April 30, 2011 at 3:10 PM

A recent article on MRO stated:

Well, YES; who would argue with all that??

Now, Let’s Look At the Real World of MRO Storerooms

• 50% of MRO needs are found in stores. 50% are purchased directly
• 65% of dollars spent are found in stores; stock-out ratios are above 25%
• Obsolete stocks exist
• Freight is not controlled; emergencies cause higher cost of parts
• Transactions are excessive; purchase order cycle costs are inconsistent with the value of the parts requisitioned
• Inventory values are inaccurate with incorrect pricing and varying measuring units
• Inventory turnover is less that once per year
• Unauthorized stock removal without notation occurs
• Uncontrolled parts with value exist through the plant as sub-stocks
• Attempts at min/max inventory reordering result in overstocks and/or stock-outs
• There is no mark-up/fee attached to the issue of parts to the budget holder
• Disciplines have varying agendas that cause costly conflicts:
• Finance wants less dollars in stock
• Operations want more stock on hand
• Budget holders keep their own safety stock of materials
• Purchasing wants to buy more to get a better price
• Plant manager wants an operation that does not drain profits and maintains production levels

WHAT DOES ALL THIS MEAN?

The above article avers that the store room is a good investment for the company because it provides Excellence for the Customer.

Is it still a good investment if stores operations do not meet the objectives i.e. provide lowest TCO, balance downtime vs. inventory costs, and insure minimal life cycle costs?

The answer is NO!  In most cases, objectives are not met and the negativity of the investment is not recognized. The costs associated with stores operations are not recovered in the manufacturing process and are viewed as General & Accepted Principles and, therefore, cannot be avoided. Well they can be!! 

WHAT IS THE ANSWER?

If you take the word “room” out of the word “Storeroom” you have “Store.” A “Store” is a Home Depot or an Ace Hardware that has categories of materials that reflect their market. These same categories are found in storerooms and reflect the particular needs of the plant.

Should a plant that has a particular manufacturing core competency and competes favorably in their market be in a business where they are not competent? The answer is no.

Companies do not operate their own cafeteria because they are not good cooks; they hire security companies because they are not experts in that field. The same reasoning should be applied to stores management; replace ineffective and costly operations with core competent experts.

Optimum return on investment (RO) benefits and LEAN objectives can be realized by allowing the experts in third party MRO (3PMRO) stores operations to come on site to effect the goals and objectives that will provide the: Excellence for the Customer.

3PMRO experts have total focus to storeroom management because it is their core competency. By personalizing this expertise to the particular needs of each operation, optimum savings are achieved and all plant disciplines are satisfied. The cost of the 3PMRO operation is paid out of the measured savings that accrue while effecting TCO financial and non-financial benefits at optimum ROI levels.

George Krauter

As the originator of the concept that became known as integrated supply, George Krauter currently serves as Vice President for Storeroom Solutions, Inc.  Frequently spotted at industry events and various industry functions, Mr. Krauter brings a wealth of insight and hands-on experience to indirect materials cost recovery methods.

Mr. Krauter’s career began in Philadelphia and carried him through management capacities in all disciplines of the indirect materials supply chain.  Following his tenure as Vice President, Sales for a large industrial supply distributor, Mr. Krauter co-founded the first integrated supply company in the US:  Industrial Systems Associates (ISA). As an internationally recognized authority on innovative methods that define and eliminate duplications in the traditional supply chain for non-capital expense materials, Mr. Krauter’s concepts led to industry distribution procedures known as Integrated Supply, JIT II and other cost outsourcing techniques within the MRO supply chain.  Following the sale of his then multi-million dollar company, Mr. Krauter joined Storeroom Solutions first as sales consultant, then as Vice President working in sales and marketing.

An authority on innovative methods in distribution and MRO outsourcing, he has been published in several publications including Modern Distribution Management and Purchasing magazine as well as a featured blogger, most recently at www.mypurchasingcenter.com.  In 2011, he was selected as one of Supply and Demand Chain Executive magazine’s Provider Pros to Know. George participates as an industry practitioner teaching classes at Temple University in Philadelphia, PA and Howard University in Washington, D.C. He has held seminars on distribution cost recovery at MIT and Duke, presented internationally in Oslo, Puerto Rico, Mexico and Dubai and has served on the President’s panel for the Conference Board in New York City. He is also a frequent speaker at industry association events including ISM and APICS.

George has a BA in business administration from Temple University and an MBAA (MBA almost) in sales & marketing.