An MRO Alert…Is Your MRO Where It Should Be?

By George E. Krauter

April 30, 2011 at 3:10 PM

A recent article on MRO stated:

“MRO EXCELLENCE IS FOR THE CUSTOMER
Why do companies have MRO storerooms?
-----To service maintenance and operations?
------To support engineering?
-------To support projects?
NO!  They have storerooms because it is a good investment!!
MRO storerooms are designed to manage inventory to ensure that service levels remain high and cost of goods remain low.
The objectives of storing parts are to minimize downtime at the lowest possible total cost of ownership, and balance the cost of downtime vs. inventory carrying cost to insure that life cycle costs are minimized.”

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.



Tags: MRO Outsourcing Storerooms MRO Excellence
Category: Blog Post

George E. Krauter

user_avatar

George Krauter, former founder and president of Industrial Systems Assoc. [I.S.A.] has retired as vice president of Synovos.

Currently, he has initiated, "George Krauter Consulting [GKC]"  for effective reliability and cost recovery for consumers  of MRO materials. George is a recognized authority on the management of the MRO supply chain and support for maintenance reliability programs. His book, "OUTSOURCING MRO...FINDING A BETTER WAY" is available from Amazon and from Reliability Web.com.

He is published in Uptime, Modern Distribution Management, and Supply and Demand Chain Executive. George has conducted seminars across North America, in Europe, and in the U.A.R. as well as a guest speaker at Temple U., Howard U., Duke, and MIT.

George is a graduate of Temple University; he lives with his wife, Joyce, in Bucks County, PA. All grand kids live within eating distance. He can be reached anytime:   georgekrauter@comcast.net.



Please add a comment

Posted by Regina on
Got it! Thanks a lot again for hlepnig me out!
Posted by Ervinke on
Thank you Marcelo, very pleased you enyojed the website content and thank you for your kind words.Apart from current work, there's a great deal in the archive to work-on and get on the website, but this takes time; so be patient and visit the site at least once a month and more material should be shown from earlier days (pre digital camera), but it's still interesting. The on-going work is a gem and I can't wait to let you see it; so again, I will get round to it, but I have to balance website work with the actual building and I want to finish the current car this summer if possible have you guessed what it is yet, SP2. Best wishes.
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