Like many of the routine necessities of life and business, manufacturing firms often consider maintenance, repair and operations processes only when something goes wrong, like:
• A critical machine part fails and a replacement is nowhere to be found.
• Excessive stockpiles of supplies tie up valuable space and capital is needed for production expansion.
• Expensive spare components become obsolete while sitting in a warehouse.
Optimizing the maintenance, repair and operations (MRO) supply chain, let alone integrating it with a company’s go-to-market strategy, is a daunting proposition. But with competition stiffening and profit margins narrowing, finding ways to become more efficient is becoming vital to profitable operations.
While companies may make tens of thousands of transactions from hundreds or thousands of suppliers each year to keep their facilities running, sourcing, ordering, paying for, receiving, storing, and distributing MRO materials, compose a relatively small percentage of a company’s annual spend. Compared to the weekly payroll, a new marketing campaign, or installing another production line, buying a spare valve or another set of drill bits seems inconsequential. But MRO has a direct impact on many critical processes.
Obviously, missing replacement parts result in unscheduled and costly downtime. But a poorly managed supply chain also manifests in costly obsolescence, expedited shipping, off-contract ordering, warehousing and dozens of other inefficiencies.
There are several steps manufacturers—or their trusted MRO supply chain management partners—can take to eliminate both initial procurement costs and ongoing warehousing expenses while maximizing production efficiency.
As mentioned earlier, companies typically begin to address their MRO issues only when a situation becomes intolerable. Only when a pump or compressor fails and its replacement has not yet even been ordered do they consider automating the ordering process or employing vendor-managed inventory solutions. Only when unexpected downtime causes them to miss a deadline and lose a customer do they think about coordinating maintenance schedules. Only when their master catalog becomes so bloated with outdated listings and duplicate entries do they vow to cleanse their data and standardize parts nomenclature.
A thoughtful and comprehensive MRO overhaul, however, can both maximize production time by making sure necessary parts are available and accessible while also keeping slow-moving and obsolete inventory to a minimum, allowing companies to cut costs, increase revenue and capture efficiencies:
• By tracking product demand, orders, delivery time, asset lifecycle, etc. to bring additional visibility to spend and total cost of ownership.
• By systematizing part number and catalog management to rein in SKU spread and non-compliant ordering.
• By centralizing warehousing, to reduce intake and accounting errors.
• By automating ordering to foster just-in-time delivery and reduce the need for costly express shipping.
For most manufacturing companies, optimization represents significant progress in reining in runaway transactional costs while ensuring assets are available when and where they are needed.
But operational effectiveness—even in the MRO context, where competitors may still languish in reactivity—is not a core competency for most manufacturing companies.
The MRO supply chain includes the procurement of products for lots of departments, from mops to lubricant to custom-made motors. It touches virtually every primary function within the organization. While multiple stakeholders add to the complexity, companies that can successfully align it with production, warehousing, finance, purchasing, etc. to transform MRO into a core activity, leveraging resources and incorporating them across business units to foster innovations in design, engineering, development, production, marketing, distribution, etc., to identify opportunities for vertical and horizontal integration, and to increase institutional knowledge.
That is a strategic advantage.
To accomplish this, manufacturers must take MRO out of its silo; consider it an extension of the plant’s other critical activities. For instance, MRO managers can communicate with production to schedule maintenance during changeover periods. They can support marketing and sales activities by increasing consumables in anticipation of high-demand periods. They should coordinate with the finance department to ensure that depletion of spare parts coincide with machine upgrades and new technology implementation.
What does this all mean?
Companies increasingly are turning to the MRO function to reduce expenditures and bolster production efficiency. Because MRO encompasses perhaps thousands of transactions annually, by either committing in-house resources or contracting with professional supply chain management providers to centralize and automate their data management, sourcing, purchasing, payment, warehousing, and distribution functions, achieving even a slight improvement can pay big dividends.
By integrating the MRO function with other mission-critical functions, companies can transform this traditionally low-value process into a source of strategic advantage, one that enables and fortifies production, sales, finance, and more.
By Kurt Meiers, VP Strategic Sourcing at SDI, Inc.