MRO Supply Chain Managers: If you are not managing these 4 four basics, it is probably costing you millions!
When operating a plant, there is nothing worse than the sound of silence. A critical part is not available, and every downtime minute costs money and even a competitive advantage. The situation is inevitably followed by arguments with the production manager who is behind with orders, the maintenance manager who does not have the spare parts, and the store’s manager who is searching for the parts – all while the Finance Manager is still talking about freeing up working capital. Despite sitting with excess spares stock in an attempt to manage the risk, the machine is standing still. This is not sustainable, and it is definitely costing you. Are you not tired of the constant emergencies?
But where do you begin to fix this? Your key measure in your asset-intensive business is uptime. There is barely time to look up from the day-to-day operational matters let alone to drag various departments through a project to address the spares problem. But then again, can you afford to do nothing? Get control of these four areas in the spares environment now and stop the leaks.
Addressing the four key MRO basics
All improvement projects always start with going back to first principles. Put the correct basics in place first and then move forward from there. Trying to improve uptime on an unstable base, will only exacerbate business frustration.
Step 1: The ability to know where you are
Before doing any change project, it is imperative to understand where you are now and what the maturity of the spares management capability is. This will help you to track and evaluate improvements incrementally and based on known facts. The baseline will give you a good indication of the maturity of your spares competence and of the level of skills of the people managing the capability. It will also drive you to improve through an ability for regular, constant measurement.
Step 2: Structured master data
Know your parts. Can you confidently say that you know what spares you have, where the parts are located, and for which assets the spares are required? If not, there is much work to do. But beyond just having a part on hand, it is critical to classify your parts based on criticality to overall production uptime. After all, it does not make sense to have twenty spare switches on hand for one lathe that is used twice per month, while only keeping one steel auger that is for a critical conveyor belt and that impacts production significantly with any downtime. You need a structured approach to set up spares classifications, to validate spares and then to maintain your master data.
Step 3: Basic contracting and optimised processes
Effective spare parts management and supplier relationships can be a competitive advantage for your business enabling you to get your products to market more quickly. Now, once your baseline is clear and you know how to classify and store your spares it is also critical to have clear inventory, procurement and stocking strategies. Such strategies allow you to optimise contracts with suppliers, ensuring effective supplier performance and cost. Supply chain management strongly depends on optimised processes. Processes include procurement, issuing and returning, replenishment and rotable assets. It is also critical to ensure all your staff are adequately skilled to execute the processes and that they are supported by effective technology systems. Develop a continuous plan-do-check-act cycle both for your internal supply chain performance as well as for suppliers.
Step 4: Implement inventory control – know what to calculate and how to calculate it
One often forgets that inventory management starts with a strategic business decision, not only when an asset breaks down. Calculating and planning inventory levels such as reorder points and safety stock should be a scientific calculation looking at all factors before a solution is deployed. Having decision-makers understand upfront the impact of their decisions in terms of availability, working capital and operational costs will ensure that when the time comes to repair equipment, the process is controlled and rather than reflexive. If you define and use basic operational demand and procurement processes supported by systems configured with the correct master data classifications, you will be able to manage all spares demand in a consistent and planned manner. Even if a part is critical but rarely required, you will know how many to stock and when and how to source it.
Get help from experts, but don’t stop operations
If you are still unsure where to start, your best investment would be to bring in the experts. This allows you to use their knowledge, best-practice methodologies, and proven experience to build your internal capability rather than having to hire in new staff or redirect your already stretched supply chain and maintenance staff. Using their years of experience, a good partner will be able to help you to prioritise a starting point that will address the twenty percent of your spares that impact eighty percent of your operations through a tailored approach that deliverers incremental and measurable benefits. With the right help, you will also be able to start implementing the changes without the need for your maintenance and production teams to slow down or even to stop. An external partner will define a focused improvement approach that works for you and your particular business needs so ensuring a smooth transition from disorder to financial and operational sustainability.
You have no time to spare
A spares programme is not just an advisory programme, but rather a complete change programme that affects many parts of your business, its people, and even its culture. Such a change can only be effective and sustained with committed and supportive leadership. You need to ensure that operations, supply chain, finance and maintenance are all involved in what you are doing and let them know that together the company will reap the financial benefits of these interventions. While a softer benefit is improved relationships across the organisation as well as with your clients, more measurable benefits of MRO optimisation include reduced operating costs, improved production availability, fewer emergency costs, and improved working capital – all of which impact the bottom line and your career. Surely this is worth the effort?