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SMRP Best Practice Metrics FOR COMMENT

1.4 Stocked MRO Inventory Value


as a Percent of Replacement Asset Value (RAV)

A. Definition:

The metric is the value of maintenance, repair and operating materials (MRO) and spare parts
stocked on site to support maintenance, divided by the Replacement Asset Value (RAV) of the
assets being maintained at the plant, expressed as a percentage.

B. Objectives:

This metric allows one to compare the value of stocked maintenance inventory on site with
other plants of varying size and value, as well as to benchmarks. The RAV as the denominator
is used to normalize the measurement given that different plants vary in size and value.

C. Formula:

Stocked MRO Inventory Value per RAV (%) = Stocked MRO Value ($) X 100
Replacement Asset Value ($)

D. Component Definitions

Stocked MRO Inventory Value Current book value of maintenance, operating


and repair materials held in stock at the plant site
(including consignment and vendor-managed
stores). Include value of MRO materials in all
stored locations, including remote stock locations
whether or not that material is officially
accounted for in the inventory asset accounts, or
an allocated portion of pooled spares. (Try to
estimate value of unofficial stores in the plant
even if they are not under the control of the
central or formal storerooms and even if they are
not on the books). Include estimated value for
stocked material that may be officially held in
stock at zero-value because of various CMMS
and/or accounting idiosyncrasies, etc. DO NOT
INCLUDE raw material or finished goods
inventories.

2005 SMRP Page 1 of 2 Rev 2-FC


Prepared by: Robert DiStefano Date: March 21, 2005
SMRP Best Practice Metrics FOR COMMENT

1.4 Stocked MRO Inventory Value


as a Percent of Replacement Asset Value (RAV)
Replacement Asset Value (RAV) Also referred to as Estimated Replacement Value
(ERV). The dollar value that would be required
to replace the production capability of the present
assets in the plant. Include production/process
equipment as well as utilities, support and related
assets. Do not use the insured value or
depreciated value of the assets. Include
replacement value of buildings and grounds if
these assets are maintained by the maintenance
expenditures. Do not include value of real estate
only improvements.

E. Qualification:

1. Could be measured quarterly or annually.


2. This is a Lagging indicator
3. Typically used by corporate managers to compare plants, by plant managers,
maintenance managers, materials managers, procurement managers, operations
managers, reliability managers, vice presidents..
4. Can be used to determine standing of a plant in a four-quartile measurement system, as
best in class plants with high asset utilization and high equipment reliability in most
industries have less stocked inventory value because of a more predictable need for
materials
5. Cannot rely on this metric alone, since lower stocked inventory value does not
necessarily equate to best in class. Should balance this metric with stock-outs (which
should be low) and other indicators of the service level of the stocked inventory.

F. Sample Calculation:

If Stocked MRO Inventory Value is $3,000,000, and the Replacement Asset Value (RAV) is
$100,000,000, then the Stocked MRO Inventory Value as a Percent of RAV would be:

$3,000,000 x 100 = 3%
$100,000,000

2005 SMRP Page 2 of 2 Rev 2-FC


Prepared by: Robert DiStefano Date: March 21, 2005