Many owners often overlook the importance of MRO items in their supply chain since they don’t directly become part of the final product. The proper allocation of maintenance and repair operations could make or break the value chain - and that seems to be underappreciated. Proper MRO contributes to the overall safety, success, and longevity of your business.
In this piece, you will learn about poor MRO practices, their impact on your supply chain’s output, and how you could undo these malpractices.
The impact of poor MRO practices on the supply chain
MRO management strongly determines your inventory management practices. When things are running smoothly, organizations can predict their next moves and easily maneuver to avoid over- or under-stocking inventory. During times the inventory management gets thrown off, the MRO practices are put to the test. A stack of poor MRO practices can directly impact the company’s profit margin - for the worse.
The ways poor MRO practices hold your supply chain back are as follows:
Improper maintenance and repair amplifies the risk of untimely equipment malfunction. These lapses in maintenance can open doors for downtime and can severely impact the final yield.
Unoptimized MRO stock management increases the possibilities of MRO stockouts. These directly lead to unplanned downtime as well as further MRO costs.
High freight expenses.
The aforementioned setbacks to your supply chain can have a snowball effect and cripple you from meeting your deadlines. And with mismanaged deadlines come upset collaborators.
Common challenges in the MRO value chain
While MRO is considered necessary — not enough business owners strategize about it.
In a supply chain, a manufacturer, distributor, and shipping company each have different MRO requirements - and that makes it difficult to manage MRO across the entire supply chain. This alone rises a myriad of hurdles within the MRO sphere, which brings us to the common challenges an MRO value chain faces.
Limited integration in the value chain
While MRO might seem perfect for the factory floor, in theory, many companies recognize an integration gap for different parties in the MRO value chain. Other chains exhibit much more collaboration and integration than MRO’s.
Take the food value chain, for example. Partners like farmers, manufacturers, and retailers work together making the success of the chain go hand in hand with their efforts. They share vital information on expenses, sales, and future demands. This requires collaboration and making sure the value chain can respond to the needs of the hour.
However, in MRO value chains, even if auto-identification (barcoding) of materials is implemented by equipment and parts suppliers, it is fairly exclusive to their operations. The same barcodes could not be read by their customer(s).
Low maintenance productivity, operational visibility and inventory accuracy
Despite the efforts and investments of companies into ERP (Enterprise Resource Planning) systems, many remote workers in the field, factory floors, and warehouses remain disconnected and have to make do with inefficient, paper-based processes.
To confirm the completion of tasks or collect newer ones, maintenance engineers have to make frequent trips which significantly slow down productivity. The time lag present between physical work and updates within ERP systems also hampers real-time visibility of operations as managers always see a delayed view of the inventory accuracy.
Weak or missing MRO processes
These challenges are extensions of the prevalent flaws of ERP systems. Most of these missing links in the MRO chain cause significant costs to the company and force them to develop their own solutions to fill these gaps.
Some of these weak or missing MRO processes are:
Kitting: The assembly of work orders in the warehouse before they are needed in the field to avoid shutdowns or turnarounds.
Gray Inventory: Excess inventory often gets ordered before the supply chain starts working. With modern ERP systems, these often go under the radar and are never returned to their respective warehouses. This is called ‘gray inventory’ and can lead to substantial inventory value if not sought out actively.
Preservative Measures: Insurance spares and equipment are saved for critical failures within the plant. This is slow-moving inventory and may stay in the warehouse for years. Due to their extended stay, these spares and equipment require regular maintenance such as greasing or lubrication. Companies often overlook these preservative measures resulting in unfit spares.
Poor maintenance planning
A poor maintenance strategy can turn your maintenance and repair operations into a loop of unproductivity. Technicians get less time to work on measures, thereby leading to higher maintenance backlogs in MRO.
What’s a bad maintenance strategy? Waiting for things to go wrong instead of monitoring faults and avoiding unplanned downtime. In such cases, the entire supply chain functions in a reactive mode instead of a proactive one.
How to improve your MRO practices to make your supply chain more productive?
The answer to these potential problems may be as follows:
Central MRO Inventory Locations: Storing MRO supplies in one central, trackable location can simplify MRO visibility manifolds. Once your enterprise is equipped with computer systems to track, manage, and control inventory, you can size your MRO inventory according to the supply chain performance standards.
Educate the MRO staff: Educational efforts such as seminars on inventory management help understand the importance of adhering to the best MRO practices better. Familiarize your MRO staff with the following areas to leave no loose ends -
Determining where the inventory exists across systems that are tracking the inventory.
Working out whether a company will build or buy their order management systems to figure out the needed level of customization.
Deciding on updating the entire order management system or tracking a real-time view of inventory.
Building a business-case to justify the investment.
Assessing various vendors to see which is the best suit.
Establishing key performance indicators (KPIs): These will help audit and measure factors such as savings, costs, and obsolescence in MRO. Some KPIs could be:
days or months of on-hand inventory,
the number of stockouts,
the ratio of rush orders to replenishment orders, and
rates of parts obsolescence.
Standardizing the business processes: Putting up standard business processes in place allows business owners to develop an accurate database to better schedule maintenance activities and effectively forecast costs. Standardizing business processes, along with stocking processes and analysis, can be instrumental to developing an accurate, up-to-date fact base.
As the year starts to unfold, so do the needs of supply chains. It’s essential to watch out for poor MRO strategies and prioritize the efficiency of supply chains. How your enterprise uses its resources to combat unplanned downtime and maximize returns will determine your supply chain sustainability in 2022 and beyond.