The reliability of your MRO supply chain partners and the efficiency built into supply chain processes can make or break your business. By tracking the right metrics, you can ensure that your MRO supply chain generates efficiencies, saves money, and keeps production humming,
Benefits of Active MRO Supply Chain Management
Effective MRO management helps companies eliminate unnecessary expenditures by ensuring that only essential items are purchased and stocked. Stockouts and excess inventory strain financial resources. Businesses that track and measure MRO supply chain metrics, however, can identify patterns in their spending and use of:
- Consumables
- Spare parts
- Personal protective equipment
- Cleaning products
- And other MRO supplies
So they can optimize their procurement processes and negotiate better terms with suppliers.
MRO supply chain optimization also aims at eliminating equipment failures and unscheduled maintenance that halt production. By closely monitoring MRO metrics, companies can predict when equipment is statistically likely to fail and schedule preventative maintenance accordingly. This direct approach minimizes unplanned downtimes and guarantees that necessary parts and tools are readily available when maintenance is scheduled.
Organizations that fulfill appropriate supply chain management metrics keep the right parts and materials on hand, without maintaining excessive and expensive inventory. Tracking MRO metrics allows businesses to reduce holding costs and the risk of parts becoming obsolete while enabling informed decisions about inventory-level adjustments.
Finally, effective MRO supply chain management identifies dependable suppliers that ensure competitive pricing, high-quality materials, and on-time delivery, all of which are essential for operational efficiency. Companies should measure supplier performance through metrics such as delivery times, order accuracy, and damaged goods percentages. Then, they can continually improve their network, culling underperformers, recruiting more accommodating partners, and shifting business to vendors that foster strong, mutually beneficial relationships.
What to Track, and How to Measure It
Proper MRO supply chain analysis ensures that production lines are continuously operational, equipment is maintained effectively, and unexpected productivity is maximized. By studying just a few key metrics, businesses can gain a 360-degree perspective on MRO supply chain management:
- Inventory Turnover Rate: Knowing how frequently inventory is used and replaced within a specific period allows for strategic resupply and just-in-time delivery, freeing operating capital and cutting carrying costs. Software-based management tools automate the turnover calculation (turnover = cost of goods sold / average inventory) and generate reports that dictate inventory policy adjustments.
- Stockout Rate: High stockout rates can disrupt operations and increase downtime. Automated reorder systems and inventory alert systems, such as barcode scanning and RFID can minimize the percentage of times an item is unavailable when needed (stockout rate = number of stockouts / total number of requests × 100). MRO supply chain optimization calls for maintaining minimum stock levels for critical items and using predictive analytics to forecast demand accurately.
- Lead Time: The longer it takes suppliers to deliver MRO supplies after receiving the order, the more uncertain organizations will be about their ability to maintain production plans, schedule maintenance, and honor customer requests. Supply chain management partners and service providers can grade vendors on their responsiveness and performance. They can assist in forging strong relationships with reliable suppliers that assure most-favored customer treatment.
- Rush-Order Ratio: A high frequency of expedited orders compared to routine replenishment orders highlights breakdowns in communication, accounting, or another function. A ratio of 1:8 or 1:10 is ideal for most businesses and industries. Tracking this metric, often through enterprise resource planning (ERP) software, enables procurement and operations teams to implement corrective actions.
- Fill Rate. The original supplier shipment should include a high percentage of the requested items sufficient to satisfy the demands of most internal customers. High fill rates (fill rate = Number of Orders Filled Completely / Total Orders × 100) indicate efficient inventory management and the vendor’s ability to accommodate customer needs. Order management systems with real-time tracking and warehouse management systems (WMS) are essential for maintaining high fill rates. Satisfactory fill rates can be assured by optimizing inventory levels to match demand and using ABC prioritization of high-demand items.
- Supplier Roster Contribution: Based on the Pareto principle (80/20 rule), which suggests that 80% of MRO spend typically is filled by 20% of suppliers. The ideal supplier roster contribution (number of suppliers accounting for top 80% of spend / the total number of suppliers) keeps this percentage in the 85% to 88% range. Concentrated. This way, organizations can devote management time and resources to the few partners that exert the greatest influence on their success.
Now that you understand the 6 key metrics to be tracking, learn more about the critical procurement best practices for the MRO supply chain.
Practices and Tools
Effective MRO supply chain management hinges on robust data collection, analysis, and action. Leveraging the right tools and processes is essential to achieve optimal performance:
- Systems Integration: A cornerstone of successful KPI monitoring is the alignment of essential systems. ERP, WMS, and supplier management applications should be seamlessly connected to provide a holistic view of the supply chain. This integration ensures data accuracy, consistency, and real-time visibility into key metrics.
- Centralized Data: Establish a unified data repository by collecting information from all applications to ensure data accuracy, consistency, and accessibility for comprehensive analysis. Break down data silos and create a single source of truth for informed decision-making.
- Automated Reporting: Mobilize advanced reporting tools to generate real-time insights and visualizations. Institute data collection, analysis, and storage procedures that ensure the most up-to-date data is available in dashboards and reports. Distribute electronic reports to relevant stakeholders to facilitate timely decision-making.
- Active Management: Foster a collaborative environment by conducting regular KPI review meetings with cross-functional teams. Leverage data insights to identify improvement areas, implement Lean and Six Sigma methodologies, and drive process optimization. Encourage active participation and knowledge sharing to achieve long-term supply chain excellence.
SDI helps clients optimize their investments in data-driven decision-making. Our services help foster a culture of continuous improvement that can significantly enhance MRO supply chain performance for organizations. This approach allows companies to leverage their data assets, identify inefficiencies, and implement targeted improvements across their operations.
We have built a sophisticated data analytics and eProcurement platform that will transform your MRO supply chain.
Contact us to learn more.
