MRO (Maintenance, Repair, and Operations)
💡TL;DR
MRO = all non-product materials that keep factories running (spare parts, lubricants, safety gear, cleaning supplies, tools). Unlike raw materials, MRO items don't become part of products but are essential for operations. Key metrics: MRO spend as % of production costs (typically 5-10%), inventory turns, stockout rate. Poor MRO management = unplanned downtime. Best practice: centralize MRO procurement, use predictive maintenance to forecast needs, leverage VMI for high-turnover items.
Definition
MRO (Maintenance, Repair, and Operations) encompasses all the indirect materials, supplies, and services required to keep a manufacturing facility running but are not incorporated into the final product. This includes spare parts, lubricants, safety equipment, cleaning supplies, and repair services. Effective MRO management reduces unplanned downtime, controls costs, and ensures operational continuity.
🏢What This Means for SMB Teams
SMB manufacturers often underestimate MRO costs because they're spread across multiple purchase orders. Consolidating MRO vendors from 50+ to 5-10 can reduce procurement overhead by 30% and improve pricing leverage. Start with high-spend categories: electrical components, bearings, and PPE.
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Patience + persistence, automated for manufacturing.
📋Practical Example
A 150-person automotive parts manufacturer tracked MRO spending for the first time. They discovered $1.2M annual MRO spend across 73 vendors with no negotiated pricing. After consolidating to 8 preferred vendors and implementing quarterly reviews, MRO costs dropped 22% ($264K savings). Stockouts decreased from 12/quarter to 2/quarter, reducing unplanned downtime by 35 hours monthly.
🔧Implementation Steps
- 1
Audit current MRO spend: consolidate all purchase orders into a single view by category.
- 2
Identify top 20 vendors by spend and top 20 items by frequency of stockout.
- 3
Negotiate master service agreements (MSAs) with 5-10 preferred vendors.
- 4
Implement min/max inventory levels for critical spare parts.
- 5
Connect MRO data to maintenance management system (CMMS) for predictive ordering.
❓Frequently Asked Questions
What's the difference between MRO and production materials?
Production materials (direct materials) become part of the finished product and are traceable to specific orders. MRO items support operations but don't end up in products—they're indirect costs. Examples: the steel in a car is production material; the lubricant for the stamping machine is MRO.
How much should MRO cost as a percentage of production?
MRO typically represents 5-10% of total production costs, but this varies by industry. Continuous process industries (chemicals, refining) trend higher (8-12%). Discrete manufacturing tends lower (3-7%). If your MRO spend is significantly above industry benchmarks, consolidation and negotiation are likely needed.
⚡How Optifai Uses This
Optifai tracks MRO supplier interactions, flagging when re-order communications are needed based on historical patterns. Integration with maintenance schedules enables proactive outreach to vendors before critical part stockouts.
📚References
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Related Terms
Vendor Managed Inventory (VMI)
Vendor Managed Inventory (VMI) is a supply chain management practice where the supplier takes responsibility for maintaining agreed-upon inventory levels at the customer's location. The vendor monitors stock levels (via POS data, EDI, or physical counts), makes replenishment decisions, and ships without requiring purchase orders. VMI reduces stockouts, lowers inventory carrying costs, and strengthens supplier-customer partnerships.
Total Cost of Ownership (TCO)
Total Cost of Ownership (TCO) is a financial estimate that captures all direct and indirect costs associated with purchasing and operating an asset over its entire lifecycle. Beyond purchase price, TCO includes installation, training, maintenance, support, energy consumption, downtime costs, and end-of-life disposal. TCO analysis enables apples-to-apples comparison between vendors and informs make-vs-buy decisions.
Bill of Materials (BOM)
A Bill of Materials (BOM) is a comprehensive, structured list of all components, parts, assemblies, and quantities required to manufacture a product. BOMs serve as the foundation for production planning, inventory management, cost estimation, and purchasing. They come in various types: engineering BOM (design), manufacturing BOM (production), and sales BOM (customer-facing options).