24 July 2012
Benefits in store with managed MRO
What do the uninitiated need to know about managed MRO and how it can benefit manufacturers today? Steed Webzell gets the inside view from the providers
What can manufacturers really expect from outsourcing managed MRO services? Improved stock accuracy is often cited as a major benefit, as is product availability – essential if the spare part is to prevent costly downtime. In truth there are many advantages, but which ones make the most impact?
"Manufacturers in all sectors must continually seek ways to reduce costs, optimise cash flow and improve performance across their operations to remain competitive," states Jeremy Salisbury, head of marketing at MRO firm, Brammer UK. "Purchasing spares for the maintenance and repair of manufacturing plants is often complex and time consuming, but critical to production continuity and the avoidance of costly downtime. Well managed, this area can generate major cost savings."
"Sharper management of MRO procurement and stores activity can make significant improvements in both plant efficiency and economy," concurs Paul Lynch, commercial director at MRO supplier, Eriks. "Stores need to be accessible and well organised to keep the factory floor running smoothly. If they are, then the arriving engineer will find the equipment they need quickly and easily without wasting time."
Outsourcing can save plenty of headaches, as well as time and money, especially where purchasing is concerned. There are a number of reasons for this, as outlined here by Eriks and Brammer.
- Improved procurement efficiency
Where the procurement and spares management process is large-scale or complex, there is much to be said for outsourcing part or all of it to a specialist MRO partner. This can streamline processes by reducing the number of vendors that a company uses. Consolidating the supplier base also means fewer invoices to process and less time spent sourcing parts, allowing maintenance teams to concentrate on other, value-added projects.
Outsourcing MRO spares management can reduce total acquisition costs and working capital, while with the right partner it is also possible to add value to the engineering team to support plant uptime and improve production output and efficiency. In the current economic climate, with capital investment restrained and plant asset life subsequently extended, an effective strategy in this area can be key to improve manufacturing plant reliability and achieve higher operational and financial performance.
- Purchasing power
Put simply, it's the economies of scale – buying typical MRO products in bulk for a host of different customers means negotiating extremely competitive prices.
- Stores as a service provider
If required, an outsourced MRO partner can handle entire stores operations, supplying a dedicated team of on-site staff who understand the customer's products and who are trained in best practices for stock and warehouse management. This solution not only addresses immediate problems but prepares for the future; outsourcing providers can monitor the stock so that gradual or sudden increases in the use of a particular spare part help identify potential problems on the factory floor. The store operation thus becomes a second line of defence alongside condition monitoring in the predictive maintenance programme, protecting productivity and efficiency.
- Reduced TCO
The total cost of ownership (TCO) is at least as important as the initial purchase price in the procurement of maintenance spares. However, the drive to reduce costs may tempt some companies into shopping around for the lowest unit cost – an approach which could result in choosing an unauthorised distributor. This introduces risk into the supply chain, as products from an unauthorised source may not be to the latest specification, may have been incorrectly stored and handled, or may even be counterfeit.
- Improved inventory management
The detailed management reporting offered by some suppliers will track component use, thus creating greater transparency and providing the basis for optimised stock through usage analysis and targeted reductions in redundant stock. A professional supplier can also help reduce working capital by performing stock profiling, standardisation of products and brand rationalisation.
- Reduced inventory
Even without moving to a fully outsourced solution, manufacturers can avoid having capital tied up in stock by reducing their inventory. There's also no need to worry about missing parts creating downtime – the MRO partner's service centre can identify and stock plant-critical items so that they are available as and when required.
- Reduced inventory costs
Improved stock management practices, supported by technical consultancy and applications advice can help engineers standardise their spares strategy, delivering cost savings and efficiency improvements through lower TCO. Consequently, outsourcing provides a strategy that consolidates MRO spares processing and handling costs but can also rationalise the supplier base, the number of spare parts used and stock held, as well as guaranteeing ongoing support when needed.
- Less downtime
The difficulty with on-site management is that the engineers themselves are often required to complete the paperwork necessary to order replacement spares. With this in mind, it is easy to see how problems can escalate. If the engineer is, understandably, keen to get back to the work for which he or she collected the spare part, correct stores maintenance can be neglected.
The more neglected stores become, the longer it can take to locate parts on the subsequent visit. In the worst case, the plant could end up without an important part because the last one was removed on the previous visit to the stores, or the time before that, and nobody noticed. Before long, the plant is at a standstill while a replacement is arranged.
Even without major crises to grapple with, it is simply not efficient to run stores with, for example, little or no stock rotation to maximise supplies and keep replacement parts in a usable state. So, using a partner to manage MRO can help to eliminate downtime as a result of poor stores management, while boosting productivity and profitability.
- Reduced working capital and improved productivity
Efficient maintenance spares procurement and management can contribute to improving overall plant efficiency, helping maintain production continuity and avoid costly downtime. Conversely, inefficiencies in MRO supply management can affect site performance and profitability. Duplicated costs, missed opportunities for improvements and unplanned downtime all place cost and operational performance pressures on a site.
- Stock optimisation
By conducting a survey of stores and inventories it is possible to establish precisely which components are critical and which are not.
Again, the advice sounds obvious but a little lateral thinking can reveal potential savings. A manufacturer may be storing 'critical' items such as large bore bearings, for instance, but if it takes a day to strip the old one out of the machine
then it is unnecessary to incur the expense and additional effort of holding them in stock. And in any case, if plant efficiency is being maximised via the regular use of condition monitoring equipment, there will already be a clear indication of when components are expected to fail, thus prompting a replacement to be ordered before it is needed urgently.
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