Reducing MRO Inventory Costs in Times of Economic Uncertainty

Reducing MRO Inventory Costs in Times of Economic Uncertainty

As the Fiscal Cliff looms and a second recession in less than five years seems more and more imminent, it is no secret that we are yet again faced with economic uncertainty. Driving efficiency and profitability has become increasingly challenging for manufacturing organizations and the pressure to reduce costs has never been greater. Although there is no doubt that the U.S. government will explore all avenues to avoid such a negative economic outcome, Americans could face significant tax hikes in the near future, forcing the economy back into a second recession worse than the first.

While MRO inventory is typically an overlooked area during times of economic stability, it is often brought to the spotlight during times of uncertainty. In such times, manufacturing organizations will be forced to examine all areas of the business to identify potential cost savings. Procurement teams will then be faced with corporate mandates to reduce costs and improve efficiency in addition to their already challenging roles.

Often underestimated, the opportunities hidden within MRO inventory not only present immediate hard dollar cost savings but also long-term benefits to all units of the business, from maintenance and procurement to IT and finance. Utilizing proper inventory management solutions and processes, organizations will have the opportunity to identify and capture significant cost savings through the reduction of excess inventory, improved maintenance efficiency and accurate forecasting abilities.

In order to reap maximum cost savings, the first phase of the cost reduction program will require the implementation of a corporate data cleansing project to standardize and enhance legacy data, identify duplicate and excess inventory, convert OEM parts to equivalent lower priced MRO items and assign proper UNSPSC coding to each unique item for future spend analysis. Clean, standardized and enhanced data will not only present immediate benefits but will also become the foundation for all future efficiencies and cost savings opportunities.

Once the database has been cleansed, the second stage of the cost reduction program will require the implementation of a corporate inventory optimization project to evaluate all transactional history over the past 12-24 months, identifying areas of inefficiency along the supply chain. Through inventory optimization, manufacturing organizations will have the opportunity to leverage spend, establish preferred supplier programs, make accurate forecasts and capture the most competitive pricing available. Using database statistics, inventory strategies can be tailored to meet specific cost reduction objectives. All identified duplicate and excess-active inventories can then be used down through attrition, returned to the supplier for credit towards future purchases or sold to a third party for cash.

After investing in Data Cleansing and Inventory Optimization solutions, a proper catalogue management process should be implemented to ensure the ongoing maintenance of data quality and corporate structure. Catalogue Management solutions can be customized to suit the unique requirements of each client. Whether you prefer to manage it internally using your own resources or outsource it to a company like I.M.A. Ltd., there are options available to meet every company’s needs. Any future catalogue updates, including new item creations, modifications or suspensions, will be formatted according to the pre-defined database format and corporate structure, while preventing any future duplication or database degradation.  

Any company at any time can reap the benefits of quality material master data but during times of economic uncertainty, MRO Inventory cost reduction can become a key factor in the success and survival of an organization.

For more information on Data Cleansing, Inventory Optimization and Catalogue Management solutions, visit www.imaltd.com or contact info@imaltd.com.

Founded in 1989, I.M.A. Ltd. is a provider of world-class Materials Master Data Management solutions, specializing in MRO Inventory and Indirect Materials. Current solutions include Data Cleansing, Catalogue Management, Enterprise Visibility and Inventory Optimization. With over twenty years of industry knowledge, hands-on part experience and internally developed tools, I.M.A. Ltd. prides itself on empowering data-driven savings with a relentless focus on the dynamic needs of the client.

For more information on Data Cleansing and related services, visit www.imaltd.com or contact info@imaltd.com.