Cutting Back Orders and Lifting Storeroom Service Level: An MRO Case Study
When back orders pile up, the cost shows up everywhere except the storeroom’s own budget. Rush shipping. Idle technicians. Work orders that stall waiting on a part that should have been on the shelf. This case study follows one MRO Manager’s project to attack that problem at its source, using the A3 framework taught in Eruditio’s Inspired Blended Learning® program.
Strategic Alignment of the MRO Storeroom
The A3 business case for the storeroom process was built to evaluate current back orders and identify the high offenders. Those items were then checked to confirm they were properly linked to assets and to the bill of materials (BOM). From there, the team reviewed lead time, reorder point, and reorder quantity for each item, adjusting across all areas to reduce back orders and lift the storeroom’s key performance indicator: Service Level.
An initial report was pulled at the start of the project and pulled again on the same specific items at close, verifying improvement item by item. The impact goes beyond the KPI. Fewer back orders means lower costs associated with rushing items in, and less waiting for maintenance teams.
Leadership sponsorship for the project was extremely high, helped by the fact that the project owner was the MRO Manager. Alongside the A3 case, the team plans to continue driving efforts around stock evaluation for movement and obsolescence, lead times, order points, duplication, and improved technologies layered over current processes. There has been some pushback on funding for one tool, but upper management has been broadly receptive.
Service Level was the initial focus. The insights that surfaced during the project opened up several more: storeroom layout, duplication, procedure improvements, item storage and maintenance, and asset/BOM association.
The Improvement Process
The implementation timeline was short. The initial report was generated at program start in June 2024, and the project closed out at the end of that year.
The milestones were straightforward. First, initial identification of the item list. Then evaluation and revisions. Then close-out, when the items were reevaluated for back-order occurrences at year end. Success was measured through the reports, the costs associated, and an end-of-year list comparison. Because this was a relatively small project, the milestones and timelines were easily attainable, and the process can now be replicated for additional back-ordered items to drive further MRO efficiencies.
The Purchasing team supported the storeroom process most closely, assisting with analysis and revisions and monitoring the back-order report as part of their daily function.
Results
Maintenance personnel were affected passively. They were never formally told about the change, but they experienced the result: parts were available on request. The third-party vendor saw an improved KPI and less urgency around rush orders on the selected items.
The primary measures of success were KPI improvement, reduction in back orders, and the elimination of rush orders and expedited shipping on those items. Several additional benefits followed, including improved MRO efficiency and accurate item setup for asset association, lead time, and reorder points and quantities.
M4 Storeroom Service Level
- Program start (2024): 92.9%
- Program end (2025): 94.5%
- Target service level: 96%
Calculation: The difference between the total number of issues made and the number of stock-outs and back orders, divided by the total number of issues made during the measurement window for the M4 Stockroom.
Sustainability
The company is currently pitching for improved analytics to maintain the storeroom process and surface new findings. System overlays are under evaluation to identify duplication and potentially reduce storage locations. The same analytics can verify accurate lead times and adjust reorder points and quantities.
The only leadership challenge to sustaining the gains is sourcing funding and resources. Once improved analytics are in place, rules can be created for streamlined utilization, and the cost savings and cost avoidance already identified will offset the software cost. One constraint: the computerized maintenance management system (CMMS) is validated, so only an approved overlay is permitted to connect and perform direct changes.
The imminent next step is continued evaluation and contract negotiation with the third-party vendor, or a decision to switch vendors. That decision has direct bearing on current processes, procedures, technologies, and where to focus on closing gaps and inefficiencies.
Learning From This Company’s Journey
Other organizations can begin storeroom implementation with a thorough evaluation of current storeroom state and processes. That assessment determines where to focus. A complete overhaul across many focus areas at once becomes overwhelming fast. Chunking the implementation into stages allows a team to hold to the timeline and bring employee culture along with the changes.
Culture is pivotal in strategic improvement, because individual impact and buy-in are tied to engagement. When a team is fully aligned and understands the strategic impact of what it’s doing, resistance drops and sustainability rises.
Education plays a key role in every process, not just implementation. Educating a team before implementation means they understand the changes coming, which builds acceptance rather than forcing it. Education provides the backbone for why you are changing and what methods have been proven in real-world application, so it isn’t always necessary to “fail forward” while trying new techniques.
