Implementing an Integrated Supply Program…Do It Correctly or Not at All

By George E. Krauter

August 16, 2018 at 11:45 AM

Albert Einstein once said: “We cannot solve our problems with the same thinking that we used when we created them.” Recognizing that you have a problem requires that you change your present processes to achieve desired improvements.

Controlling MRO costs is one of those problem areas where a fresh approach can oftentimes help to right the ship.  An “integrated supply” MRO program, for instance, can cut MRO total cost of ownership (TCO) and result in a positive return on investment (ROI).  How so?

First recognize that there are multiple definitions of “integrated supply” put forth by multiple traditional distributors. One distributor offers nine different options under the heading of integrated supply. The danger here is that if you enter into any one of these programs as defined by the term integrated supply and, if it fails or does not result in the savings predicted, you will probably again consider embracing an integrated supply approach.

The definition I use for integrated supply is a program that totally outsources your MRO supply chain and gets you out of the MRO distribution business altogether (MRO distribution is not your core competency). Installing one of the many cost saving programs, i.e., VMI, consignment, vending, etc. will leave costs on the proverbial table. That means you will eventually have to install a new process change again in order to accrue all of the available potential savings.

The total outsource option

Consider a totally outsourced process for optimum return, but do not move forward with it unless you can implement properly. I have implemented over 100 successful MRO outsourcing programs…but only after having first learned how to fail.  Below are some of the major land mines to avoid. Improper execution could destroy your program savings. Below are some critical best practices:

  1. Make sure all relevant plant departments and disciplines agree with your new process. Assure them that your personalized MRO outsourcing plan and process will benefit them specifically.
  2. Make sure these same people are aligned with your recommended implementation steps.
  3. Ensure that senior management will budget the dollars necessary to implement successfully.
  4. Select, with care, the proper supplier. They must demonstrate a history of successful implementations and commit their assets to your program (Make sure to attain this commitment from their senior management). Also, your supplier must be able to report continual improvements over the contract period; a static process without these improvements will end in defeat. Your supplier must be able to answer the question, “What have you done for me lately?”
  5. Co-create an action item time line schedule that defines each step with completion dates and ensure that the new process launches on time.
  6. The condition of existing MRO storerooms will dictate the time necessary for successful implementation. You must be prepared to establish the time period necessary for success; a messy and crowded storeroom can take six to ten weeks from an implementation start date to opening day.
  7. Be prepared to pay an implementation fee to your supplier who must present a detailed cost schedule. As stated, your supplier must be a major factor in planning the time line; however, it is crucial that you do not short cut the necessary time line to save money.

The investment in proper implementation will pay off with continual accumulation of benefits that can be measured. All plant personnel who want proper MRO supply chain reliability need to be sold on your outsourcing plan; they all need to support the investment dollars necessary for success.



Tags: MRO supply chain MRO cost control MRO cost savings
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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