MRO Magazine


Cut costs with vendor-managed inventory

Question: “Dear Ken, we are looking for innovative ways to get control of our MRO inventory. Any ideas?”

Those who keep track of their inventory expenditures know that good inventory management is expensive. And for those not keeping track, it’s a lot more expensive.

Without good inventory control, maintenance handicaps its planning and scheduling efficiency and is not able to provide reliable failure history and cost analysis. For those looking to gain more control over their inventory, there are many innovative approaches available through third parties, often offered at a much lower cost per transaction than going it alone.

Managed inventory costs a company in three ways: (1) operating costs for the day-to-day purchase, counting, dispensing and accounting transaction requirement for moving items in and out of the inventory storeroom; (2) working capital investment costs for holding multiples of items; and (3) real-estate costs.

There are many MRO suppliers offering vendor-managed inventory (VMI) contracts that can significantly reduce all three of these costs. VMI contracts are available for most distributed inventory items, and for many OEM items. Contracts can be fairly comprehensive, such as a supplier providing on-site inventory service with parts-availability guarantees, or a supplier providing cabinets of “free issue” nut and bolt fasteners located throughout the plant and performing an inventory count-and-fill service. Some suppliers even provide vending machines with common parts; all are consistent in that they work with a blanket purchase order and only charge for items used, thereby reducing the cost per transaction and working capital cost.

In most cases, suppliers will hold dedicated inventory off-site at their location and give a guaranteed delivery time, charging only when the part is used.

The level of an offering depends on your current or expected usage factor. Talk to your current suppliers and look into what services they are willing to provide.

For more information on implementing asset maintenance and energy management programs, contact Ken Bannister at (519) 469-9173 or by email at