The MRO supply chain is evolving thanks in part to Industry 4.0. But while businesses spend a huge amount of time managing their direct supply, historically the MRO supply chain has been overlooked. It’s not surprising though. Maintenance, Repair and Operations (MRO), which can literally be nuts and bolts but also includes services and materials, typically is not viewed as an essential function, even though this supply chain is mission critical – safety equipment, lubricants to keep production lines running, critical component parts that if missing could mean hundreds of thousands of dollars in machine downtime.
We walk through 5 common pain points in MRO and how to approach them to help make the turn from reactive to predictive, increase speed-to-value, and improve data-driven decision-making.
Accountability and ownership over the process
Departments often have metrics, but what we find is that department-based metrics aren’t tied to the overall effectiveness of the supply chain. Lacking cross-department insight, metrics, communications and actions that benefit one department often sub-optimize the end-to-end MRO supply chain. For example, Procurement might have a metric that tracks spend under contract, but if those contracted vendors only cover 20% of the stocked items in the storeroom, then this is a flawed measure for the entire system. Sourcing and Procurement communicate well most times, but does Procurement ever ask Maintenance about the quality of suppliers and reliability of parts? Only in rare instances. Maintenance might tell Accounting not to pay an invoice for a late or inferior product, but this hardly ever gets back to Procurement. Just connecting all MRO players around one table to discuss and hear the impact of individual efforts can be enlightening.
MRO is not just products – it is process. Moving towards better MRO practices must include consistent communication, common measures, meaningful connectivity, and integrated processes across all MRO functions. Each department needs to understand the end-to-end MRO process and their role in making it efficient and effective. Beyond communication, to solve the systemic problems in MRO requires a single owner of the process.
Tying MRO supplies to Work Order Management and other Systems
The “swivel effect” isn’t about integrating disparate system – it’s about working with data in different forms across systems to perform a single task within the entire end-to-end MRO process. For example, SDI had a client who performed all work order matching processes in Maximo and then had an offshore group copy all purchasing data into another system so they could process payables. Additionally, they instituted an email approval process that adds another layer of complexity to the workflow process.
Segmenting information and workflows across islands of system functionality adds a great deal of manual labor and opportunities for mistakes at each step of the MRO supply chain. Switching between systems impacts the Maintenance team the most. They are responsible for trying to pull together different parts of the MRO process to make sure the planners and mechanics have the right parts for a scheduled repair at exactly the right time. Additionally, they need to ensure that their vendors are satisfied by getting paid for the product in a timely manner, and Accounting has the information needed to properly cost jobs and analyze product profitability. Mismanaged and miscalculated costs are not uncommon in this environment. Planners will oftentimes take the easy way out. Instead of going through the proper procurement procedures, which takes time and effort, they just use a P-card and bypass the system all together or they will misappropriate costs by
aggregating into one big bucket.
Even if it’s not a true system integration – at least strive for system alignment. Select the system to serve as the definitive financial structure, and make sure all supporting systems and data conform to the one overriding financial system.
Optimizing Maintenance Technicians’ Time
Mechanic search time is a big waste of time and misappropriation of resource in manufacturing environments. Typically, technicians spend at least 25% of their time looking for parts, driving to different suppliers to purchase parts, and returning to sites to finish jobs. The time spent searching compounded with lead times for critical spares extends work order completion time significantly. The systemic problem is, when you’re in the reactive search mode, you don’t have the resources to eliminate the need for rush orders. And your desire for predictive and precision-based processes to avoid critical equipment failures feels like a pipe dream.
Since predictive and precision process are lacking, organizations use an expanding inventory of parts to cover up poor processes. This places the organization on the treadmill of outages, overstocks, expediting, and downtime. It is incredibly hard for organizations to leave the reactive mode without facing and fixing the systemic issues. SDI can scan and assess failed parts to determine why the part failed. We then redesign the part and understand usage patterns, so it won’t fail in the future.
The pathway to better MRO practices begins with an assessment of critical equipment and critical parts. Simply conduct a Pareto analysis of all purchased parts for critical equipment, then develop and document a bill of materials for those parts. If you can’t do this, then analyze critical spares and assess which equipment consumes these spares. Now planners can tie the Pareto analysis to the weekly production schedule and work to define these specific Bills of Material. Now the planner knows the consumption pattern, the materials have part numbers and defined suppliers, consumption is aligned to stock levels, and the MRO team can be more efficient even when
working in the reactive mode.
Driving Compliance to Negotiated Contracts
Historically, MRO has been a diverse spend across many vendors and many smaller-dollar pieces and parts – and global procurement organizations tend to focus on the larger and more consolidated spend areas. Procurement’s perspective is that the bigger spend areas provide opportunities for greater savings. These areas are measured on not just quality of the product, but their cost savings. Procurement, as a group, feels if they aren’t driving cost savings then they aren’t viewed as a value-add. So, when we talk about negotiated deals and driving compliance, there hasn’t been a level of focus on negotiating good deals or pushing end-users to follow through on using suppliers with
established deals. MRO is so diverse and the spend is so small that the savings impact on the P&L is not great…which doesn’t do much to raise the perceived value for Procurement.
When a Maintenance manager incurs unplanned downtime, their entire focus is to get the line up and running right away. With very few negotiated deals in MRO, the Maintenance team learns the behavior of stockpiling parts required to get the line productive again. Costs begin to rise because the Maintenance person orders 10, they use a couple, they misplace others – and instead of spending time searching for parts, they simply order more. On a large scale, this impacts the company because noncompliance becomes part of the culture – and, over time, this will weigh heavily on profitability. On a small scale, it impacts the Operations manager because their budget takes a hit in terms of lack of processes, role confusion, elevated shipping costs, and over- ordering / excess inventory.
The road to better MRO practices must start with better data for better decisions. When the data is bad or incomplete, the tendency is to make decisions based upon emotion and not fact. MRO leaders must commit to a data cleansing and management process as part of any improvement initiative. Better data is the foundation of better insight, transparency, and decisions. This will help Procurement add greater value and better serve the organization.
Visibility into Holistic Spend And Data Analytics
Because the business landscape is changing so rapidly, organizations are finding it difficult to use historical data to provide a view into future supply and demand – whether in their finished goods and products or in supplying the MRO needed to keep their plants and employees safe and operational. The need for timely, near real-time data to glean insight into their holistic parts spend is critical for daily requisitions. The use of procurement data analytics in dynamic pricing and replenishment is one way that organizations are using data to guide their supply chain strategy. A purpose-built MRO analytics tool can help sourcing specialists pinpoint where best to drive efficiencies in supplier consolidation, cost reduction, and productivity improvements. Procurement data analytics essentially helps aggregate data from the various points in the supply chain – storeroom information, purchasing records, industrial Internet of Things’ sensors and feedback, and of course supplier catalogs.
Analyzing these various data points and distilling them down in a holistic way helps connect dots that otherwise may not be connected. In this way, procurement data analytics helps organizations leverage their key MRO data for operational outcomes. From understanding where you’re spending your dollars and gaining visibility into that end-to-end supply chain to seeing where supplies are coming from, having full transparency allows organizations to know immediately where to optimize and course-correct.
To learn how SDI’s digitally-enabled and data-driven solutions help clients gain visibility and greater control, addressing pain points by connecting the MRO supply chain to their overall enterprise reliability programs or for a demo of ZEUS data analytics, contact us today.