By George E. Krauter
It all started with one key large company manufacturing executive proclaiming “Something must be done to improve MRO’s contribution to our business goals”. That lead to a realization that reliability goals of plant maintenance and plant engineering could not be met without the support of a world class MRO storeroom operation.
A procurement manager responsible for capital expenditures was assigned to the MRO project (let’s call her Ally); she discovered that MRO spend was just 20% of the capital budget but that MRO-related tasks consumed 85% of her time. She realized she had to rid herself of the daily burden of MRO administration and still achieve the improvement goal requirement.
As part of her action plan, a scope of work (SOW) was drafted that included a fully operational supply agreement with an experienced provider who committed to managing the entire MRO supply chain. Senior management participated, approved, and directed that the SOW be implemented. The SOW included the projected savings and asset reliability benefits that could occur across several targeted plants. Ally was held accountable for the success of the project.
How nine plants became operational within three months of action plan deployment.
Ally presented the SOW to nine plant managers and the maintenance managers of each plant at a single meeting. Objective and subjective objections where addressed and resolved. A schedule of implementation actions with a time line was established for each plant; implementation occurred per the schedule within the three-month goal. Ally and the provider visited each plant to oversee implementation.
How savings were achieved
A list of savings-related goals was established for each plant; both financial and non-financial.
The provider and their major MRO sources were required to provide savings that would achieve the goals. Existing costs were determined for each item on the goal list, e.g. Price, Freight, Inventory Cost, etc. After six months, actual performance was measured vs. goals.
How asset reliability was improved
The provider was required to provide engineering services with evaluations to improve manufacturing processes and to recommend new MRO products that would provide higher levels of reliability. These actions were monitored and the savings approved per plant.
How the benefits were sustained
In the world of MRO, improvements have a tendency to revert to old procedures and old established suppliers when sustainable measures are not in place. A major contributor to this phenomenon is often a change in responsible personnel. Ally was promoted mainly because of the profit contributions she drove as a result of the MRO reliability project. Too many times, a new manager is assigned to MRO without the knowledge of what the traditional MRO set up was compared to the current state.
To sustain an improved MRO management process, measurement of performance must be recorded and be made available to any new member of management connected to MRO. There must be a hand off requirement; Ally made sure the new manager understood the need for change and the reason to sustain the new approach.
In addition, the provider must record and present benefits achieved and improvements activated to insure longevity for the plants and for extensions for their contract.
In conclusion, MRO represents the highest percentage of cost recovery available to the procurement community and should not be ignored. Specifics regarding this particular case study are available from firstname.lastname@example.org.
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: email@example.com.
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