BUSINESS & MANAGEMENT METRIC

1.4 STOCKED MAINTENANCE, REPAIR AND

OPERATING MATERIALS (MRO) INVENTORY VALUE
AS A PERCENT OF REPLACEMENT ASSET VALUE
(RAV)
Published on April 16, 2009

DEFINITION
This metric is the value of maintenance, repair and operating materials (MRO) and spare parts
stocked onsite to support maintenance, divided by the replacement asset value (RAV) of the
assets being maintained at the plant, expressed as a percentage.

OBJECTIVES
This metric enables comparisons of the value of stocked maintenance inventory onsite with
other plants of varying size and value, as well as comparison to other benchmarks. The RAV is
used in the denominator to normalize the measurement, given that different plants vary in size
and value.

FORMULA
Stocked MRO Inventory Value per RAV (%) =
[Stocked MRO Value ($) × 100] / Replacement Asset Value ($)

COMPONENT DEFINITIONS
Estimated Replacement Value (ERV)
Also referred to as Replacement Asset Value (RAV), it is the dollar value that would be required
to replace the production capability of the present assets in the plant. Includes
production/process equipment, as well as utilities, facilities and related assets. Does not use the
insured value or depreciated value of the assets. Includes the replacement value of buildings
and grounds if these assets are included in maintenance expenditures. Does not include the
value of real estate, only improvements.

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MRO (Maintenance, Repair and Operating Materials)
An acronym to describe maintenance, repair and operating materials (MRO) and spare parts.

Replacement Asset Value (RAV)

Also referred to as estimated replacement value (ERV), it is the dollar value that would be
required to replace the production capability of the present assets in the plant. Includes
production/process equipment as well as utilities, facilities and related assets. Also includes the
replacement value of buildings and grounds if these assets are included in maintenance
expenditures. Does not include the insured value or depreciated value of the assets, nor does it
include the value of real estate, only improvements.

Stocked Maintenance, Repair and Operating Materials (MRO) Inventory Value

The current book value of maintenance, repair and operating (MRO) supplies in stock, including
consignment and vendor-managed inventory. Stocked MRO inventory value includes the value
of MRO materials in all storage locations including satellite and/or remote storeroom locations,
whether or not that material is included in inventory asset accounts or an allocated portion of
pooled spares. Estimates the value of unofficial stores in the plant, even if they are not under
the control of the storeroom or are not on the books. Includes estimated value for stocked
material that may be in stock at zero value because of various computerized maintenance
management systems (CMMS) and/or accounting idiosyncrasies, etc. Does not include raw
material, finished goods, packaging materials and related materials.

The monetary cost of an individual storeroom item is calculated as: Monetary Cost of Individual
Storeroom Item = Quantity on Hand × Individual Item Cost

The aggregated cost of all storeroom items is calculated as: ∑N (Quantity on Hand × Individual
Item Cost)i.

QUALIFICATIONS
1. Time basis: Annually and/or quarterly
2. This metric is typically used by corporate managers to compare plants. It is also used by
plant managers, maintenance managers, materials managers, procurement managers,
operations managers, reliability managers and vice presidents.
3. It can be used to determine the standing of a plant in a four-quartile measurement
system, as in most industries. Best-in-class plants with high asset utilization and high
equipment reliability have less stocked inventory value because they have a more
predictable need for materials.

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 4. Do not rely on this metric alone, since lower stocked inventory value does not
necessarily equate to best-in-class. Instead, balance this metric with stock-outs (which
should be low) and other indicators of the service level of the stocked inventory.

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:

Stocked MRO Inventory Value per RAV (%) =

[Stocked MRO Value ($) × 100] / Replacement Asset Value ($)

Stocked MRO Inventory Value per RAV (%) =

($3,000,000 × 100) / $100,000,000

Stocked MRO Inventory Value per RAV (%) = 3%

BEST-IN-CLASS TARGET VALUE

Generally less than 1.5%; top quartile range is 0.3% to 1.5%, varying by industry

CAUTIONS
Top quartile target is reasonable only if maintenance practices are advanced and mature. The
target should be higher if maintenance practices are not advanced and not mature. For
example, a third quartile plant with third quartile practices will have to maintain a third quartile
inventory level (higher compliment of spare parts) to account for the uncertainty and
unpredictable need for materials. Reducing inventory levels in a less advanced and less mature
maintenance practice will result in severe stock-outs and consequential extended downtime.

Regarding the variation by industry, an abundance of data suggests that lighter, less complex
industries (e.g., non-industrial facilities) tend to require less stocked inventory than heavier
industries (e.g., mining), although the differences are quite small in the top quartile. The range
shown above describes the lowest industry’s top-of-the-top quartile target (0.3%) and the
highest industry’s bottom-of-the-top quartile target (1.5%). Targeting 1.5% may or may not be
appropriate for a particular facility. Consultation with experts is advised to establish the
appropriate target for the facility.

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HARMONIZATION
This metric and its supporting definitions are similar to the indicator E7 in standard EN15341.

Note 1: Both indicators exclude depreciation cost for strategic parts

Note 2: SMRP metrics include operating materials. The EN 15341 definition only includes
maintenance materials. This can give a higher value compared to the EN15341 indicator.

This document is recommended by the European Federation of National Maintenance Societies

(EFNMS) as a guideline for calculating the E7 indicator.

Additional information is provided in the document Global Maintenance and Reliability

Indicators, available in the SMRP Library.

REFERENCES
A.T. Kearny. (n.d.) Published benchmarks for the chemical processing industry. Chicago, IL.

Brown, M. (2004). Managing maintenance storerooms. Hoboken, NJ: Wiley Publishing.

Hawkins, B. & Smith, R. (2004). Lean maintenance–reduce costs improve quality, and increase
market share. Philadelphia, PA: Butterworth Heinemann.

Management Resources Group, Inc. (2002). Proprietary benchmarks for 14 industries. Sandy
Hook, CT.

Mitchell, J. S. (2007). Physical asset management handbook (4th ed.). London, ON: Clarion
Publishing.

Moore, R. (2002). Making common sense common practice. Philadelphia, PA: Butterworth
Heinemann.

Solomon Associates. (n.d.). Benchmarks for the oil refining, petrochemical, chemical processing
and other industries. Dallas, TX.

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