The objective of your MRO storeroom is to manage parts and material investments used in maintenance, repairs, and operations. As such, it provides the parts and components needed to repair equipment and support business objectives. Without an effective maintenance storeroom, the results can be catastrophic.
Here, we’ll look at how to optimize and manage the total cost of your storeroom while enabling it to provide the right parts and materials at the right time.
What Is a Maintenance Storeroom?
The MRO storeroom is a secure area set aside for storeroom parts, materials, and other necessities used in maintenance, repair, and operations. That includes maintenance parts, repair parts, and operating supplies that are ready to use to specifications.
One of the primary goals of your storeroom is to keep parts for future use to avoid prolonged downtime, plant shutdown, and lost income.
Some common storeroom requirements to follow include:
- Store only parts that are linked to an asset, with the exception being free stock and operating supplies.
- Promote physical security for parts. Treat them as you would your own checkbook or debit card.
- Staff and control your storeroom during the same hours as production.
- Make sure each part is assigned a Min/Max/Reorder Point. Review those regularly.
- Measure storeroom performance with KPIs, such as stockouts, storeroom value, inventory turns, number of times someone enters without checking out a part, mean time between failures, etc.
Key Areas of MRO Storeroom Management
The key areas of MRO storeroom management can be divided into six parts, all of which drive toward improved results.
The first area to look at is measurement. In your maintenance storeroom, some of the potential issues you might have are:
- Stockouts – Times when the system says you have a part, but it’s nowhere to be found.
- Parts cost – The amount spent on parts.
- Vendor efficiency – The percentage of time the vendor delivers on time with the right part in the right quantity.
Next, and very simply, you want to make sure you have the right materials, the right lubricants, and the right parts in stock.
When handling the personnel aspect of MRO storeroom management, it’s vital to have all processes mapped out and executed precisely. Without a process map for storeroom management, it’s hard to get everyone in alignment.
Tip: It’s a good idea to have your MRO storeroom process map printed out and posted where everyone can see it, particularly if you have different shifts with different tasks i.e., if one’s doing receiving, another cycle counting, etc.
In addition, everyone should be trained in the same way in the specific tasks they need to perform, and their roles should be clearly defined with RACI. When everyone knows who is Responsible, Accountable, Consulted, or Informed, it creates a clear separation of duties that prevents confusion.
Environment is an important component of managing your MRO inventory. Humidity can be a problem for certain parts, and many items need to be stored to proper specifications. For instance, large bearings would need to be stored flat on a vibration pad to prevent damage.
The storage environment also needs to be secure. If your inventory is not secure, anyone can walk into your storeroom and take a part. It doesn’t matter if you trust your personnel. Odds are they’re using those parts for needed repairs. However, it’s a matter of keeping track of your stock and knowing where each part goes. Having to expedite a part in because it wasn’t put on a work order can get very costly very fast, all while throwing off expenditures and maintenance records.
Your methods need to involve sound procedures, meaning everyone does everything the same way every time. To achieve this, each new employee you bring into the storeroom needs to be task qualified. Having your best person in the storeroom essentially certify them as qualified to perform each task—perhaps with the use of a checklist—can make sure they’re well trained.
An additional method is to use KPI dashboards. By having metrics visible, you’ll be able to tell how well you’re doing with your storeroom, purchasing, and so on.
Finally, your assets should be operated and maintained to specification. This cannot be done without the right parts and materials.
Inventory Performance Indicators
To measure the performance of your MRO inventory, consider tracking the following metrics.
Inventory Turnover Rate
One important inventory performance indicator is whether your inventory turnover rate is increasing or decreasing over time. You might consider tracking issuance of items on a monthly basis. If a certain part’s turnover rate is increasing, it can show potential failures with a particular asset that might be overlooked otherwise.
Turnover rate also informs purchasing decisions. If you see an uptick in turnover for certain items, you’ll need to adjust spending on those parts. Conversely, keeping an eye on inventory trends can prevent you from overbuying and leaving parts sitting on the shelf for years.
Stockouts are parts that are supposed to be in the storeroom but aren’t. For instance, if your inventory management system shows you have a certain number of a part on the shelf, but you can’t find it, that’s a stockout.
Stockouts could also include instances where you have to pull an item from reserve stock instead of your normal inventory.
Ideally, you want service level stockouts to be less than 5%. If stockouts are too high, it’s an indicator that you either have poor storeroom security or are simply keeping insufficient stock on hand.
Inventory accuracy should be above 95%. Stockroom personnel should be doing regular cycle counts to keep their records as accurate as possible.
Percentage of Parts Assigned to Assets
All parts should be assigned to an asset unless they’re free bin/free stock items.
Number of Expedited Parts
Expedited parts should be kept to a minimum since they represent instances where an important part was needed but not available, often incurring massive costs.
The cost of emergency purchases—such as overnight deliveries and expedited costs—should also be kept to a minimum. High emergency purchase costs can be crippling to a lot of operations.
In an ideal operation, backorders should be below 5%. That means vendors need to be in tune with your operation and aligned with your objectives. Having contracts with preferred suppliers helps make sure they keep the items you need on their shelves, and they may even store some of your inventory for you in some cases.
Vendor efficiency can be measured by multiplying the percentage of on-time deliveries times their right quantity times their right part deliveries, or:
(% On Time) x (% Right Quantity) x (% Right Part)
You want this metric to be 98% or higher. If they don’t get 98% or above, it may be time to find another supplier.
Tip: A good tactic is to do internal audits on your top preferred vendors. That way, you can take a look at their operations and help them help you more efficiently.
Vendor-managed inventory is the ratio of stock keeping units (SKUs) that are managed by a supplier or vendor to your total number of stock items. Generally, you don’t want much of your inventory to be owned by the vendor. At times it may be necessary, but you’ll usually want to keep this number below 5%.
Inactive stock is the ratio of inactive MRO stock records to the total number of MRO items. This metric excludes critical spares and non-stock inventory records. The purpose for measuring inactive stock is to tell you how much of your stock has not been used for the last year and to calculate potential reductions in working capital.
What Does a Good Storeroom Look Like?
With the above metrics in mind, what does a good storeroom look like? A well-run MRO storeroom will exhibit the following:
Clean and Organized
The storeroom should be regularly cleaned and kept well-organized.
Right Part at the Right Time
The inventory provides the right parts at the right time.
Parts Stored to Best Practices
Parts should be stored according to best practices. For example, V-belts should be coiled up instead of hanging in a long loop (which could cause them to fail prematurely). Fluorescent lights and exposure to ozone can also deteriorate rubber materials faster.
The storeroom should be secure 24/7 to make sure people go through the correct processes to check out parts. A good practice is to use a keycard to lock the door, and have an alarm sound if it’s left open. Doing so keeps people from following their coworkers in to get parts and bypass the system.
Parts Charged to Assets/Work Orders
All parts should be charged to an asset or work order. Blanket work orders are to be avoided since they don’t tell you where your parts go.
Monthly Cycle Counting
Cycle counting is a sampling technique in which you count several items in various areas within your storeroom. By counting a few select items at a time, you can infer the count of the entire warehouse. That way, you can avoid counting your entire inventory all at once.
This method can be used in place of a full year-end inventory. To determine how many items you need to count each day, just divide the total number of line items in your system by the number of working days.
Adequate Conditioned Air for Specific Assets
A good storeroom has adequate conditioned air (temperature and humidity) for specific assets and components. A rule of thumb you can use here is your own comfort level: if you’re uncomfortable, your parts are uncomfortable.
Large HP Motors Turned Monthly
Large horsepower motor shafts (50hp or larger) should be turned 1 1/4 turns every month. Vibration from the production floor can damage these components over time, so it’s a good idea to have your storeroom people turn motors as a preventive maintenance task.
Fast-Moving Parts Up Front
Faster-turning parts should be in the front of your storeroom for quick access, while slower-moving or larger parts are stored farther back.
Secure Kitting Area
The kitting area should be kept secure and separate from the rest of your storeroom area. That way, items that are kitted for the next day’s/next week’s work are kept safe from personnel who might wander off with it. No parts should be allowed out of the kitting area without a work order attached.
Your kitting area should also be well organized, such as with numbers, symbols, or color-coded bins.
No Maintenance Free Stocks
Ideally, no part should be left as a free stock item. All parts—including simple items like fasteners and fuses—should be tracked, so you can know where each part is going and keep an eye on failure patterns in your plant.
Indicators of Poor Storeroom Practices
On the other hand, these indicators are signs of poor storeroom management.
Cluttered and disorganized aisles, torn and leaking packages, and lack of rotation for stock to allow for “first in, first out” (FIFO) cycling are all indicators that the storage area isn’t being cared for.
Tip: Your storeroom is a mirror of your maintenance program. If your storeroom isn’t clean and well-kept, then your maintenance program is likely also chaotic.
If you’re having stockouts on a recurring basis, while the stock is still showing in your inventory, it’s an indication of poor inventory management.
Expedites on Materials Already on Order
Expedites on materials or parts that are already on order are indications that either your suppliers are not meeting demands, or your buyers aren’t paying attention to your needs. Additionally, your min/max/reorder quantities may not be set appropriately.
Parts and Materials Not Charged to a Work Order/Asset
All parts should be checked out and charged to a work order or asset.
No Return to Stock Process
Sometimes someone will check out a part and later return it. There needs to be a process in place for returning parts since taking them out on the floor could damage or contaminate them. This is especially important for electronic components like IO boards that could be exposed to magnetism, but it also applies to bearings and other items.
No Kitting for Scheduled Work
Kitting is highly important for scheduled work. The kitting/staging area should be kept as secure as possible.
Causes of Common Problems
When MRO storeroom management falls short, there are a number of common causes that are worth looking at. These include:
Lack of Effective Standard Operating Procedures
Standard procedures either don’t exist, aren’t effective, or aren’t followed.
People Being Unaware of What They Don’t Know
People aren’t aware of what they don’t know when there’s no demonstrated best practice. On the other hand, if there is a demonstrated practice, all people have to do is repeat it.
Complacent with the Norm
When you demonstrate best practices or attempt to implement changes, sometimes your personnel will try to wait it out, thinking everyone will eventually go back to the way they’ve always done things. Complacency with the norm has to be countered with rigor.
Measuring the Wrong Things
Often, maintenance teams track metrics in the storeroom that offer no real value.
Without a scorecard, it’s hard to tell if you’re heading in the right direction. MRO KPIs you’ll want to display include (from leading to lagging):
- Percentage of parts tagged to an asset
- Inventory turns for each item
- Percentage of parts with min/max/reorder points
- Expedited shipping costs
- Inventory value
- Total maintenance material cost
- Total maintenance cost
All of the above metrics feed into your total maintenance cost, and they’re all important to track since they give you insight into your facility’s reliability. For instance, if you’re seeing increasing inventory turns for a part, that could be a clue into a problem that’s causing those parts to fail.
Seven Habits of an Effective Maintenance Storeroom Leader
MRO storeroom management is a function of effective leadership. The seven habits of an effective maintenance storeroom leader are:
- Ensures all maintenance parts checked out are charged to a work order. No work order, no parts.
- Monitors leading and lagging storeroom KPIs and makes decisions based on data.
- Makes sure the storeroom is secured and monitored 24/7 using locks, cameras, etc.
- Applies technology—such as RFID tags and handheld devices—to manage the storeroom effectively.
- Brings in vendors to provide free training to technicians. Your crew will often see outside people as experts.
- Rebuild items are shipped to the rebuilt facility within 48 hours.
- Rebuild facilities are inspected to ensure quality of rebuilds.
Benefits of Having a Clean and Efficient MRO Storeroom
As stated, your MRO storeroom is a reflection of your maintenance program (not to mention your company as a whole). When your storeroom is kept clean and efficient, you’ll see the following benefits.
Lower Costs and Increased Revenue
When your MRO storeroom runs efficiently, it reduces costs, allowing your company to realize an increase in revenue.
In a clean storeroom, you’ll find parts faster, allowing you to spend less time on labor wasted looking for lost or missing parts. In addition, accelerating your MRO process can curb forms of waste covered by the acronym TIMWOOD:
For instance, having high-turn items up front reduces waste from travel and waiting.
Lower Freight Costs
Another benefit is lower shipping, freight, and expedited costs. A more efficient storeroom means you won’t spend money on items you already have while reducing high shipping costs from expediting parts.
Tip: When logging freight costs, make sure you list them as separate line items on purchase orders. By keeping shipping expenses separate from parts costs, you’ll have an easier time tracking them.
Lower Inventory Carrying Costs
Inventory carrying costs are costs incurred by keeping items in your storeroom. Effective storeroom management allows you to shrink your inventory of parts by determining what’s unnecessary or obsolete.
Tip: An annual obsolescence review helps you notice when items aren’t turning and get rid of them if they’re no longer necessary.
Maximize the Use of Available Space
Reorganizing your storeroom and removing unnecessary parts allows you to make maximum use of the space. You might gain room to make your MRO activities more efficient or even reclaim some of the area for production, RCA, or other processes.
How to Be Proactive with Stores Through an Evaluation
The beginning of MRO proactivity is with a storeroom evaluation. The best way to evaluate your storeroom is to walk through it once per week and check on the following items:
- Check ten part numbers and verify them against your CMMS. What’s the variance between the CMMS and your on-hand balance?
- Review orders from the day before and note the number of shortages. How many orders can be filled and meet your daily requirements?
- Are items in your kitting/staging area filled and rotated daily, or do they linger for a week or more?
- Are there non-authorized persons (employees or contractors) in your storeroom looking at stock, shopping, filling their own orders, etc.? Are in/out controls working?
- Finally, ask storeroom personnel (in a casual setting away from leaders) if they have any issues with supplier or buyer response.
Setting Storeroom Goals and Priorities
Before you dive into fixing things, it’s important to set some goals and priorities to start out. These priorities should be based on your company’s immediate needs and resources. Some considerations include:
- Number of storerooms in your facility (some may be as incidental as a random cabinet)
- Number of SKUs you have
- MRO process maps and diagrams
- Number of the same part listed under different inventory numbers (you’ll need to consolidate them)
- Production and maintenance schedules
- Activity levels/parts turned for each shift
- Number of people you can devote to the project
- Baseline information and statistics on where you currently stand (to measure progress)
- Condition of spare parts and materials (whether they’re used, stored properly, the right parts at all, etc.)
- Get a snapshot of your storeroom’s current condition with photos, report data, etc.
If possible, have an outside evaluation done on your storeroom to get the baseline metrics evaluated. In six months, redo the evaluation to see if you have any improvement.
ABC Analysis for Parts
There are different types of parts you’ll have in inventory. The ABC analysis discussed below will help you determine how many hours and resources you’ll put into checking on these items and keeping them secure.
- “A” Category items usually compose 15% to 20% of your total inventory, but represent 80% of your inventory’s value. As such, they’re highly important.
- “B” Category items represent 30% to 35% of your inventory and 15% of its total value. They’re typically managed through a formal inventory system.
- “C” Category items compose 50% of your inventory but only 5% of its value. They can be managed through a relatively relaxed inventory process.
Requirements for Successful Inventory Control
Inventory management means controlling where items go. These are some basic guidelines to follow when it comes to controlling your inventory.
- Storeroom is secured 24/7.
- All parts are charged to a work order assigned to a specific asset.
- No uncontrolled remote stores.
- No hidden spares (since they present a tax issue).
- Use a barcode scanner to scan parts and work orders. Download that information into your CMMS.
- “First in, first out” (FIFO).
- No used parts unless they’ve been rebuilt or restored to specification.
- All parts for scheduled maintenance are kept in a secure location separate from the storeroom and have a work order copy attached.
Emergency vs. Proactive Parts Obtainment
When it comes to the difference between emergency work and proactive maintenance, the workflows for parts obtainment look something like this:
- Emergency work notification
- Work order created with an asset number
- Technician scopes out the job and checks if parts are required
- If so, looks for parts in the bill of materials in the CMMS
- Parts are charged to the asset using your CMMS
- Technician picks up parts at the storeroom
- Returns to job site
- Completes work
- Work order is closed out
- CMMS metrics are updated
- Work ID generated from preventive maintenance, predictive maintenance, and operator care
- Work order is created by maintenance planner
- Job scope is determined
- Work is planned
- Parts ordered are set aside in the kitting area
- Work is scheduled
- That work is executed to specification
- Work is then completed to specification
- The work order is completed
- Work order closed out in the system
The proactive process gets good data into your system and is preferred to emergency work.
6S for the Storeroom
Storeroom waste can be eliminated through the 6S method. The 6 S’s include:
Remove parts that are no longer used. If a machine has been gone for a few years, there’s no more need to keep spare parts for it.
Sort and store parts based on ABC analysis and turnover rates.
Keep parts, materials, and the storeroom itself clean and climate-controlled.
Create a standardized route to sort, straighten, and scrub your storeroom, and to eliminate redundant parts. Buy from quality vendors, not the lowest bidder.
Expand the process to other areas, and develop new ideas to store and secure parts.
Access control, security cameras, alarms, and so on.
Tip: A good way to detect areas of waste is to do a maintenance Gemba Walk, during which your people step away from day-to-day activities and look over the work area. For instance, you might do this once per quarter with your storeroom manager.
With all this information, what’s next? The following four steps can help you optimize your MRO storeroom management:
- Educate everyone in maintenance materials best practices and processes.
- Agree on a master plan for improvement with goals and quick wins along the way to keep people engaged.
- Create a RACI chart aligned with your MRO process map.
- Establish leading and lagging KPIs to track.
By following these steps, you’ll be well on your way toward implementing the principles of MRO storeroom best practices.
Note: This article is based on a webinar “Maintenance Storeroom Best Practices” with Ricky Smith and Radar Huntsinger. To view the recording of the webinar, visit this link.
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