Here are a couple of curious observations:
- End users and providers of ERPs (enterprise management systems) are often technologically very backward in this specialty of managing MRO supplies.
- There are but a handful of specialists (experts) in this field who have developed any sort of advanced technological solutions, yet they remain somewhat obscure.
Whilst there is considerable knowledge and expertise available it does not seem to get far beyond those specialists.
Is There Complexity in the Management of MRO Materials?
Unfortunately, a reductionist and misguided view still prevails in the industry, where everything boils down to manually assigning Min/Max and EOQ to items in an inventory.
I could write dozens of pages explaining what is the real dimension and complexity of the discipline (risk analysis, economics, logistics, mathematics, statistics, reliability engineering, theory of constraints, etc.). However, as there is no room for extended explanations, I will give this illustrative example:
Suppose an inventory of just 1,000 items (a thousand stock codes); even if we set a maximum stock level of 1 (allowing just 2 options between 0 and 1 for each item), there are 21,000 distinct inventory positions, i.e., an astronomical number of possibilities.
The question that then arises is: Among these possibilities, which one, or ones, would be the best? As it can be seen, a reasonable level of complexity exists and certainly cannot be approached without the support of advanced analytical tools that, despite being available in the marketplace for quite a long time, most industrial companies either still do not know or do not use.
What is the Real Impact of MRO Materials in the World Industry?
Many companies have too much of what they don’t need and not enough of what they do, inventory levels tend to be higher than necessary, resulting in financial loss with working capital tied up to inventory.
There is an inexorable fact: every lack of material (stock-out) causes some sort of an operating expense (production loss, product downgrade or loss, cost with operating and maintenance maneuvers to keep the plant running, expedited freight, overtime, and lower labor productivity, among others).
Moreover, an ineffective spares management process can result in at least 20% – 35% of machine downtime due to its impact on repair times. This is often due to the lack of necessary parts and materials to perform repairs correctly and quickly the first time. The side effect is lower availability and, consequently, lower production volume, lower revenue, and lower profit. Compounding that we can find maintainers who will “make due” with what’s available, corrupting asset configuration and potentially creating even more downtime when later incidents occur with the same machine.
Paradoxically, despite significant production losses caused by a lack of spare parts, those losses are hardly accepted by management. Often we hear a claim: “Here in our company there is no production loss because any loss can always be recovered without impacting the production plan.”
Excluding spare capacity caused by lack of demand for the products, if there is always room to “recover production losses”, then one would conclude that the assets are being programmed to operate with float, and one of the reasons for this certainly is the assumed “unavoidable” delays caused by lack of materials. In other words, we assume there will be delays, build in slack to allow for it and then we can’t be behind! Prophesy becomes reality.
Part 2 will go over effective technologies to manage MRO Materials. Be sure to subscribe to our blog to receive an instant notification.
This article was written by David A de Castro, President of Brasman Engenharia, Brazil. He is a registered consulting engineer with an MSc degree in mechanical engineering. David has over 35 years of experience in maintenance and reliability engineering with large corporations and on-the-job training in Germany, Italy, Spain, Switzerland, the UK, and the USA. He has authored over 20 technical papers on maintenance engineering and MRO materials. For the past 10 years, David has specialized in scientific inventory control of MRO materials and spare parts. The work has involved developing and implementing innovative best practices and analytical tools to process facilities all over Brazil. David is a lecturer of post-graduation at the University of Salvador, Unifacs, Salvador, Brazil.
