Inventory Management: Taking Cost Out

Posted by CovestAdmin on Oct 30, 2018 1:08:22 PM

Most businesses have a pretty good handle on their high-level processes, however they do not have a good understanding of all the costs associated with procuring MRO inventory. Theses inventory management solutions can help you save time, space, and money while making sure your facilities are safe and running efficiently.

What's Your Current Inventory Situation?

Do you think you have a good handle on your MRO inventory? You can find out by asking yourself three simple questions:

  • Do you know what percent of your MRO inventory items have actually been used in the last 12 months? 
  • Do you know how many times you have ordered each item in your inventory?
  • Do you know the number of steps and handoff’s that are involved in the cycle?

Did you answer "No" or just aren't sure about one or more of these questions? Then you should consider reevaluating how you are managing your inventory.

The fact of the matter is, companies believe they are managing their inventory more effectively than they actually are. When the replenishment process of an inventoried item involves 30 steps, 5 people, 5 hand-offs and 1 approval it's no wonder companies don't want to reproach their methods. Because of complex processes like this, 90% of MRO inventory items are issued fewer than six times a year, 50% of MRO inventory items have had no usage for over 12 months, and 85% of MRO inventory items have an on-hand value of less than $200.

Common Inventory Management Needs

  • Ability to manage it myself
  • 24/7 access
  • Thorough reporting 
  • Fast and easy ordering
  • Tracking of products
  • Reduce paperwork
  • Boost Productivity

Taking Cost Out of Managing your MRO Inventory

When it comes to stocking your inventory, most companies focus on the convenience and insurance of having the items on hand in case they need them - simply reorder whatever they are using in the same amount regardless of how frequently the item is used or how critical the item is to their business. The issue with this method is that:

  1. Many companies don’t know how much inventory they need and inevitably stock too much.
  2. Half the inventory currently stocked isn’t needed often enough to warrant its availability. 
  3. Twenty five percent of the time, people can’t find what they’re looking for because it's in the wrong place or simply lost in the clutter.

Those situations translate into money that could be better spent elsewhere. What you want to be working towards is true inventory management. To ensure the right items are in the right place at the right time, a company should actively monitor and measure usage and inventory levels on an ongoing basis, make adjustments to stocking levels, and add new items to shelves based on thorough planning. Find the right VMI solution can reduce overall investments related to time, purchases and space A.K.A. reduce total cost. 

The Importance of Data

The correlation between better managed inventory and reduced cost begins with data. Without data, you’ll have limited visibility into the "what, where, who, when and why" of stocking and consumption. By having accurate data on your usage, purchasing, and process costs you'll have the ability to manage your data efficiently. 

A critical part of moving from replenishment to an inventory management approach is reporting, you need detailed data on the activity of the items managed in order to achieve the biggest impact (a service CoVest provides). But data alone doesn’t do much good if you are not using it to continually adjust your on-hand stocking levels to align with use. 

Systems integration can also save significant cost. Building in order approval workflows into your purchasing system is a great way to create a seamless experience ordering and managing your items.

Three ways to manage your Inventory

  • Customer Managed
  • Vending / Dispensing
  • Vendor Managed

When deciding on the best method for your business it's critical to remember the best results come from matching the right solution to the right situation. To help you better determine which inventory management is best suited for you, review our descriptions below:

Customer Managed Inventory (CMI)

Customer Managed Inventory, or CMI, solutions are best if you want to manage your inventory yourself. CMI can range anywhere from personal lists on the web, to label programs, scanning technology on your phone via App, or tracking solutions. 

Elements of Customer Managed Technology 

  • Technology supported
  • Easy re-ordering wherever inventory is located
  • Order one-time products at the same time
  • Mobility for field-based personnel
  • Customized product lists and catalogs
  • Minimize paperwork
  • Detailed purchase reporting 

Best for:

  • Just getting started with Inventory Management 
  • Lower Volume
  • Prefer self-management
  • Restricted access areas
  • Remote locations
  • Mobile needs
  • Limited support needs
  • Labor restrictions

Dispensing / Vending

Dispensing is ideal when your primary need is to control consumption of critical, fast moving, or high value durable items needed 24/7. Vending can increase productivity by providing the right products at point-of-use, provide controlled access to reduce unwanted consumption, and decrease inventory carrying cost with the right min and max levels in place.

Elements of Dispensing / Vending
  • 24/7 availability
  • Increase productivity
  • Reduce product overuse
  • Prevent stock-outs and overstocking
  • Reduce on-hand inventory costs
  • Help drive standardization
  • Reduce fulfillment time

Best For:

  • Fast moving items
  • Higher value items
  • 24/7 access
  • Limit Use
  • High shrink items
  • Usage tracking
  • Point-of-use needs

Vendor Managed Solution

In some cases, your activity levels will dictate the need for an onsite services representative. They should work with you to understand exactly how you use your inventory, and understand your criticality, lead time, and supplier availability to determine the risk associated with not keeping certain items in stock.

Elements of Vendor Managed Inventory

  • Detailed reporting of product use and costs
  • Product assistance before and after the purchase
  • Onsite representative can be resourced up to 40 hours or more a week
  • Product put-away, counting, order support and special request

Best for:

  • Higher Volume
  • Productivity challenges
  • Inefficient process
  • Need tracking systems
  • Need expertise
  • Large crib/tool areas

Grainger offers a consultative Approach

Want a supplier who will work with you, understand your total end-to-end processes, and make sure you have the right set of solutions for your specific needs beyond piece price

Grainger will work with you to gather information to truly understand your inventory and processes, identify what products you are carrying, how they are moving, and where they are stored, so they can determine the best solution set to meet your goals before they install. This information will help them determine which of their KeepStock approaches works best for you.


KeepStock is Grainger’s portfolio of Inventory Management solutions. You have the option of the three solutions stated above with the addition of their NEW Managed MRO solution.

With their CMI program, Grainger works with customers to get them set up with labels specific to the products they want to manage, learn how to use the scanning app, maintain any changes to the products, and answer any questions after the installation. 

A Grainger (Vendor) Managed Solution sends an Onsite Service Representative to your location to help you analyze your inventory levels, set the right min/max levels, and regularly meet with you to review the differences between what you are stocking and consuming, and make adjustments based on real usage. The amount of time and work done by the representative varies, based on your needs.

Grainger's onsite store (dispensing) option is for those whose needs are very complex, high-volume, and ongoing. The dispensing machine is located inside the customer's facility, fully stocked and staffed and is tailored to meet the customer’s specific needs.

Grainger also has a new Managed MRO solution which places a fee-for-service representative on your site to help you with all of your inventory management needs. This is similar to an integrator approach except they do not take ownership of your inventory or disrupt your supplier relationships. 

Who Is Grainger?

Grainger is the largest broad line B2B supplier of maintenance repair and operating supplies in the US with an international presence as well. They stock 1.7 million products from 5,200 suppliers. Grainger has a robust distribution network and strong digital presence. In fact, Grainger is the 10th largest e-retailer in North America with over 69% of orders originating online. They have over 1000 team members in the US conducting Inventory Management activities on customer’s sites. Visit them at,



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Information within this blog was taken from Chris Jones's (Regional Director for Onsite Inventory Management Services at Grainger) presentation during the 2018 CoVest Member Meeting.

Topics: Supplier News, Educational

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