Many companies continue to struggle with the maintenance, repair and operations (MRO) issue by ignoring or at least tolerating the existence of the MRO storeroom and the necessary operations around it. Few companies work to improve the MRO function in the supply chain and some do not even consider MRO storeroom management as part of plant operations at all. Others are striving to strike a balance in managing MRO.
In his book,
Outsourcing MRO…Finding a Better Way, George Krauter writes, “MRO represents the highest percentage of cost recovery opportunity….and should be a major target for reliability and profit improvement.”
There is little doubt that MRO storeroom operations, MRO storeroom solutions, MRO supply chain management, or however you label it, is gaining attention from the corporate offices to the production floor. If it hasn’t already reached that point at your company, it will.
Traditionally, functions assigned to storeroom operations include basic procedures – stock keeping unit (SKU) issuance, min/max measurement, purchasing, receiving and stocking, spot buys, etc. – that enable manufacturers to track part usage and, at least, gain a better understanding as to how much money is being spent on MRO with the goal to optimize cost and increase reliability. While a step in the right direction, these procedures are basic at best. At worst, when not sustained, these same steps can be a drain on production efficiency, returning the storeroom into a worse disarray than before the process started.
Today, as technology evolves and companies grow more sophisticated in MRO supply chain management, it’s imperative that operations around the storeroom and the peripheral services associated with it keep pace and maximize efficiency.
There are some encouraging signs as to how companies are recognizing the need to change and are taking specific actions to improve. Here are four critical tools necessary to deliver improved MRO inventory management and reliability.
Companies are questioning, "Why are we buying parts we do not need?"
1 MRO Supply Chain Services
Gone are the days when the definition of supply chain stops at the receiving dock. Today, companies are using advanced technology to source, purchase, track, measure and evaluate MRO spare parts as those parts move through the supply chain, from the manufacturer through distribution, to the company’s MRO store and finally to consumption or the end of shelf life, whichever comes first. To relieve some of the obvious duplications in distribution and associated costs, more and more companies are placing an MRO service provider on-site to manage the MRO storeroom operation.
Supplier relationships are also being redefined; there is downward pressure on total cost of ownership, not just price, driving the need to provide additional services and value. For example, suppliers and original equipment manufacturers (OEMs) often would recommend stocking far more spare parts than is typically required under the guise that more is better, or at least stronger protection against downtime. Companies would follow such recommendations for fear of nullifying the warranty.
But, it only takes a little time to track the lack of usage of some of these spare parts to realize that money is being lost because of these unused parts and there is no true return on investment. It is exactly this activity that is forcing companies to pay attention, monitor the flow of materials through their facilities and hold departments – maintenance, engineering, reliability and others – accountable for MRO costs. Companies are questioning, “Why are we buying parts we do not need?”
As a result, strategic sourcing professionals are forging new relationships with suppliers, where creativity and trust are mandatory. Piece price as king is dead. Buried. In its place are strategic supply chain agreements and relationships that enable both parties to follow the complete supply chain and adjust where and when necessary.
2 Asset Services
A second important tool is the need to connect asset management to MRO supply chain management. This awakening is typically driven by service providers through reliability engineers who are well aware of the need to change. Companies are seeking providers who know how to tie spare part consumption to MRO inventory management to deliver mean time to repair (MTTR) reduction, reliability measures and other continuous improvement initiatives.
Optimum MRO asset management must include activities, preferably from a provider who operates on-site, such as:
- Workflow process analysis;
- Asset hierarchy and bill of material (BOM) development reflected in spare parts inventory intelligence;
- Maintenance planning and coordination that consistently includes communications with the on-site provider;
- Technical procurement that relates to reengineering and commercialization of OEM spare parts.
3 Master Data Leadership
Supply chain research shows that an estimated 85 percent of all data management initiatives fail to meet their objectives. That marks the difference between data enrichment and data leadership.
Data enrichment is the process of naming all like parts with a consistent and complete description to eliminate the existence of multiple SKUs and to accurately order and issue the required part.
Data leadership, however, is all of that and more. Enriched data combined with data leadership, particularly governance and stewardship, is master data leadership, which analyzes and uses that data in ways few have seen before, thus returning value through improved maintenance effectiveness, stronger asset management and overall reliability.
Among the goals of master data leadership are:
- Eliminating data redundancies / standardize descriptions;
- Sharing inventory across multiple sites;
- Reducing inventory and the number of SKUs;
- Connecting assets to supply chain data;
- Reducing spot buys; it’s likely already in the storeroom under a different description;
- Reducing substocks by building trust and defining duplicated inventory;
- Having the correct parts on hand when needed.
To be successful, master data leadership must be implemented and sustained by an entity with experience and expertise in all categories of MRO and OEM parts. It is not a task recommended for inexperienced staff.
As Tracy S. Smith wrote in the article, “ERP and EAM: Partners Not Competitors” in the June/July 2014 issue of
Uptime magazine, asset management is “a key driver of an organization’s financials and the guts of the operation.” He couldn’t be more correct.
This is why companies are spending so many resources on reviewing and implementing enterprise asset management (EAM) or computerized maintenance management system (CMMS) technology. EAM/CMMS technology is readily available, but many existing EAM systems look at MRO as a low priority category and, as a result, fail to meet the needs of on the ground maintenance reliability teams. Many systems fail to be in sync with individual maintenance reliability goals; many provide unfriendly operating situations that result in work-arounds and, eventually, inaccurate data.
EAM/CMMS applications for MRO must be customized to each user’s situation to meet specific reliability goals and track performance data. Any on-site provider of supply chain services, asset management and master data leadership should be able to provide the proper EAM/CMMS process to support every client’s initiative.
The expanding role of MRO in achieving a reliable plant requires expertise in managing four essential activities: supply chain services, asset management, master data leadership and customized EAM/CMMS. These must be added to the traditional standard operating procedures of MRO storeroom management.
This collective concept can be labeled, “The New Integration.” It is new to the existing world of MRO management and requires a coming together of the provider and plant disciplines to achieve plant reliability goals.