From manufacturing to construction, every industry has felt the impact of supply shortages, delays, and increased costs since the Covid-19 pandemic. As an inventory or procurement manager, you face regular pressure to stay on budget and reduce costs. But, that is proving even harder with the ongoing supply issues. None of us know when things will level back out, and supply will catch up with demand. So, we must manage what we do have control over, which is our internal MRO cost reduction strategies. MRO is the abbreviation for maintenance, repair, and operations. It typically refers to your inventory of parts and tools for your business’ maintenance, repair, and operations needs. This is a key area to reduce costs, and we’ll share our top tips to do so.
Our Top 6 MRO Cost Reduction Strategies
Collect Data to Gain Visibility
If you don’t have data, trying to reduce costs is like walking around blindfolded. You have no visibility, so you will not be efficient or even effective with your decisions. Strategic decision-making has to be driven by data. Also, data solves more problems than just visibility for companies with multiple locations. The easiest way to gain visibility is to implement Enterprise Asset Management (EAM) software. You could try to build reports from your paper or spreadsheet-based processes, but it will require more data entry and manual labor hours. Plus, you’re less likely to have complete and accurate data. Redlist’s EAM software auto-populates your reports so you have your real-time data at your fingertips.
Review Your MRO Consumption
While this may sound like an obvious strategy, there’s an important perspective shift to keep in mind. MRO inventory relies on the efficiency of your maintenance, repair, and operations. So, you have to think of your MRO consumption alongside other data like your equipment downtime, total cost of ownership, asset health, and preventive maintenance strategies. This opens up opportunities for savings that you may not have noticed before. One Redlist user improved their preventive maintenance with better asset lubrication. That one change alone reduced their MRO costs by $24,750, which they were previously spending on replacement pumps, bearings, and mixers.
Focus on Total Cost of Ownership Instead of MRO Costs
Total cost of ownership is an essential data point to consider in your MRO review. For example, in your review, you notice that a critical asset has a high recurring spend on a particular part. You could dive deeper into the data to that asset’s total cost of ownership. This may reveal that the asset has reached an age where it is costing you more to constantly buy parts and spend time repairing it. Instead, it may actually be cheaper to replace the asset. This is why you can’t focus only on MRO costs. You could be missing a big opportunity for savings if you overlook total cost of ownership.
Adjust Your Ordering Thresholds
When facing supply delays or shortages, it is definitely tempting to stock up. However, that is not the best strategy when it comes to MRO cost reduction. For items that aren’t used often, could you wait a bit longer before ordering? For example, let’s say you replace the item every time you use it to keep your inventory level at four. There are costs associated with the labor hours an employee spends on that purchase order and any shipping fees. If you wait and order two at a time, you reduce the overall cost by distributing the purchase order and shipping costs to two parts instead of one.
Talk to Your Suppliers
Suppliers can be very accommodating of your needs and a conversation can go a long way. Ask your suppliers if they have any discounts for bulk orders or if you spend a certain amount with them annually. Oftentimes, you may not know that your supplier offers discounts or expanded to a new market and can now fulfill more of your inventory needs. Additionally, refer back to your data to see if various locations are buying the same part from different suppliers. If you can consolidate your suppliers, you can save on shipping, simplify your orders, and potentially benefit from a volume discount.
Eliminate Inefficient Processes
There are many steps to the purchasing and inventory process. That means there are just as many possibilities for error or inefficiency. Is the storeroom unorganized causing inaccurate inventory counts or unnecessary parts purchases? Or, is a paper-based system causing slow processes and errors in data entry? Streamlining the process from start to finish is one of the best MRO cost reduction strategies that is often forgotten.
Hone Your MRO Cost Reduction Strategies with Redlist
Whether you’re dealing with the pandemic supply issues or you simply want to optimize your MRO budget, Redlist is here to support you. The software helps you streamline your processes, eliminate inefficiencies or bottlenecks, and gain visibility that you didn’t have before. Not only will you find the cost savings you’re looking for but also you will get back valuable time. Learn more about how you can use Redlist to drive your MRO cost reduction strategies by scheduling a demo.