BUSINESS MANAGEMENT

1.4 Stocked MRO Inventory Value as a

Percent of Replacement Value (RAV)

BUSINESS AND MANAGEMENT METRIC

1.4 Stocked MRO Inventory Value As a Percent

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

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

D. COMPONENT DEFINITIONS
Stocked MRO Inventory Value
Current book value of maintenance, repair and operating materials held in stock at the
plant site, including consignment and vendor managed inventory. Include the value of
MRO materials in all storage locations, including remote stores locations whether or not
the material is included in inventory asset accounts or an allocated portion of pooled
spares. (Try to estimate the value of unofficial stores in the plant even if they are not
under the control of the storeroom and even if they are not on the books). Include the

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Copyright 2009 SMRP. All rights reserved.

Publicatio Date: April 16, 2009

Revised: September 26, 2012

estimated value for stocked material that may be in stock at zero-value because of
various maintenance management mystems (MMS) and/or accounting idiosyncrasies,
etc. DO NOT include raw material, finished goods or related inventories. The monetary
cost of an individual storeroom item can be calculated as:

Monetary Cost of Individual Storeroom Item =

Quantity on Hand Individual Item Cost

When aggregated as the cost of all stocked items, inventory value is calculated as:

N
(Quantity on Hand Individual Item Cost)

MRO
Maintenance, repair, and operating materials and spare parts

Replacement Asset Value (RAV)

Also referred to as Estimated Replacement Value (ERV). This is 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, facilities 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 the value of real estate, only improvements.

E. QUALIFICATIONS
1. Time basis: Annually and/or quarterly.

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Copyright 2009 SMRP. All rights reserved.

Publicatio Date: April 16, 2009

Revised: September 26, 2012

2. Typically used by corporate managers to compare plants, by plant managers,

maintenance managers, materials managers, procurement managers, operations
managers, reliability managers, vice presidents.
3. Can be used to determine 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 of a more
predictable need for materials.
4. 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:

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%

G. BEST IN CLASS TARGET VALUE

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

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Copyright 2009 SMRP. All rights reserved.

Publicatio Date: April 16, 2009

Revised: September 26, 2012

H. CAUTIONS
Top quartile target is reasonable only if maintenance practices are advanced and
mature. 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 (non-industrial facilities, for example) tend to require less stocked
inventory than heavier industries (mining, for example), although the differences are
quite small in the top quartile. The range shown above describes the lowest industrys
top-of-the-top quartile target (0.3%) and the highest industrys bottom-of-the-top
quartile target (1.5%). Targeting 1.5% may or may not be appropriate for your facility.
It is advised that you consult with experts to establish the appropriate target for your
industry and your facility.

I. 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.

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Copyright 2009 SMRP. All rights reserved.

Publicatio Date: April 16, 2009

Revised: September 26, 2012

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 for purchase as a publication in the SMRP
Library.

J. 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 maintenancereduce 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.

PAGE 5 of 5

Copyright 2009 SMRP. All rights reserved.

Publicatio Date: April 16, 2009

Revised: September 26, 2012