Looking for new ways to find savings in your manufacturing operation? Dive in to MRO spending and find out how to tackle the chaos in inventory management and process and policy controls. Become accountable and reap the TCO rewards.
It’s no secret to purchasing managers: You can no longer afford to ignore or dismiss maintenance, repair and operations products used every day on the shop floor. It might not feel like these components and parts used to machine products and keep workers’ body parts out of harm’s way are part of your cost-control duties. If you want to influence MRO spending, they need to be on your radar, say MRO, supply chain management and purchasing experts.
The nuts, fasteners, helmets, gloves, eyewear, machine lubricants and cutting tools all matter because they all have a cost to acquire, to store and to replenish. And what if you have separate manufacturing operations with their own profit and loss numbers and distinct budgets? How are MRO supplies being handled across separate operations?
When done right, supply chain management has the potential to truly reduce total cost of ownership. When left unattended, MRO costs can account for upward of 40 to 45 percent of manufacturing expenditures, according to Supply Chain Management Review. As the Material Handling & Logistics white paper “It’s Time to Rein In MRO Spending: 7 Tactics for Reducing MRO Inventory Costs” finds, you can uncover MRO cost-saving opportunities in “hidden places” by eliminating departmental roadblocks and bad inventory management habits.
Take Measure of Spending Across the Supply Chain and MRO
“MRO supply is often overlooked as an ‘inventory’ responsibility; as a consequence, it is rarely handled with the rigor and attention that it should be,” writes Supply Chain Management Review in the article “The Case for Managing MRO Inventory.” “… MRO supply activities have little direct accountability, and are driven too often by stockouts rather than any overarching supply chain plan.”
Anecdotally, the article shares examples where MRO inventory is expensed but sits somewhere on the shop floor “without any identifiable locator system, ID, or a usage history.” The result? It’s difficult to understand true costs. If MRO products are unaccounted for or there is little to no information about how often an item is used, MRO spending can become chaotic and costly pretty quickly.
“If the MRO storeroom is unreliable, engineers and other workers often will take more than they need and create uncontrolled substocks in the plant,” says George Krauter, supply chain expert and author of Outsourcing MRO: Finding a Better Way. “If there is vertical integration, duplications could be optimized.”
More organizations are beginning to see how to drive process and supply-delivery efficiencies that balance shop floor needs with cost control. Research firm Aberdeen Group finds best-in-class MRO performers report superior operating margins, lower maintenance costs, better return on assets and less unscheduled downtime (2 percent versus 5 percent) when compared to the industry average.
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Fantastic read! I really enjoyed the article "It’s Time to Rein In MRO Spending: 7 Tactics for Reducing MRO Inventory Costs.” I recently started at a company with a small foundry and the MRO was not well-maintained and our currently VMI has been unchecked for the better part of 2 years. I'm coming into a new position, with a new company, in a new industry. I'm currently exploring other MRO solutions, such as vending machines and VMI with other companies. Thanks!
150Thank you for the positive feedback.
132The ten questions are a very important start to reigning in MRO costs. I feel they give positive direction to where a business needs to go in order to control costs, create better efficiencies and increase output effecting the bottom line.
142Thank you so much for the feedback, Bill.
138Are you able to email me this article to my company email? Thanks, Kim
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