This project addresses the inefficiencies of a decentralized Maintenance, Repair, and Operations (MRO) inventory network for a large, vertically integrated conglomerate operating across Canada and the United States. Driven by a fragmented stocking strategy, the organization's existing MRO supply chain suffers from duplicate inventory, inflated safety stock levels, and limited visibility into total material and freight costs. To evaluate the trade-offs between cost, service reliability, and downtime risk, this study pairs a multi-dimensional Stock Keeping Unit (SKU) segmentation framework with a Mixed Integer Linear Programming (MILP) network optimization model. By utilizing K-Means clustering across ABC (spend), XYZ (volatility), and VED (criticality) dimensions, the model successfully isolated 241 vital, high-spend SKUs as prime candidates for centralization. The MILP simulation demonstrated that transitioning from 15 independent facilities to a hybrid centralized architecture anchored by two hubs (one in Canada and one in the U.S.) yields an optimal balance of cost and operational resilience. By leveraging the square root law of risk pooling, this two-hub configuration reduces required safety stock by 33% in Canada and 12% in the United States, decreasing the base total landed cost from $211,517 to $140,851 and generating $70,666 in annual structural savings. When inventory pooling savings ($90,473/yr) and procurement consolidation benefits ($14,829/yr) are included, the total extended annual saving reaches approximately $175,968 – $164,389 within Canada, and $11,578 within the United States. This is paired with a one-time capital release of $361,894 from rationalizing distributed on-hand inventory – $346,815 within Canada, and $15,079 within the United States. To sustain these improvements, the project recommends institutionalizing automated SKU deduplication, shifting to Free Carrier (FCA) procurement terms to leverage the company’s transportation fleet for regional short-haul multi-destination routes, and adopting the targeted hub redesign.
