abcanalysisofmroinventory-LifeCycleEngineering.PDFVIP

ABC ANALYSIS OF MRO INVENTORY Background Although there is not a direct correlation between the two, an ABC Analysis on MRO parts is somewhat similar to Criticality Rankings that are developed for plant equipment by Reliability Engineering. Criticality Rankings define the relative priority of assets in terms of their impact on plant safety, productivity, efficiency or other criteria. An ABC Analysis determines the relative priority of items in an MRO storeroom based on their criticality to the support of operations and their potential impact on plant inventory and investment. There are three key activities involved in completing the analysis: prioritization, stratification, and optimization. The results of the analysis provide valuable information that can be used to determine how each part should be monitored and managed from the perspectives of procurement, warehousing, and strategic inventory management. Prioritization The first part of the analysis consists of rank ordering all MRO storeroom parts from 1 to n based on a set of predefined criteria. There are several different schools of thought on the best approach to take, and it is important to understand the advantages and disadvantages of each before deciding which method is best suited to your particular situation. Unlike a dependent-demand manufacturing operation with a Master Schedule and complete BOM’s, material requirements in an MRO environment are largely unpredictable. The inherent assumption in the ABC Analysis for MRO parts is that – at least to some degree – the past is a fairly reliable predictor of the future. Investment brokers are quick to remind us that is not the case, but in lieu of accurate material forecast data, there is little option. That brings up several key points to consider: 1. It is not advisable to prioritize items by on-hand inventory value