Maintenance, repair and operations (MRO) is a critical—but often overlooked—element of the supply chain. Certainly, when compared to the attention paid to direct materials, MRO can be a procurement and supply chain backwater. MRO is seen as necessary, but not necessarily strategic. MRO is often assigned to overworked purchasing staff, who may not have the time, nor the experience in MRO supply chain management, to be able to step back and consider more valuable improvements in managing the integrated supply chain.
By just employing basic supply chain management tactics, there is plenty of opportunity for reducing both process and purchase costs. For example, it’s likely that there are many MRO categories and items in the tail-spend that can be brought under management. With the right supply chain expertise and resources, it is possible to look beyond to changes that deliver even more value. Unfortunately, because MRO is typically considered a cost center, it is sometimes difficult to justify adding expert staff, or acquiring the analysis tools that would be needed.
How to Get Expert MRO Management Services in a Cost-Effective Manner
That’s where an “MRO As-a-service” offering makes sense. It can provide the integrated supply chain management expertise, resources and systems that relieve internal staff of the day-to-day burden of managing MRO materials and processes. Because of the economies of scale inherent in this outsourcing model, it is possible to bring close to 100% of MRO spending under management. This promises opportunities for improvements such as reductions in: inventory locations, inventory levels, expedited shipments, inventory write-offs, overall equipment effectiveness, returns and production stoppages.
Once the MRO supply chain is under effective management, the organization’s procurement staff (and the enterprise as a whole) is freed to focus on further optimizing the integrated supply chain. For example, they can investigate strategic sourcing options for their high value categories and identify the spend categories that have been sourced multiple times. This requires a lot of “data crunching”, which is made feasible by using complex sourcing tools with advanced optimization and analytics. These tools—and the know-how to run them—are certain to be available from the MRO as-a-service provider. Experience tells us that the typical organization will likely identify an additional 10% savings on such categories.
Procurement staff can now also spend time analyzing the MRO supply chain network and optimizing its levels of service. The network of suppliers can be trimmed—consolidating down from thousands to hundreds of suppliers for the majority of parts and services—while ensuring the right stock and service levels are provided, through regular and consistent monitoring of supplier service performance.
Transition from Customer to Partner
A key to successful management of the integrated supply chain is the partnership between supplier and purchaser. Procurement and maintenance should collaborate to institute supplier development and joint innovation programs to find “win-win” ways to improve not only service levels, but also the assets and parts themselves, and the equipment and systems used in manufacturing and delivery.
Once you and your suppliers are partners at the supply chain planning table, you can propose topics such as:
- Moving inventory upstream to the supplier
- Implementing asset variabilization
- Piloting RFID tracking to streamline the end-to-end supply chain process
Now that you have close, mutually beneficial relationships with your suppliers, perhaps they will have some innovation projects in mind.
The scope for improvement is boundless, but first you must get your MRO supply chain under control, so you can get out of the day-to-day purchasing grind. With an efficient integrated supply chain in place, there is more time for your procurement professionals to focus on high value opportunities that can help impact competitiveness, improve market share and drive bottom line growth.
Need help getting your MRO supply chain in check? Whether you need help every step of the way, or only with some aspects, SDI is here to help. Contact us to find out how we can help your business!
