At a chemical plant years ago, a maintenance technician made a hasty pump repair. A required repair part wasn’t available, so the technician did the unplanned maintenance with another similar-looking part. But the materials of construction weren’t rated for the pump’s service, and the pump casing ruptured and vented 1,300-degree oil into the atmosphere.

Luckily, the chemical plant was able to mitigate environmental harm, and no one was in the immediate area when the life-threatening failure occurred. But the accident was a severe wake-up call. The plant couldn’t just hope the right parts were around. It needed an effective strategy to maintain its maintenance and repair inventory.

Maintenance technicians often feel immense pressure to get production up and running after an operations breakdown. Unfortunately, this burden can lead them to take detrimental shortcuts to complete emergency repairs. Though the risks associated with breakdowns are often financial, poor maintenance stocking can also cause environmental and safety risks.

Optimize your MRO inventory stocking strategy

Maintenance effectiveness can be expressed as a ratio of planned maintenance to breakdown maintenance. Planned maintenance is comprised of all planned and scheduled activity (PM, PdM, corrective, etc.) while breakdown maintenance consists of emergency work, reactive work and break/fix work that is unplanned and requires an immediate response. A good target follows the 80/20 rule: 80% planned, 20% breakdown.

MRO inventory refers to critical supplies, spare parts and other materials needed for routine maintenance, repair and operations. If you are optimizing MRO inventory, you will need to determine a few things before considering the overall impact of your maintenance team’s planning capabilities. Does your inventory optimization tool:

• Dynamically assign criticality to your spare parts?
• Have a “where-used” feature to associate spare parts with their appropriate assets?
• Consider the asset/equipment criticality in the overall assignment of the spare part criticality?
• Calculate a moving-average total lead time rather than relying only on stated lead time?

It’s important to know how critical each part is before you apply forecasting algorithms and cost models. Tools designed for the manufacturing, service and retail industries have forecasting algorithms that focus on procurement and sales data rather than asset and work order data. These algorithms don’t factor in criticality and the business risk associated with criticality, which is crucial for MRO inventory stocking strategies. I like this analogy: If a grocery store runs out of bread, business is hardly interrupted, and the store does not shut down. However, in most industries, a lack of certain parts can prolong outages or potentially shut down operations completely.

Planned versus unplanned maintenance and the impact on stocking strategies

If you are effectively planning and scheduling 80% of your maintenance activities, planned parts should be ordered and available within the stated lead time. Proper planning provides a clear demand signal for spare parts, which eliminates the need to stock for planned work. Planning thereby reduces the need for stocking, maintaining, and managing spare parts. As such, you should stock enough parts to cover the 20% of unplanned work.

It’s important to track spare parts purchases against planned and unplanned maintenance. In addition to achieving the 80% planned work ratio, businesses must consider whether the scheduling window adequately accommodates supplier lead time. If parts cannot be delivered in time, maintenance may be forced to use safety stock to continue operations. When safety stock is depleted for planned maintenance, operations are placed at risk when an emergency arises. A stockout event often leads to increased stocking levels, which creates a ripple effect that increases maintenance budgets, reduces profit margins, increases space requirements and leads to surplus. Today’s surplus is tomorrow’s potential waste.

It is important that the planners have access to an inventory optimization tool that calculates a total lead time (including requisition to order time, supplier weighted average time and delivery time). Having visibility into total lead time allows planners to fully execute their planned maintenance and have the right parts available within the lead time window. If your planning is not effective, you will end up holding more inventory for longer periods, even with an inventory optimization tool. The forecasting algorithms will adjust stocking strategies to include all consumption (unplanned and planned) rather than planning and procuring as needed and keeping stocking levels appropriate for the 20% of unplanned work. Over time, this practice leads to more obsolete, wasted inventory.

Keep your maintenance planning effective by understanding total lead time for required parts. Keep your inventory optimized by stocking for the unplanned, emergent work. Find an inventory optimization tool that is designed for the unique requirements of maintenance activities, and you’ll be able to put the right measurements in place to ensure success.