It's 2011: Where's your MRO inventory?

By George E. Krauter

February 12, 2011 at 12:03 PM

It continues to amaze me that companies big and small, well known and obscure, cannot give an accurate figure of what they spend and/or of the value of their MRO inventory.

When asked what a company’s MRO spend is, estimates can vary 100%, 200% or even 300%. You will hear “It’s about $1.5 million”; “No, it’s more like $2.5 million, if we count the pallets and shrink. Wait, the spot buys are another $1 million.” 

This lack of information does not exist within the supply chain for production materials, capital equipment or other important areas of business, so why do companies allow it to exist for indirect-MRO materials?

I have been in the MRO business for more than 50 years and have not seen much of a change; it is baffling that this condition continues to exist especially in today’s economy when control of all costs is so critical.

This situation is further clouded by a level of obfuscation based on who is responsible for indirect-MRO, job protection, supplier preference and the like.  Some personnel who want to protect against change will devalue the MRO spend to prove that change is not worth the effort or the cost of changing.  To negotiate better pricing, many will increase the spend estimate in order to get the better pricing even though in practice, the spend never reaches the amount estimated.  

Inventory values vary based upon who is providing the reporting and rarely includes floor and sub-stocks. Values also vary based on whether the inventory is asset or expense-based (asset more; expense less). You will hear the store’s supervisors say they have more inventory; “We are efficient, but we need more inventory to increase fill rates and guard against downtime.”  Chief financial officers say less inventory, unless it is an inherited asset, and then they say more. Chief purchasing offiers want less inventory so they can buy more. Distributor sales people want as much as stores can hold--they are on commission so they want to sell more, not less. Manufacturers that sell through distributors want distributors to stock more; the distributor wants to stock less and get the client’s MRO storeroom to stock more. The plant CEO wants less spend, less inventory, but parts on hand when needed in order to exceed plan. Inaccurate estimates cause inaccurate measurements and erroneous conclusions.

It is rare when all are on the same page! 

A clearly defined indirect-MRO analysis—one that shows a true and objective picture—can be the first step in optimizing indirect-MRO costs that will in turn contribute to corporate net profits. Do you agree? What do you think? Let us know. 


Tags: MRO buying
Category: Blog Post

George E. Krauter


George Krauter, former founder and president of Industrial Systems Assoc. [I.S.A.] has retired as vice president of Synovos.

Currently, he has initiated, "George Krauter Consulting [GKC]"  for effective reliability and cost recovery for consumers  of MRO materials. George is a recognized authority on the management of the MRO supply chain and support for maintenance reliability programs. His book, "OUTSOURCING MRO...FINDING A BETTER WAY" is available from Amazon and from Reliability

He is published in Uptime, Modern Distribution Management, and Supply and Demand Chain Executive. George has conducted seminars across North America, in Europe, and in the U.A.R. as well as a guest speaker at Temple U., Howard U., Duke, and MIT.

George is a graduate of Temple University; he lives with his wife, Joyce, in Bucks County, PA. All grand kids live within eating distance. He can be reached anytime:

Please add a comment

Posted by Jodi on
Dude, right on there brhoter.
Leave a Reply

(Your email will not be publicly displayed.)

Captcha Code

Click the image to see another captcha.

Related Content

Thought Leadership and the Demise of Your Third-Party MRO Outsourcing Program: Part 4

George E. Krauter

When one defines third-party MRO (3PMRO) success, one assumes that fundamental operations are being executed and that expectations are being met (i.e., ROI goals are surpassed} Read More

Guidance for Addressing the New Talent Acquisition Challenge

Dennis Bouley

The US Labor Department reported in March of this year that there were 6.6 million job openings, a record high. Although most of us applaud these numbers Read More

Millennials in Supply Chain Management Seek Advancement and Development Opportunities

Marisa Brown

Millennials working in the supply chain management field don’t fit the mold that the older generation assumes for them. APQC’s recent study Read More

Supplier Profiles


Staples Advantage is the one supplier that offers all the business solutions you need, all with the expertise of a specialty vendor. Read More


It started in 1972 with an idea, a new concept in distribution. Today, Digi-Key Corporation is one of the fastest-growing electronic component distributors in the World. The stimulus for this growth is Digi-Key's customer-centered business philosophy… Read More

Lunney Advisory Group

Lunney Advisory Group was founded in 2007. Our firm is not your typical consulting company. Some members of our firm are highly qualified and experienced industry executives/practitioners while others are full time or adjunct university professors.… Read More


What CEOs Expect Of Purchasing

Guest Contributor

Procurement and supply management leaders have a seat at the table, and management’s expectations are high. But what do CEOs really want, and is purchasing delivering on these expectations? This webcast looks at how procurement and supply management … Read More

Growing Purchasing Influence On Indirect Spending

Guest Contributor

At world-class companies, purchasing’s influence touches just about every area of spending. But, how exactly do procurement teams get to the point where other departments approach them for help with sourcing such indirect categories as human resource… Read More

Procurement-Finance Collaboration

Guest Contributor

Procurement & finance are two business functions which are often at loggerheads with each other. One reason for this is the lack of perception alignment on an important metric of procurement and finance performance - 'savings'. Read More