Gaining Efficiencies from MRO Waste Reduction

By George E. Krauter

July 26, 2018 at 9:30 AM

Is there waste in your MRO management operation? Are there benefits that can be realized from increasing MRO efficiencies? You betcha on both counts.

In 2003, David McBride listed seven types of waste that occur in production. His analysis is based on recognizing the benefits of diminishing waste in the manufacturing environment and reveals some important parallels that apply to the in-plant MRO management chain.

  1. Overproduction: (Make it before required)

As you manage MRO, do you have too many spare parts? Are some parts in inventory not needed?  Inventory turnover in the MRO world is typically is less than ONE. Of the many causes for lack of profitable turns, here are three of significance:

  1. Pressure from OEM sales people to purchase and stock excess quantities of spare parts under the threat of negating warranties. Many OEM SKU’s are never needed and become obsolete. In addition, many can be commercially purchased at greatly reduced pricing. Accountants use a term FIFO (First In First Out). Inventory for many MRO SKU’s can be labeled “FISH” (First In, Still Here)
  2. Duplication of part (i.e., the same exact item under different SKU numbers). One company had six different stock locations for AA batteries under different descriptions.
  3. Lack of proper control of Min-Max quantities to reflect variance in MRO consumption causes unnecessary inventory investment.
  4. Waiting: (Idle workers)

In MRO, when there are inefficiencies in the management of stores, requisitioners can be kept away from their jobs for lack of parts. Also, if parts are stored away from jobs, there are many distractions to and from the work areas.

  1. Transporting: (Shifting parts from various operations).

In MRO, the movement of goods from arrival at the dock, through hold areas, into the MRO store, on to the proper stock location, and finally into the hands of the mechanic, is a cause of duplicated effort and can be recovered. There is also a time lag associated with the distribution of non- inventory spot buys to the requisitioner.

  1. Inappropriate processing (Information control lacking)

In MRO, the MRO spend is about 6 to 10% of the company’s total purchasing budget; however, MRO accounts for over 80% of the company’s processing costs. This is an existing waste that is easily remedied and should be recognized as a significant cost reduction opportunity.

  1. Unnecessary inventory (Not reflective of market conditions)

In MRO, the conceived lack of reliability of not having parts available from MRO stores will cause mechanics to establish separate “sub” stocks of critical materials to make doubly sure they have the parts when needed. This is a waste of duplicated inventory that is out of control. I know of a plant that moved their manufacturing operation to another state; when the plant emptied, they found over $950,000 in uncontrolled parts for which they finally sold for 15 cents on the dollar. Sub stocks can be greatly reduced by increasing the reliability of MRO management.

  1. Unnecessary excess motion (This is corrected by critical path analysis)

In MRO, the waste of excess motion can be recovered by a redesign of the MRO storeroom. Redesign means to place SKU’s in locations that would optimize time and effort to satisfy the needs of every MRO plant customer.

  1. Defects (The waste of reworking defective products)

In MRO, proper management of stores would require inspection of parts that are critical to the company’s production and maintenance requirements. Proper inspection instruction requirements would insure that no defective parts would reach the production floor.

There are exceptional opportunities available to reduce and recover total costs associated with the MRO supply chain. Addressing the seven areas of waste to improve the MRO supply chain are well worth the time and effort.      



Tags: MRO management MRO waste MRO improvement MRO best practices
Category: Blog Post

George E. Krauter

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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.



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