Most manufacturing Organizations are littered with a high volume of low value items in the category of Maintenance, Repair and Operating spares and consumables MRO. Commonly referred to as indirect materials this includes items that encourage internal operations – from spare parts for mission-critical industrial equipment and tooling, to safety gloves and manufacturing consumables. In essence it is the ‘oil for The motor’ – absolutely crucial for productivity but frequently overlooked as firms focus cost-cutting attempts on capital spending and direct materials as opposed to MRO. As a consequence the class is not top priority from a tactical standpoint
What does bring MRO on the boardroom agenda is the realization that MRO can equate to a hefty percent of total spend. For those in businesses who are addressing MRO, the principal tactic utilized is targeting unit price. Using the Pareto principle, focus is centered on the top 20 percent of purchases which constitute the majority of what they purchase. Whilst often delivering cost Benefits, this method is subject to factors out of the control. Environmental and political volatility like the 2011 Japanese earthquake and instability from the Middle East influence on commodity based objects. In 5 Essential Elements to Unlocking Profitability from your Storeroom, we propose ways to produce a significant and sustainable bottom line impact by focusing on what you can control – your own consumption.
This may appear at face value to be a strange question. Surely we are focusing on reducing our use of MRO, not on what we do not use? Unfortunately statistics do not lie. Normally, manufacturers see their MRO grow at annual rate approaching 7 percent. This is compounded by the fact that nearly 70 percent of all items purchased on a yearly basis are not used. In essence, there are three ‘commodities’ which are being consumed – money, time and space. By identifying what is no Longer required obsolete or overstocked items a structured disposition strategy can turn this ‘dead stock’ into money.
Many organizations make the Error of discarding old machine spares, as they perceive them to be of little or no worth. However, there’s a buoyant mro industry for these things. From bearings to PLC’s, specialist business will purchase them, refurbish if necessary and market on. Freeing up space is a second Advantage of cleansing your MRO. Whether stock is stored at a centralized Engineering and Maintenance shops or in satellite locations like line-side, footprint has an intrinsic worth. By rationalizing the physical space consumed by your own spares and consumables, you can free up space for more productive pursuits. The final benefit relates to the time taken to travel, find and recover MRO by your own employees. At a macro level, the farther away these things are from point of use, the larger the effect is on staff productivity.