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  • 1.  Inventory Holding Cost % and Cost of PO

    Posted 07-19-2023 04:18 PM
    Edited by Brian O'Donnell 07-19-2023 04:19 PM

    Hello, 

    Can someone share an effective method for calculating MRO (Maintenance, Repair, and Operations) Inventory Holding costs and the average cost of a Purchase Order (PO)? Should we adhere to any industry standard for this? I know these components play a crucial role in the EOQ (Economic Order Quantity) formula. We've relied on "loose estimates" so far, but now I'm eager to explore this topic further to ensure precision. Any insights or thoughts on this would be greatly appreciated. Thank you 

    Brian. 



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    Brian O'Donnell
    Manager of Maintenance Reliability
    American Eagle Outfitters
    Weatherly PA
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  • 2.  RE: Inventory Holding Cost % and Cost of PO

    Posted 07-20-2023 06:42 AM

    Why do you want to use EOQ?  EOQ was never meant to be used for MRO inventory. I would recommend using inventory turns as a true measure of how effective your inventory strategy is.  Of course, do not use the value of critical spares in the calculation.



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    Andrew Gager CAMA, CMRP, CPIM, CRL, CSSGB
    CEO / President
    Wake Forest NC
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  • 3.  RE: Inventory Holding Cost % and Cost of PO

    Posted 07-20-2023 10:51 AM

    We primarily employ EOQ (Economic Order Quantity) as a reference to determine the optimal quantity of a stock part to order when it hits the replenishment point. 



    ------------------------------
    Brian O'Donnell
    Manager of Maintenance Reliability
    American Eagle Outfitters
    Weatherly PA
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    Original Message


  • 4.  RE: Inventory Holding Cost % and Cost of PO

    Posted 07-20-2023 11:52 AM
    What's percent are you using for carry costs? What cost are you using to place an order?  What items in the storeroom do you have a KNOWN annual usage? Do take into account the uncertainty of lead time?



    Original Message


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