Most companies don’t use about 90% of their inventory in a given year and holding onto inventory you don’t need is probably costing more than you think.

With the advancement of cloud technology and software, tracking your MRO inventory is easier than ever.

The truth is, inventory management can have a big impact on your bottom line and it doesn’t have to be complicated or confusing.

What is inventory management?

Inventory is often one of the largest costs for businesses, but a properly managed inventory can ensure you’re not spending more than absolutely necessary.

Many companies tend to want to keep a lot of everything on hand so they don’t run the risk of running out of something or because they don’t think it’s important enough to invest in a proper management solution.

Inventory management is all about having the right stock in the right place at the right time, and investing in a good inventory management solution upfront can save you quite a bit down the road.

Why is inventory management important?

Good inventory management can save you 10-30% a year on your inventory costs, so proper inventory management is crucial to the success of your company’s operations. No matter the size or type of company, efficiently managing your inventory has a large impact on your bottom line.

A properly managed inventory maintenance, repairs, and operations (MRO) inventory can help you:

  • Cut costs
  • Reduce downtime
  • Improve productivity
  • Improve safety
  • Maintain compliance


Lower maintenance costs

Quite a few company’s inventory costs are higher than they need to be due to things like:

  • Holding too much stock
  • Inefficient maintenance scheduling
  • Lack of stock
  • Inefficient purchase orders
  • Outdated and inefficient tracking procedures

Inventory is often one of a business’s largest expenses, and it’s for good reason: if you don’t have it, you can’t sell it. Your company may not sell finished products, but if you don’t have the proper parts to repair your production equipment or maintain your facility, you can’t produce the widgets your company sells or keep your facility running efficiently.

Let’s look a little closer at how the costs of these inefficient inventory practices add up.

Holding onto inventory

It’s not uncommon to order parts from a supplier in bulk in order to negotiate a better deal. However, it all may actually end up costing you more in the long run than what you first paid for the parts. Most companies only use about 8-10% of their stored inventory on an annual basis. 

When you hold inventory, you accrue carrying costs for things like rent and insurance on the facility, utilities, labor to keep the parts on the shelves and to organize them, and more.

Carrying extra stock of everything also inevitably leads to loss as parts spoil, degrade, or become obsolete. In fact, somewhere between 90% of inventory is never used during the year according to Wally Wilson, an industry expert with over 30 years of experience in supply chain management.

Inefficient maintenance schedules

Planning and scheduling regular maintenance ahead of time gives you much more control over your inventory. When you know when you’ll need parts, you don’t have to hold onto them in case you might use them. You already know exactly how many you’ll need and when, so you can order appropriately.

maintenance technician checks tablet

Using a good inventory tracking software platform can also help you because you can set it up to automatically assign parts to planned maintenance work and notify you when you’re running low based on custom min/max levels you determine. If inventory tracking is part of a larger enterprise asset management (EAM) software, you can create templates for your work orders that include the parts used for recurring maintenance work, and automatically generate and assign work orders when it’s time for preventive maintenance work.

Lack of inventory

How many times has critical maintenance work been delayed because you don’t have the necessary parts in stock? According to the Aberdeen research group, 50% of all unplanned equipment downtime can be traced back to a lack of parts.

Not only does a lack of inventory lead to more downtime, but you’re also spending money on technicians who don’t have anything to do because they’re waiting on parts. Using a robust inventory management software can help you ensure you always have the right parts, in the right place, at the right time.

Inefficient purchase orders

It’s easy to forget that purchase orders cost money. For every purchase order you create and send, you have to pay for someone to take time to do it, shipping costs to get the parts to you, and any other overhead expenses that might be involved. If your purchasing manager is generating and sending a PO for every part you need, you’re wasting time and money.

If you’ve correctly identified the appropriate maintenance strategy for your assets, and you have an efficient preventive maintenance program in place, you can combine your purchase orders and only order when you need to.

Poor tracking procedures

The fact is quite a few companies still rely on paper charts or spreadsheets to track inventory. Using these outdated and inefficient methods inevitably leads to miscommunication and delayed maintenance work.

You may have a part in stock, but if your technician doesn’t know that the maintenance manager has already assigned it to a more critical work order, then the team can’t complete the more important maintenance, which could be disastrous.


Reduce downtime

Downtime is a fact of life, but you can minimize it with a good preventive maintenance strategy. A proper inventory management system is vital to reducing your downtime. If you order the right parts at the right time for your preventive maintenance work and keep only your most critical inventory on hand, your technicians always have what they need to get work done and keep your assets running.

Increase productivity

Some estimates say that technicians spend as much as 25% of their time trying to find the right parts to do their job. That’s a lot of time they could be repairing your assets. Not to mention the money lost for every minute your assets are offline. By adopting mobile-friendly inventory management software, you can track parts, automatically assign them to work orders, and easily reorder them before they run out so you don’t lose any productivity.

Improve safety

Keeping your team safe is a top priority. Every injury in the workplace can lead to compensation, OSHA fines, and even litigation. Keeping your inventory properly stocked with PPE and the right parts to keep your assets running is a big part of keeping your team safe.

Maintain compliance

Every industry has regulations they must adhere to, including ones connected to inventory. When parts are out of place or mismanaged, and assets are offline, and especially if you’re lacking proper safety equipment, you can quickly fall out of compliance which again, costs you money you didn’t need to spend.

For example, one of the basic OSHA regulations for personal protective equipment (PPE) requires employers to provide proper safety equipment to your employees. If you run out of earplugs and one of your techs needs a new pair, you can be fined for not having any on hand. 

How to properly manage your inventory

There’s a lot involved in managing your inventory, but it doesn’t have to be complicated or frustrating. There are a few basic guidelines you can follow to begin managing your inventory more effectively. Best of all, there are some great tools that can help.

But before you can reach the goal of an efficiently managed inventory, you need to start with some basics.

Figure out what you have

Manually identifying your inventory can be time-consuming, but it’s a vital first step. If you don’t already know what you have, you don’t know what you need. The good news is that any good inventory management software provider can help or even take on this job for you. The best ones can send a professional to your sites and perform a complete audit of your inventory and assets so you can stay focused on your job.


An important part of this process is identifying the critical inventory vital to your production. Critical parts are items that either have a long lead time, are extremely specific or proprietary, or have an immediate impact on production. These items are generally large and expensive and are only needed every so often, but you do need them, you need them immediately. Any delay in having this item on hand can have devastating consequences.

These high-risk items, meaning if you had zero on hand your company would be at high risk, can be easily managed from your inventory management software so you don’t ever have to worry about not having them when you absolutely need them.

Figure out where it is

Next, you need to know where your inventory is located. During this step, you might find out you had inventory in places you didn’t even know you had it. You might also discover ways you could make more efficient use of your storage space. If you have multiple facilities, you might notice discrepancies or inefficiencies in where you are storing your inventory across your sites.

Figure out how to organize it

This step is key to being able to stay on top of your inventory, but you can’t do it properly until after you’ve identified what you have and where you have it. Once you know that information, you can figure out the best way to organize your inventory.

The most common way to organize inventory is by numbered isles and bins. This is generally the most effective way to organize inventory, and it makes it consistent for everyone in the facility.

Communication is key

Humans have been trying to figure out better ways to communicate with each other for as long as we’ve been around, and we still haven’t mastered it yet. Miscommunication is one of the most common causes of inventory and maintenance mistakes, so anything you can do to improve it will be beneficial to your company.

This one of the main benefits of using inventory management software. Thanks to cloud technology, your inventory management software can instantly communicate accurate inventory levels to your technicians and continuously keep your database up to date.

Optimize inventory management with software

Technology has come quite a long way in the past several years, so much so that we are experiencing a new industrial revolution. The advent of cloud-based technology has enabled us to manage parts and inventory in ways never before possible.


There are a few key features you want to look for when searching for an inventory management software solution:

  • Easy inventory tracking with barcodes
  • Work order management
  • Cost analysis reports

Once you’ve audited and uploaded everything into the software, you’ll want to use barcodes and scanners to instantly update and keep track of your inventory. The source of truth is updated in real time to reflect any changes, so the purchasing manager can be instantly notified when it’s time to place an order.

You also want to look for a software solution that manages your work orders and can automatically assign parts to work orders based on your preventive maintenance program. That way your technicians can know that even if there may be a part in the bin, it’s already assigned somewhere else and your maintenance work isn’t interrupted.

Lastly, make sure your software solution can generate cost reports for you so you can see where your money is being spent on inventory. Once you’ve begun tracking your inventory within the software, you should be able to see pretty quickly where you’re losing money and where your money could be better spent.

Next steps

Proper inventory management is crucial to the success of your business so don’t wait any longer to being optimizing your inventory. Start doing some research on the best cloud-based inventory management software solutions and if you have a lot of assets to manage too, be sure to look for inventory management as part of a larger EAM solution.


About the author

Jason Cockerham

Jason is a storyteller at heart with a career spanning everything from film and TV to iPhones. Just don't expect much before his first cup of coffee.
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