Throughput and MRO Connected? Who Would have Thunk it?

By George E. Krauter

February 02, 2016 at 8:11 AM

One of my best friends, Alice C., has been named the CEO of a consumer products company, HHPC (fictitious name, fictitious company; real scenario) with six manufacturing locations spread across the U.S.   

This highly competitive market requires that HHPC products be delivered on schedule with quality levels that insure market expansion. HHPC has six critical functions necessary to manufacture reliable products: welding, molding, metal removal, gear cutting and assembly.

Manufacturing throughput time is the time required when raw materials first enter the manufacturing process until the finished product is ready to be shipped. In order for each step in the process to be at optimum, all steps must function on time and proceed in the quantity necessary for the next step to take place. Optimum throughput time is dependent upon the reliability of the assets (machines) necessary to make the components, the reliability (work ethic) of company associates, and the reliability (spare parts on hand when needed) of the MRO storeroom. Total throughput timing consists of process time, inspection time, move time and queue time.

When Alice assumed the CEO position, she thought that her first concern would be the supply chain (including pricing) of the materials needed to produce HHPC’s products, i.e., plastics, metals, tubing, wire, electronics and prefab components. This spend for “production” materials amounted to 73% of her annual budget; not included was capital spend as well as indirect expenditures. Seventy-three percent should certainly claim attention.

Next on Alice’s list was the condition and reliability of the plant’s assets necessary to produce product reliability, and third was all the other plant functions lumped together of which she assumed to be of a comparative minor consideration.

Upon investigation, Alice found that the supply chain was functioning just fine. Purchasing and logistics were at optimum regarding the various commodity markets; the suppliers were doing their job and reaching their KPI (Key Performance Indicator) goals. However, throughput seemed to have some hiccups; product was not flowing through the process adequately in order for delivery promises to be met. Just what was causing these bottleneck delays? 

Alice went to the production floor and guess where she found the biggest flaw? The drawback in HHPC’s quest to be the number-one American supplier of its household products? If you guessed the unreliability of the MRO storeroom, you win. 

Who would have thought that MRO could be that important? Five percent of the spend dollars cannot be important; well, as it turned out, it could. The lack of spare parts caused an expansion of the mean time to repair (MTTR), which in turn, caused a backup in the flow of production, also known as increased queue time resulting  in missed delivery promises. Do customers go elsewhere because delivery promises are not met? You bet!  Does an unreliable MRO operation cause a company to lose clients? Lost sales? Sounds like it.

Recognizing that without sales, there is no need for purchasing (nothing to purchase), no need for accounting (nothing to count) and no need for manufacturing (nothing to make), Alice concentrated on the factors that would insure customer retention: On-time delivery of quality products exceeding client requirements. Here is what she delivered:

  • Maintenance was tasked with identifying parts (critical spares) that, when missing, would extend MTTR. 
  • A company was hired to name all SKUs properly in all plants and to identify duplications.
  • Inventory was “right sized” based on revised min/max data and EOQ (Economic Order Quantity) analysis. 
  • Identified critical spares were placed in stores in each plant with RFID tags tying them to each particular asset.
  • A  MRO supply chain services expert provider was selected to operate all phases of MRO operations, onsite, in all manufacturing facilities. A jointly written specific scope of work that met the needs of HHPC was implemented.
  • The MRO expert agreed to certain KPIs that assured MRO reliability, i.e., no time wasted in the queue waiting for spare parts—zero downtime caused by MRO deficiencies.
  • MTTR was at optimum; the previous time/cost drag on production was recovered.

HHPC is reliable, its sales and marketing offering delivers what is promised reliably. Fixing MRO failures fixed HHPC performance back to number one in the market.

 


Tags: purchasing MRO indirect Supply chain management Procurement manufacturing sourcing maintenance reliable plant
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

You must be logged in to leave a reply. Login »


Related Content

Thought Leadership and the Demise of Your Third-Party MRO Outsourcing Program: Part 4

George E. Krauter

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} Read More

Guidance for Addressing the New Talent Acquisition Challenge

Dennis Bouley

The US Labor Department reported in March of this year that there were 6.6 million job openings, a record high. Although most of us applaud these numbers Read More

Millennials in Supply Chain Management Seek Advancement and Development Opportunities

Marisa Brown

Millennials working in the supply chain management field don’t fit the mold that the older generation assumes for them. APQC’s recent study Read More


Supplier Profiles

Staples

Staples Advantage is the one supplier that offers all the business solutions you need, all with the expertise of a specialty vendor. Read More

Digi-Key

It started in 1972 with an idea, a new concept in distribution. Today, Digi-Key Corporation is one of the fastest-growing electronic component distributors in the World. The stimulus for this growth is Digi-Key's customer-centered business philosophy… Read More

Lunney Advisory Group

Lunney Advisory Group was founded in 2007. Our firm is not your typical consulting company. Some members of our firm are highly qualified and experienced industry executives/practitioners while others are full time or adjunct university professors.… Read More


Webcasts

What CEOs Expect Of Purchasing

Guest Contributor

Procurement and supply management leaders have a seat at the table, and management’s expectations are high. But what do CEOs really want, and is purchasing delivering on these expectations? This webcast looks at how procurement and supply management … Read More

Growing Purchasing Influence On Indirect Spending

Guest Contributor

At world-class companies, purchasing’s influence touches just about every area of spending. But, how exactly do procurement teams get to the point where other departments approach them for help with sourcing such indirect categories as human resource… Read More

Procurement-Finance Collaboration

Guest Contributor

Procurement & finance are two business functions which are often at loggerheads with each other. One reason for this is the lack of perception alignment on an important metric of procurement and finance performance - 'savings'. Read More