Thought Leadership and the Demise of Your Third-party MRO Outsourcing Program

By George E. Krauter

August 28, 2018 at 7:21 AM

When one defines third-party MRO (3PMRO) success, one assumes that fundamental operations are being executed and that expectations are being met (i.e., ROI goals are surpassed} and that benefits are sustained throughout the term of the agreement.  However, under some circumstances, success can be inhibited by detractors.

Experience shows that there is almost always someone and/or a group of “someones” in the plant who are against the change of procedure (i.e., introducing a 3PMRO approach} and that will look for ways to defeat it.

I will write a series of blogs that will highlight the thought leadership necessary for you to recognize potential pitfalls when addressing the resistance challenge. Opponents to your idea of implementing a 3PMRO approach could employ a strategy to denigrate and destroy the value you have been attempting to build up as you work to accomplish your new agenda.  

Below are five pitfalls that, if obstructionists have their way, could hamper your efforts:

#1.  Adding functions - The obstructionist adds functions to the original scope of work without an agreement to add a cost of additional personnel needed to perform those added functions. The 3PMRO provider now has more responsibilities to manage resulting in a lack of performance; the obstructionist now claims the 3PMRO is either uncooperative or incompetent.

#2.  Denial of use of previously-approved new brands/parts - Continual improvement is an important factor in the scope of work; the introduction of new brands/products for increased productivity surrounding particular SKU’s is essential. The obstructionist will approve the use of the new part and then, after its application, claim malfunction and claim that the provider only proposing substitutions to increase profits. This puts the provider in an unwarranted position and could cause defeat. It also derails any incentive to increase productivity.

#3.  The use of purchase cards - If “P” cards are allowed to exist in the plant after 3PMRO is installed, the obstructionist can purchase parts around the 3PMRO store operations resulting in increased uncontrolled inventory (in sub-stocks} and obsolescence in stores. In addition, on any given day, the obstructionist can get a preferred supplier to low ball a price in order to show that the 3PMRO provider is “high in price and costing the company money”. If allowed to permeate, defeat follows. The “P” card must be eliminated or more tightly controlled in a 3PMRO environment.

#4.  The requisitioning of large (unneeded) quantities of a SKU causing a shortage of stock - The obstructionist will requisition a large quantity of a particular SKU knowing that those same parts are used by other departments. When the provider has issued the max quantity to one requisition, there is a period of time when there is a stock out. When another requisition is submitted before stock can be replaced, the provider is charged with a stock out­ and frequently accused of causing downtime. The obstructionist can now claim that the 3PMRO program has failed because parts are not available when needed. In these cases, the plant was not out of the needed SKU; the storeroom was out because of the action of the obstructionist.

#5. The drawing out of critical spares during non-storeroom hours - The plant has earmarked specific SKU’s as critical to operations; the provider has agreed to 100% fill rates on these critical spares. The obstructionist is aware of which parts are marked as critical and can go into stores during dark hours and remove the part in question. When the storeroom reopens, the obstructionist can request the part knowing it is not there; the provider can now be charged with creating downtime for not having the spare part as agreed.  “This program is not working; they are always out of the things we need,” is a common message that the obstructionists try to propagate.

When deploying a 3PMRO program, recognizing potential pitfalls before they occur can avoid unnecessary costs and can safeguard profitable operations. 



Tags: MRO outsourcing MRO delays MRO costs MRO obstacles MRO goals
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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