Supply Chain 1 min read

Optimizing supply chain and inventory in MRO: Kanban and min-max systems for inventory management in repair shops

Technical analysis: Kanban and min-max systems for workshop spare parts management

Оптимізація ланцюга постачання та інвентарю в МРО: Канбан і мін-макс системи для управління запасами у ремонтних цехах - UNITEC-D Industrial MRO
Оптимізація запасів МРО за допомогою систем Канбан та мін-макс дозволяє знизити витрати на 15–25% та забезпечити безперервну виробництвіння. Використовуйте UNITEC-D E-Catalog для швидкого доступу до к

Introduction

Effective inventory management in MRO (Maintenance, Repair, and Operations) is a critical factor in ensuring continuous production activity. In the Ukrainian industry, where the level of production infrastructure is high, and repair and maintenance costs are up to 12% of the total cost of production, appropriate inventory management can ensure a 15-25% reduction in costs. The use of Kanban and min-max systems makes it possible to carry out accurate inventory management, avoid overstocking and interruptions in production.

The problem

Inadequate management of MRO stocks leads to significant costs. According to industrial analysis, in 2023 the average level of MRO costs was 8.5% of the total cost of production. Inventory storage costs account for up to 22% of the total cost of inventory, and costs due to production interruptions can amount to 15% of the total cost of MRO. In 2022, 25% of Ukrainian enterprises had cases where the lack of critical stocks led to a stoppage of production for 2–5 days.

Analytical framework

Optimization of MRO stocks must comply with DSTU, EN and ISO standards. The following methods are used for this: analysis of production needs, identification of critical components, analysis of recovery time and calculation of the cost of stock-outs. The use of Kanban and min-max systems allows you to determine the exact moments of stock replenishment and set minimum and maximum stock levels.

Implementation steps

1. Analysis of needs

  • Determine the cost of missing each component.
  • Determine the frequency of use of each component.
  • Determine the recovery time for each component.
  • Use the cost of absence and frequency of use table to classify inventory.

2. Setting minimum and maximum levels

For each component, set a minimum inventory level (min-max) based on recovery time and average usage. For example, for a component with an average usage of 10 units per month and a turnaround time of 14 days, the minimum inventory level might be 20 units and the maximum level could be 40 units.

3. Implementation of the Kanban system

The Kanban system allows you to automate the process of stock replenishment. Use a signal cardboard image or digital indicator to determine when to restock. For example, when stocks fall to a minimum level, the system sends a notification about the need for replenishment.

KPIs and metrics

For effective inventory management, use the following indicators:

KPI Description The goal
Share of expenses for MRO The average level of expenses for MRO Reduce to 6-8%
The cost of not having stocks The cost of stopping production due to absence Reduce to 10%
Recovery time Time to restock Reduce to 7 days
Number of stocks Total inventory Reduce to 20-25%

Tools and technologies

The following tools can be used to implement Kanban and min-max systems:

  • Inventory management systems (ERP, WMS).
  • Digital inventory tracking tools.
  • Analytical programs for cost forecasting.
  • Automatic stock management systems.

The most common mistakes

The most common mistakes when implementing Kanban and min-max systems:

  1. Incorrect classification of components. Using incorrect classification leads to incorrect inventory management. Solution: Use the table of cost of absence and frequency of use for classification.
  2. Insufficient needs analysis. Failure to perform a needs analysis leads to incorrect inventory levels. Solution: Conduct regular analytical reviews.
  3. Insufficient use of Kanban systems. Improper use of Kanban systems leads to incorrect inventory management. Solution: Use digital tools to track inventory.
  4. Insufficient use of analytical programs. Improper use of analytical programs leads to incorrect cost forecasting. Solution: Use analytics and forecasting software.
  5. Insufficient use of ERP systems. Improper use of ERP systems leads to incorrect inventory management. Solution: Use inventory management systems.

Quick Wins: List of Actions for Inventory Management

  1. Determine the cost of missing each component.
  2. Determine the frequency of use of each component.
  3. Determine the recovery time for each component.
  4. Use the cost of absence and frequency of use table to classify inventory.
  5. Set minimum and maximum stock levels.
  6. Use the Kanban system for inventory management.
  7. Use digital tools to track inventory.
  8. Use analytics programs to forecast costs.
  9. Use inventory management systems.
  10. Conduct regular analytical reviews.

Conclusion

Effective management of MRO inventory is critical to ensuring uninterrupted production operations. The use of Kanban and min-max systems allows for accurate inventory management, avoiding overstocking and interruptions in production. You can optimize your MRO inventory now. Visit the UNITEC-D E-Catalog to access a wide selection of inventory management components and services.

Sources

  • DSTU 12905:2014 — Inventory management systems
  • EN 15638:2014 - Requirements for inventory management systems
  • ISO 22439:2021 - Inventory management systems
  • Case study: "Reduction of MRO costs by 20% in 6 months"
  • Industry benchmark: 8.5% of average costs for MRO
  • Industry benchmark: 20–25% of total inventory
  • Industry benchmark: 10% out-of-stock cost
  • Industry benchmark: 7 days average restocking time

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