How to Get Started with MRO Inventory Optimization

If you’re reading this, chances are you’ve already seen our article “When’s the Best Time to Optimize Your MRO Inventory” and you’re starting to recognize just how valuable this process could be for your organization.

Whether you’re dealing with stockouts, excess inventory, or just a lack of visibility, optimizing your MRO (Maintenance, Repair and Operations) inventory can be of help. It’s not just about reducing costs; it’s about ensuring the right parts are available at the right time to keep your operations running smoothly.

In this article, we’ll guide you through the first steps of an MRO inventory optimization project. From laying the groundwork to identifying quick wins, you’ll get a clear roadmap to help you move forward with confidence.

How to Start an MRO Inventory Optimization Project

Embarking on an MRO inventory optimization initiative involves several key phases:

• Define the scope of work
• Establish business rules
• Introduce the ACR model
• Launch data collection
• Define parts criticality
• Optimize Min/Max levels
• Roll out inventory changes
• Provide implementation support

Before jumping into data collection or inventory adjustments, it’s essential to begin with a strategic planning session. This session should bring together key stakeholders from maintenance, procurement, engineering, and operations to ensure alignment across departments.

During this session, you’ll define the scope of work, establish business rules, and introduce the Asset Criticality Ranking (ACR) model as the foundation for prioritizing optimization efforts.

1. Define the Scope of Work

The first step is to clearly outline the scope:

• Which sites are involved?
• Which storerooms or inventory locations?
• Are you optimizing all material categories, or focusing on specific segments like critical spares, high-turnover parts, or items with long lead times?

Having a well-defined scope helps estimate the required effort and ensures that the optimization project is aligned with available resources and business priorities.

2. Establish Business Rules

To maintain consistency and clarity throughout the optimization process, it’s essential to define key operational rules:

• What qualifies as obsolete material?
• What is the frequency for reordering or reviewing inventory levels?
• How are lead times calculated and updated?
• Which items should be stocked, made-to-order, or strategically sourced?

These business rules will guide how inventory policies are applied across materials and sites, and ensure decisions are data-driven rather than ad hoc.

3. Introduce the ACR Model: Asset Criticality Ranking

Inventory decisions should be tightly aligned with asset reliability priorities. The Asset Criticality Ranking (ACR) model provides a structured approach to identifying which equipment, and, by extension, which components, are critical to your operations.

The goal is to answer two key questions:

• Which assets are most critical to the plant’s performance, safety, and compliance?
• Which spare parts must be available to avoid significant downtime or risk?

The ACR score is calculated based on five weighted criteria:

• Environment: Potential environmental impact in the event of failure.
• Maintenance: Failure history, repair frequency, and maintenance costs.
• Quality: Consequences of failure on product quality or process control.
• Operations: Impact on production output and operational continuity.
• Safety: Risk to personnel and equipment safety.

By applying the ACR model, you can prioritize which components should be held in stock and define optimized min/max levels for each. This ensures that the right parts are available for the right assets at the right time.

To learn more about Asset Criticality Ranking, have a look a this page : Asset Criticality Ranking (ACR).

4. Start Data Collection Process

A successful MRO inventory optimization effort depends on accurate and clean data. Begin by reviewing the part master data within your CMMS, ERP, or inventory management system. This includes all fields related to material descriptions, part numbers, stock levels, lead times, supplier details, and consumption history.

Prioritize using a recognized standard like ISO 14224 when structuring your part master data. It provides a consistent framework for data collection, classification, and analysis. To see how ISO 14224 can support your optimization efforts, here’s a link to a webinar we hosted in April 2025: Applying ISO 14224 for CMMS Master Data.

Key activities during this step:

• Identify and eliminate duplicate entries that can cause confusion or lead to redundant stocking.
• Flag inactive or non-moving items that haven’t been used within a defined period (e.g., 24–36 months).
• Standardize naming conventions to ensure consistency and searchability across systems.

5. How to Define Part Criticality in MRO

This part enables you to determine which materials are essential to keep in stock — and which can be procured on demand without jeopardizing operational reliability.

Part criticality should ideally be determined by a combination of factors, including:

• Reception or lead time delays: how quickly a part can be delivered once ordered
• Cost of the part: higher-value items may justify lower turnover but require tighter control
• Annual consumption rate: frequency of use impacts stocking decisions
• Operational impact: what happens if the part isn’t available? Does it cause a full equipment stoppage, or is there a contingency?

Based on these considerations, parts can be grouped into three general stock categories, which help guide stocking strategies:

• Class A: Rarely used but critical inventory. Typically valued at over $1,000 with a turnover rate of less than 6 times per year. These items are usually tied to high-risk assets or long lead times.
• Class B: Infrequently used inventory. Valued between $100 and $999 with an average turnover of about 6 times per year.
• Class C: Frequently used or consumable inventory. Valued under $100 and turned over more than 12 times per year. These are generally active items needed for routine maintenance.

6. Set Optimal Min/Max Levels

After determining which parts are critical, the next step is to define appropriate stocking levels. This involves setting minimum (Min) and maximum (Max) thresholds based on several key inputs:

• Historical usage data (e.g., average consumption, peak demand)
• Failure rates and mean time between failures (MTBF)
• Supplier lead times and variability
• Known seasonal trends or planned shutdowns that may influence demand

The method of supplying stocks using Min/Max levels is a foundational resupply mechanism used in most ERP and inventory management systems:

• The Min value represents the stock level that triggers a resupply action.
• The Max value defines the target stock quantity to reach after the replenishment.
• The difference between these two values is often interpreted as the Economic Order Quantity (EOQ), the most cost-effective quantity to order at one time, balancing holding costs and ordering frequency.

These thresholds shouldn’t be static, review them periodically to ensure alignment with evolving operations, changes in asset criticality, supplier performance, or consumption trends. A dynamic approach helps you avoid both overstocking and stockouts, while keeping carrying costs under control.

7. Roll Out the Optimization Plan

With the new min/max thresholds, part classifications, and data governance rules in place, you can move forward with the rollout phase.

• Update inventory settings within your ERP, CMMS, or standalone inventory systems.
• Align with procurement teams to adjust reorder strategies and avoid conflicts with existing contracts or supplier terms.
• Communicate with operations and maintenance teams to ensure that changes are understood, and expectations are managed, especially regarding availability of formerly overstocked items.

This stage should be managed as a coordinated initiative, not just a technical update, to ensure buy-in across departments.

8. Provide Support and Follow-Through

Optimization should not be treated as a one-time event. Without ongoing attention, inventory levels and data quality can quickly drift back to pre-optimization conditions.

• Set regular review cycles (e.g., quarterly or semi-annually) to reassess part usage, lead times, and criticality.
• Establish a governance process to maintain data quality, handle new item requests, and monitor KPI trends.
• Provide training and documentation to ensure that new hires or stakeholders understand the logic behind stocking decisions and how to manage the system moving forward.

This continuous improvement approach helps sustain the benefits of the optimization project and ensures long-term value.

Conclusion: Best Practices for Managing MRO Inventory

MRO inventory optimization isn’t a one-time project, it’s an ongoing strategy that supports reliability, cost control, and operational efficiency. By defining a clear scope, applying structured methods like the ACR model, and maintaining clean, standardized data, your organization lays the foundation for smarter decisions and long-term savings.

Most importantly, successful optimization depends on collaboration. Engaging maintenance, procurement, and operations teams from the start ensures the changes are both realistic and sustainable. And with regular reviews, data governance, and continuous support, you can prevent backsliding and keep your inventory aligned with your business needs.

Raphael Tremblay,
Spartakus Technologies
[email protected]