The Purchasing MRO “Mumpsimus”

By George E. Krauter

July 19, 2017 at 8:31 AM

Mumpsimus is defined as: “The adherence or persistence to an erroneous practice out of habit or obstinacy…A person who persists in a mistaken practice.”

In the world of MRO procurement, mumpsimus prevails with a persistency that is totally out of sync with modern purchasing practices. 

Applied intelligence in the areas of Plant Reliability Information Management (PRIM), Enterprise Resource Planning (ERP), analytics, automation, and the ever-expanding internet-of-things (IoT) allows procurement to continually improve techniques and profitability. These activities are professionally applied to the procurement of direct spend materials, but, when it comes to indirect spend considerations (MRO), this professionalism is lacking. Is this because of the 80-20 Prado theory – 80% of the dollars purchase 20% of the parts? In the world of MRO, it is much worst; less than 10% of the dollars spent create over 80% of the transactions processed. Although many dot com companies offer relief from this back office burden, there are many ongoing costs that still exist in the MRO supply chain.

The following data were extracted from a recent survey and white paper published by ReliabilityWeb.com – “MRO Best Practices”:  

The study uncovered these existing costs unrelated to piece price:

  • 40% of lost time for maintenance trades people is attributed to the lack of spare parts.
  • 80% of work orders do not have all parts delivered on time.
  • 25% of jobs must wait for parts.
  • Storeroom inventory stock turn goals are x2; actual turns are less than one.
  • 26% of surveyed companies have less than 60% of needed parts listed in the maintenance catalog; this means that 40% of parts are purchased as spot buys (at higher prices) without inventory control.
  • Only 57% of SKUs in the maintenance catalog have alpha and numerical listings; 43% of the listings have incomplete/inadequate/duplicated descriptions.
  • Only 53% of issued parts are charged to a work order or to an account number which effects inaccurate maintenance costs for affected assets.
  • 48% of the companies reported that inventory levels are not updated in near real time causing stock outs and overstocked SKU’s.

Four conclusions that can be drawn from this study; they represent concrete reasons why the mumpsimus syndrome must be changed:

  1. Lack of planning and tracking of MRO activity cause reliability issues and downtime.
  2. Maintenance and Procurement rarely communicate/agree on how the MRO supply chain should be managed.
  3. Technology is underutilized for MRO stores activities.
  4. Price should not be the determining factor in selecting a MRO supplier. 

Why does is this condition continue to exist when MRO represents the highest percentage of cost reduction available?

  • Relatively small percentage of total spend; “Why spend time on MRO?”
  • Lack of agreement as to how, what, or who is responsible for change improvement
  • Lack of change support from existing supplier base
  • Opportunity costs; no time to think about change (usually caused by MRO emergencies) 

The Answer?

The solution involves establishing, measuring, and evolving consistent processes without restricting resources. 

If any change to ongoing mumpsimus cannot be found internally, the solution is found externally by employing a company that manages the entire MRO supply chain as its core area of expertise. This “New Integration” effects optimum return on investment for major consumers of MRO materials. 

The mumpsimus opposite is sumpsimus, defined as: “A strictly correct expression or usage substituted for an old popular error.” In the world of MRO, being sumpsimus would be the act of embracing the “New Integration”; direct the management of a company’s MRO supply chain to a service provider with a history of success applying storeroom management, Master Data LeadershipSM, asset reliability, and connected CMMS technology .

 



Tags: MRO procurement indirect spend direct spend MRO supply chain MRO tracking
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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