covered the basics, and we understand the goal of an MRO inventory strategy, we can understand what a software-based MRO inventory management system does and its role can be accentuated to build excellence in MRO processes.
Ascertain Min/Max Inventory Levels
In inventory management, Min/Max refers to the minimum and maximum quantities of a given item that should be in-stock.
An inventory management system ascertains and suggests min/max level based on its criticality and consumption patterns and ensures active governance of these thresholds
Demand Forecasting
Based on legacy consumption patters, seasonality and equipment usage, an MRO inventory management system can ascertain the demand for a given spare part for the near future.
At Verdantis, MRO360, our spare part inventory optimization solution leverages artificial intelligence to build demand forecasting models, based on which the appropriate authority will receive notifications in case the stock levels are below or way above the forecasted quantities
Real-time Tracking Stockout Notifications
One of the more powerful features of an inventory management system is its capability to track real-time movement of products and their consumption.
For fast-moving and critical spare parts, an MRO management software has the ability to share real-time notifications related to stockouts.
Flag Obsolete Spare Parts
This is not something that is considered as a “Gold Standard” as far as MRO inventory management systems go, but is certainly something that can equip procurement professionals with the right data to plan inventory schedules much better and prevent mishaps due to Obsolete Spares
Auto-Fetch Alternate Spares & their Suppliers
Advanced MRO inventory solutions, like MRO 360, also have AI-powered capabilities to fetch alternate spare parts and suppliers for those to ensure undisrupted maintenance operations despite obsolete spares.
Procurement Automations
Advanced software solutions, especially the ones powered with Agentic AI can also autonomously scan inventory threshold levels and submit purchase requests or flag them when certain min/maximum inventory levels have been met.
Integrations with Work Orders
As discussed earlier, a digital bill of material is the starting point to ascertain the linkage between spare parts and fixed assets. This works for fixed assets where no major maintenance work has been undertaken.
In cases where there has been significant maintenance work linked to a specific piece of equipment, the software can also integrate with the work orders and identify the revised sets of spare parts or consumables that are now required to maintain the equipment.
This is also why a seamless management process for work orders is sometimes a pre-requisite before building MRO inventory management workflows
Here is a short snippet that showcases MRO360, Verdantis’ purpose-built software solution for optimizing spare part inventories.
Verdantis partners with Industry pioneers across a diverse range of industries to build excellence in MRO operations with Industry-trained Agentic AI Solutions and purpose-built software that is flexible for diverse use-cases.
Conclusion
Optimizing your MRO inventory isn’t just about cutting costs – it’s about building a system that supports smoother operations, minimizes downtime, and keeps your team ready for anything.
By following these best practices – like assessing your current stock, simplifying and standardizing parts, cleaning up your data, and investing in the right tools – you can set your organization up for long-term success.
The key is to think of MRO inventory optimization as an ongoing journey. Regular check-ins, smart forecasting, and collaboration with suppliers will help you stay ahead of challenges and adapt to changes. With a little effort and the right strategies, you’ll not only streamline.
Equally important is MRO data cleansing, which ensures that your inventory data remains accurate and reliable. By removing duplicates, outdated information, and inaccuracies, you ensure that your inventory decisions are based on trustworthy data.
With a little effort and the right strategies, you’ll not only streamline operations but also enhance the effectiveness of your MRO processes.A lot of companies provide MRO data cleansing solutions.
Optimizing MRO inventory management requires a balanced approach that considers cost, availability, and operational requirements. By implementing these best practices, organizations can significantly reduce inventory investment while improving maintenance efficiency and reducing downtime.
Remember that MRO optimization is not a one-time project but an ongoing process of refinement and improvement. Start with the highest-impact areas, measure your progress, and continue to build on your successes.
The payoff – reduced costs, improved efficiency, and enhanced reliability – makes the effort well worthwhile.
