Put Efficiency In MRO Storerooms

Outdated designs, work processes, and technologies keep many of today’s storeroom operations from adequately meeting the needs of the maintenance efforts they’re expected to support.

While bar-code technology has been around for decades, only a few storerooms have fully implemented it to track and manage their MRO inventory.

By Wally Wilson, CMRP, CPIM, Life Cycle Engineering

Regardless of organization size, many storerooms are still operated as they  were when the plants first began operating—which could have been decades ago. They still have light-duty metal shelving that wastes substantial vertical-storage space and heavy-duty pallet racking with extra-wide aisles to accommodate large components. For many sites, changes that make MRO (maintenance, repair, and operations) storerooms more efficient are long overdue.

Why a storeroom deserves TLC

An MRO storeroom is a business within a business that’s expected to have available items to maintain a site’s operating equipment. While the maintenance department may be its primary customer, it serves many areas of an organization. Its main role is to manage the inventory investment and provide the needed parts and components for equipment repairs and support the overall objectives and goals of the business.

The culture of the maintenance organization directly affects how a storeroom functions. If the expectation is to provide repair parts quickly for equipment breakdowns, the storeroom will be forced to operate with a large inventory investment—and in a very reactive mode. If maintenance personnel are conducting reliability-centered maintenance (RCM) and planning and scheduling their work, the storeroom operates in a more efficient and proactive manner, and with less inventory.

Note that how inventory is managed affects the outcome of equipment reliability. Take, for example, the fact that a harsh storeroom environment can damage parts. Dust, dirt, heat, cold, vibration, and static electricity can affect the quality and performance of some parts when put in service.

Service life can also be affected by how items are physically handled and stored. Think about the impact of an electric motor that’s dropped or had its shaft struck by a lift truck. Mishandling of parts can cause concealed damage that does more than adversely affect the life of the components themselves. It also can cause collateral damage to other equipment with which those items are installed.

Here are some recommendations for bringing your storerooms up to date in terms of location, storage equipment, work processes, technology, layout, inventory-stocking decisions, and kitting approaches for planned work.

Changes that make their MRO storerooms more efficient are long overdue for many sites, starting with elimination of substantial space-wasting, light-weight vertical shelving.

Update location

Past thinking was that the storeroom needed to be centrally located for easy access from anywhere on the site. This philosophy was driven by the role of the storeroom and the need of the employees to have access to everything from office supplies and consumables to repair parts for equipment maintenance.

Current thinking is that the storeroom should be located on the perimeter of a site for increased security. Placing a storeroom there also reduces delivery traffic that can cause a safety hazard for employees and delivery-vehicle operators. 

Locating the storeroom on the site’s perimeter increases the need to plan and schedule the preventive and routine maintenance work. To support the planning and scheduling of this work, parts need to be kitted and delivered to a staging area or specific job site. Ensuring that needed parts and services are available before a job is scheduled is critical—and directly supports proactive maintenance and MRO-storeroom operations.

If a storeroom isn’t staffed 24/7, grouping inventory by commodity helps off-shift personnel find parts they need without searching throughout the storeroom.

Update storage equipment

Regardless of a storeroom’s location, how space is used determines whether it operates efficiently. Assessing the vertical space, along with the square footage, helps define which storage equipment will be best suited to effectively manage inventoried items. Most MRO storerooms contain about 70% small items, with larger components and sub-assemblies making up the balance.

The smaller items should be stored in high-density cabinets, that, compared with metal shelving, dramatically increase space utilization. Cabinets can reduce the footprint of metal shelving in a storeroom by two-thirds. These types of cabinets also provide protection from environmental hazards (dirt and contaminates) that can damage parts. 

If square footage is limited, but ample vertical space is available, vertical carousel units are a good option. These units combine the high-density cabinet capability with a small footprint for storing large numbers of parts. Keep in mind, however, that such units are not limited to small-item storage.

Most vertical-carousel units have a maximum weight capacity of 300 to 400 lb./tray. These units can be configured in varying heights from 16- to more than 30-ft. to maximize use of available vertical space. Implementing vertical carousels significantly increases the use of available square footage and reduces the required footprint even more than high-density cabinets. A limiting factor is usually the cost, which can range from $150,000 to $250,000 per unit.

Update work processes

Several basic work processes need to be in place to effectively manage the storeroom and the inventory. Some rely on areas of the business operation outside the storeroom to be successful. Processes internal to the storeroom include:

• Receiving. Identifies tasks required for the storeroom clerk to document and verify receipt of a shipment.
• Inventory-stocking. Activities required to locate and store items to ensure the parts are properly stored.
• Inventory-issue. Tasks required to allocate items from the storeroom inventory.
• Inventory-cycle counting. Activities required to verify and correct on-hand quantity discrepancies.
• Inactive-inventory identification. Identifies non-critical, slow-moving items that are candidates for revised stocking levels.
• Obsolete-inventory identification. Activities required to identify parts that are not attached to a current operating equipment asset.

Work processes that the storeroom supports include:

• Incoming inspection. Inspections of incoming items that were fabricated or require certification before receipt.Return-to-inventory. Activities that credit returned items to a work order.
• Return-to-supplier. Activities that address warranty, credit, or replacement of a defective part.
• Planned-work kitting. Activities that ensure all parts are on-site before the job is scheduled for completion.
• Repairable-component process. Activities that track and manage the rebuild of selected components from removal from service to return to the MRO storeroom inventory.

Update technology

Technological advancements can be valuable tools for dealing with MRO inventories. Many organizations, though, have invested hundreds of thousands of dollars to purchase and install a state-of-the-art inventory-management system, but failed to leverage all of its capabilities. The sad fact is that employees often don’t receive adequate training on how to use the software. Consequently, they continue to rely on spreadsheets and other workarounds to do their jobs.

The business software is one of the most critical aspects in effective management of today’s storerooms. While bar-code technology, which is supported by most of today’s available software applications, has been around for decades, only a few storerooms have fully implemented it to track and manage their MRO inventory. To maintain visibility of the storeroom inventory, its receipt, management, usage, and re-stocking of materials has to be streamlined and updated in real time.

If such software is managed properly, all authorized individuals have access to real-time inventory reporting. Accurate, real-time inventory visibility is essential to your maintenance planners. If they’re not confident the inventory is accurate, they will spend much of their time doing physical checks to confirm the parts are actually on site.

High-use items, such as personal protective equipment (PPE), tools, filters, and leak-prevention solutions, can be dispensed using various types of vending machines.

Update layout

A storeroom should be laid out with consideration for space utilization and material flow. Inventory analysis and classification, using the A-B-C identification system, lets the storeroom manager establish a cycle-count frequency and define what items are critical, what should be held in inventory as stock, what should be non-stock (order on demand), and what are commodities that should be vendor-managed in the shops.

Handling or moving inventory items multiple times is a waste of effort for the storeroom staff—and increases the chance of damaging parts and components. When determining the space needed for a specific commodity group, a cushion of 15% of the space should be reserved for expansion. This approach provides space for new parts stocked for equipment modifications or new equipment installations.

Generally, inventory is best located and managed by commodity grouping items. The main advantage for grouping by commodities is to reduce duplicate inventory. This minimizes dollars invested in inventory and frees up valuable space. If a storeroom isn’t staffed 24/7, having the inventory grouped by commodity helps off-shift maintenance personnel find parts they need without wasting time searching throughout the storeroom.

Update stocking decisions

Inventory should be tied to an operating-equipment asset. Not all parts—even those deemed critical—will be held in the storeroom inventory (nor should they be). The decision to stock a part in inventory should consider these factors:

• Order lead time. The understanding of order lead time often varies within an organization. The order lead time typically starts when the order is received by the vendor and ends when the order leaves their shipping dock.
• Expected usage. Many parts could have multiple applications across the site and if the MTBR (mean time between repair) is available, the stocking decision can be made more accurately.
• Vendor reliability. When selecting vendors, consider past vendor performance and issues that could affect their ability to provide the needed parts.
• Impact on safety, production, and/or environment. Gauge the potential blow to these areas if a needed part were not available for the equipment repair.

For consumable inventories, consider these options:

• Vendor-managed inventories (VMI). Items in this category are high-use, low-dollar items that can be stocked at a point-of-use location.
• Vending machines. Many consumables, such as personal protective equipment (PPE), tools, filters, leak-prevention solutions, and office supplies, can be dispensed using various types of vending machines.

Update kitting approaches

Ensuring that all correct parts are available for a job provides a strong platform for a proactive maintenance program.

A planned-work kitting program also helps the storeroom. The key benefit is the ability of the storeroom to reduce the level of parts stocked and total dollars of inventory investment. Reducing the inventory investment contributes to an organization’s ability to operate at a lower cost.

Adding to the storeroom’s efforts to reduce inventory, the purchasing group can secure parts as they are needed for repairs, thus reducing the need to expedite purchase orders for parts or stock large quantities of many items.

For example, it costs $150 to $300 to generate and administer the average purchase order from requisition to invoice payment. Using the auto-replenishment (material-resource-planning) capabilities of an inventory-management system cuts the purchase-order cost to $10 to $12 per transaction. If the kitting process is successful, much of the inventory can be ordered as needed, staged for the job, and the work executed as scheduled.

Kitting provides a number of other benefits for a plant, including better maintenance-technician utilization. In most organizations, that rate is about 25%. With a planned-work kitting program, the rate increases because jobs, by definition, are well planned, and technicians will not be wasting valuable time looking for the parts to complete them.

Start sooner than later

The common approach to revising storeroom operations is to turn to new technology to solve all problems. The first step, however, should be to determine where you are now and what barriers prevent you from having a functional storeroom that proactively supports your site’s reliability and maintenance efforts. You’ll most likely discover some problems that haven’t yet been addressed—perhaps because your site has never launched an initiative designed to capture the opportunities they represent.

If, in fact, you find that your MRO storeroom needs a makeover, start the process as soon as possible to reap the associated operational and financial benefits. Innovation is driven by a clear understanding of the problem, planning a strategy to facilitate the needed change, identifying key activities to achieve the goals of the strategy, and measuring the performance with lagging and leading indicators.

Having a strategy to execute an improvement plan puts a rudder on your storeroom ship. Monitoring the progress of the initiative with key performance metrics will validate your progress and drive the continuous-improvement effort forward. MT

Wally Wilson is a senior reliability consultant in materials management and work management, planning, and scheduling for Life Cycle Engineering (LCE.com), Charleston, SC. He can be contacted at wwilson@LCE.com.

Key Storeroom-Performance Metrics

Key performance indicators (KPIs) that report lagging storeroom performance can shape strategies and action plans to drive long-term continuous improvement. Leading indicators are the mid- and long-term performance goals and the strategy to trend the storeroom performance toward the target goals. The strategy should include key activities and process revisions to drive the expected performance. 

The following KPIs are used to measure storeroom performance:

• Inventory-turns ratio. The best-practice MRO inventory turns ratio is three to four annually.
• Inventory value. Best practice is 0.5% to 0.75% of the asset-replacement value.
• Inventory issued. Indicates dollar value of inventory issued.
• Inventory received. Indicates dollar value of inventory received.
• Inventory transactions. Indicates the utilization of storeroom employees.
• Incidence of inventory stock-outs. Best practice is less than 2% of total inventory requests for unplanned jobs.
• Identified obsolete inventory. Expressed in dollars, the best practice is less than 5%.
• Excess inventory. Stocking overage, expressed in dollars.
• Inventory accuracy. Best practice is 98% overall inventory accuracy.
• Inventory adjustments. From inventory cycle-count activities.

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