This client operates the largest public-school system in the United States, servicing over one million students each year. With an estimated $14 million of maintenance inventory, warehoused to service five boroughs with over 30 trade groups in each borough, the opportunity to consolidate, standardize, and redefine the supply chain became clear to SDI.
The old reality: MRO logistics put the squeeze on the education system
The school district’s MRO logistics impacted four key areas – human capital, invested capital, working capital, and operating expenses. These areas affected the learning environment as well as student achievement, which created backlash from parents and the community, negative coverage, and a culture of hopelessness.
- Human capital (the people component) – There were not enough man hours budgeted for the much-needed materials and supplies. Custodians and maintenance technicians were forced into fire-fighting mode in this highly reactive environment, without any time left for strategizing. Mechanics spent a large portion of their time shopping for the needed materials to complete their work, which lead to reduced wrench time and increased deferred maintenance. Additionally, a skills gap forced mechanics to manage the materials and the storerooms.
- Invested capital (infrastructure, facilities, schools, and plants) – The aging asset base of the schools was beyond its useful life and the limited budget was not aligned with best practices in asset management, which lead to a growing deferred maintenance liability. Additionally, there were health, safety, and environmental issues at the schools.
- Working capital (inventory) – Previously, the lack of inventory controls had led to stock outs and left the school district with ballooning inventory levels in excess of $25 million as well as a growing inventory of excess and obsolete supplies.
- Operating expenses (purchasing materials) – The operating budget for the schools was not aligned with the age of their assets. This created an operating expense that far exceeded the annual budgets. Using an analog supply chain, the schools lacked the ability to leverage innovation and were limited in their ability to direct spend to local or M/WBE suppliers (Minority and Women-owned Business Enterprise). Their de-centralized approach to procurement with antiquated work roles and disparate systems lead to p-card purchasing, rogue spending, and an inability to drive compliance to negotiated sourcing strategies: no visibility, no control, and no compliance.
SDI’s analysis of old MRO logistics
- Analysis of the inventory revealed that more than 50% of the inventory on-hand had not been used in over 24 months.
- More than 65% of the parts and over 50% of purchase orders were placed at a quantity greater than a full year’s supply.
- The 21+ day material delivery lead-time compounded the work order backlog and trades personnel lost 20-30% of their daily wrench time traveling to warehouse inventory locations for needed materials.
System-wide efficiencies implemented to drive real change
SDI collaboratively developed an MRO logistics solution with the school system to consolidate and optimize their MRO logistics.
- Consolidated inventories into a single location, creating a ‘pick, pack and deliver’ system that provided real-time visibility to order status, delivery, and parts.
- SDI rationalized and separated material based on demand, implementing standard naming conventions and UOM (Unit of Measure) formats.
- Cleansed all data and assumed control for new additions.
- Restructured the supply chain for high-demand items, implementing both just-in-time supply as well as consignment.
- Buy Local: school system supply chain to source 75% of materials from local vendors, the tail spend includes vendors like Amazon Business for their robust platform that also attracts local and MWBE vendors to the marketplace.
Resulting custodial improvements and maintenance streamlining
Thanks to new MRO logistics strategies, the client experienced significant cost savings, including a 20% reduction in overall spend and the recovery of thousands of square feet of valuable warehousing space.
- One central distribution center with cross-dock operations, consignment, and an advanced just-in-time add-on serves the five boroughs.
- Client realized an inventory reduction of more than 40%.
- Redeployed 40 union trades personnel to focus on maintenance work.
- School maintenance and custodial staff experienced a 20-30% increase in available wrench time and a 75% decrease in work order material lead time.
- Increased visibility of orders throughout the supply chain with online delivery tracking.
The advantage of working with SDI
SDI understands MRO logistics strategies, so we understand improving system-wide efficiencies. Leveraging our proven operating process and powerful ZEUS platform, we’re able to quickly create solutions that provide large-scale results.