12/10/2017 Key Performance Indicators for Stores and MRO - Reliabilityweb: A Culture of Reliability

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Key Performance Indicators for Stores and

MRO

Learning point takeaways are listed below:

1. Learn what a key performance is

2. Learn the formulas and the priority for each KPI for MRO and Stores

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12/10/2017 Key Performance Indicators for Stores and MRO - Reliabilityweb: A Culture of Reliability

3. Apply the knowledge to individual companies

Also discussed are a criticality matrix, benchmarking activities, and expected outcomes when
implementing Key Performance measurements.

Introduction

A Key Performance Indicator (KPI) is defined as a method to measure quantifying objectives to

enable the measurement of performance. Some examples of this include the measuring of
inventory turns, inventory accuracy, the dollar amount spent on emergency purchases
compared to the overall purchases of the company, internal and external quality defects, stock
outs, service levels (customer satisfaction), and others listed in the KPIs matrix. Management
then takes these measurements, that are done on a periodic basis (daily, weekly, and/or
monthly), and analyzes them through trend analysis, benchmarking, and critical path analysis
(PERT). These numbers are posted at work centers, strategic operations areas, and other
areas where they can be readily viewed.

Many companies use only a few KPIs to measure outcomes. Stores and MRO are not always
measured for their performance. However, the old adage that if you do not measure, you cannot
know where you have been or where you are headed is often true.

KPIs play a major role in gauging the success or failure of MRO and Stores. They provide a
simple and concise method for comparing actual performance from one period to another. They
can even be used to compare performance to industry best standards, plants within a
corporation, and other storerooms. It is important to have most of the information required to
calculate KPIs in the computer system or CMMS program. That way the manual effort is
removed and replaced with an automated one. The accuracy of these calculations is directly
dependent on the accuracy of the data in the database and the documentation of material
movement.

Quantitative Measurements Matrix Chart

Listed are the required formulas and descriptions of each KPI for Stores and MRO. The
maintenance manager must rank the importance of each KPI to his or her needs. They are
ranked in four categories: C-Critical need, H-High importance, M-Moderate need, and L-Low
importance. Performance can then be benchmarked and compared.

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12/10/2017 Key Performance Indicators for Stores and MRO - Reliabilityweb: A Culture of Reliability

There are two types of measurements. The first type consists of qualitative measurements.
These include Pareto charts, milestone charts, critical analysis, and project plans. The second
type consists of quantitative measurements, which are formulas.

Qualitative Measurements

A qualitative measurement is one that has no numerical value. Nonetheless, qualitative

measurements are important KPIs that should be utilized. As noted previously, there are a
number of qualitative measurements that can be used. Following are descriptions of a few of
these measurements that are most often used. A milestone chart is a preliminary timeline on a
chart that depicts major time intervals and events for a project. This gives management and
project members an overall look at an upcoming project. These charts are used in construction,
industry, government, retail, and other situations to visually and quickly show the overall
progress and upcoming major events. A second measurement involves a project plan itself,
showing all the events related to a project with start and finish dates, the percent of completion,
and the resources and costs needed to complete the project. A critical analysis shows the path

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12/10/2017 Key Performance Indicators for Stores and MRO - Reliabilityweb: A Culture of Reliability

to meet the end goal. Some call this the determination of the critical path. Finally, there is a
Gantt chart, which shows the events and the dates graphically, as well as the completions.

The quantitative measurements matrix chart (on the previous page) presents the required
formulas and gives a description of each KPI for Stores and MRO. The maintenance manager
must rank the importance of each KPI to his needs. They are ranked in four categories: C-
Critical need, H-High importance, M-Moderate need, and L-Low importance. Performance can
then be benchmarked and compared.

Benefit Tracking - Having KPIs Work for You

These are potential benefits, gained by measuring through the KPIs that are shown in the
quantitative measurement matrix. In addition, there are other benefits gained from KPIs in the
storeroom. These include salvage operations and scrapping obsolete parts, vendor buyback
programs, sale of equipment, reduction in freight expediting dollars, improvement in collections
from past due invoices, improvements in service after the sale, and others.

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12/10/2017 Key Performance Indicators for Stores and MRO - Reliabilityweb: A Culture of Reliability

Criticality Matrix

Critical parts are very important in the calculation of KPIs. This matrix shows the criticality index
cubed. The most critical item is in the red first row and in the first square. The failure is
imminent, and the lead time is catastrophic

or long. The middle row (yellow) is moderately critical. The last row is green and is the least
critical. Critical parts always have priority.

In summary, if you do not measure, you cannot determine where you have been, or objectively
analyze where you are going. It is important to establish the KPIs for the storeroom and MRO to
measure their performance, evaluate suppliers, and measure productivity.

"Success equals goals; all else is commentary." - Brian Tracy

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12/10/2017 Key Performance Indicators for Stores and MRO - Reliabilityweb: A Culture of Reliability

Daniel DeWald, CMRP, CPIM, CPM, CPMM, has spent the last seven years in project
management affiliated with Life Cycle Engineering, NFI industries, and DMD Solutions. He is
currently working as a consultant for GP Allied as an SME in materials management. He has
over 30 years of experience in warehousing and distribution, production control, materials
management, logistics, supply chain management, and purchasing.

Focal Points

Join The Association of Asset Management Professionals

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