MRO. Spare-parts supply. Supply-chain optimization. Whatever you call it, keeping your site properly stocked is a core business concern for any industrial facility. While the term “MRO” (standing for maintenance, repair and operations) may sound like technical jargon, the consequences of good or bad MRO strategy directly affect your bottom line. Lacking the right spare parts when needed can have devastating consequences for asset owners or operators. MRO is essential to technical asset management and is best seen as insurance against various risks threatening facility operations.
Bad MRO is a cost you don’t want to pay
Take one instance from a retail store in Ningbo, East China. Recently, during a power outage, the diesel engine on the site’s backup generator failed to start. Discovering that they lacked the needed spare parts for a repair, and would need 24 hours to source a replacement, the facility was forced to shut down for a full workday, with all fresh and frozen food thrown away. For lack of proper MRO strategy, the site lost huge sums of money on revenue and inventory – a disaster that could have been reduced enormously by having the MRO inventory on hand and combined with a solid preventive maintenance plan.
Good MRO is increasingly digitalized & strategic
Optimizing MRO is a highly specialized inventory management task, requiring deep understanding of each asset’s operational context and its contributions to overall plant performance. In short, different assets have different levels of criticality and the best MRO strategy draws on principles of ISO 55000 to identify the strategy for each spare part. As seen in the case from Ningbo, the single biggest source of savings lies in harmonizing your site’s level of MRO inventory against the criticality of various assets they serve.
For MRO, risk analysis usually takes precedence over logistics and direct cost reduction considerations. A good MRO team can conduct this important task jointly with the client, facilitating the whole process through a digital platform, such as Akila.
Integration with a digital platform brings many advantages. Among two of the biggest:
- Providing a single source of truth on information about asset criticality, asset health & maintenance plans, as well as spare parts movement based on data (either collected from a fresh audit or from clients’ existing system).
- Continuous running of advanced marketplace analytics. These can proactively point out optimization opportunities.
Through this continuous analysis, substantial performance improvements are identified & captured:
- Better protection against unanticipated breakdowns whose costs can quickly reach millions.
- Reduction of “ghost stock” and an immediate clean-up of inventory not related to critical or important use.
- An opportunity to integrate multiple teams doing MRO on their own as “small fish” with little pooling or coordination.
- Definition of an MRO care plan. This typically avoiding 5-10% write-off yearly through the proper preventive care of stored items.
Business benefits from an MRO plan
Once the risk & opportunities are clearly established within the framework of the overall asset performance, and the MRO stock is managed accordingly, the following optimization strategies – or a combination of those – can be executed:
Optimizing MRO procurement has a measurable impact on your bottom line. Too many businesses underestimate the total amount they’re spending on MRO due to hidden costs within the procurement process. While individual products are typically inexpensive, research suggests that the average organization spends twice as much on procurement as on the product itself. With the right strategy, you can find and eliminate those inefficiencies and maximize your purchasing power.
Strategic partnership keeps your costs down in several ways:
- Supply chain consolidation
- Price deflation – volume leverage, global supplier network
- Inventory optimization – inventory reduction, buyback, etc.
- Reduced downtime
Easy plugin, easy scale-up
When you shift from decentralized to unified MRO, getting all teams on board can take time. The fact is, different teams may have different levels of readiness for change, and some may hesitate to disrupt familiar purchasing networks.
The good news is that nothing speaks like results. One of MRO partnership’s greatest advantages is how easy it is to run a pilot that plugs just one team into the global MRO network and then scale up after value has been proven and wider acceptance begins building up.
Aden’s MRO team has done just this for hundreds of MRO customers in Asia. But, by linking one team into our wider MRO services by being on-site for collaboration every week, and delivering concrete value in a short time, we were able to produce an immediate gain that opened the door to further gains on other teams.
More time for core business
MRO is a high mix, low-volume business. If you do it on your own, that means continually making small orders, with plenty of time drain on various teams. Remember, switching to a strategic MRO partner isn’t just about what we’ll do for you. It’s about what we free your people up to do after we come in.
The fact is, many companies only realize how much of a time and energy burden doing their own MRO is after they have outsourced to a strategic partner. The numbers can be staggering – hundreds of suppliers and thousands of purchases at a time.
With a strategic partner, that’s all shifted away from your employees, with your teams seeing a marked freeing of resources and attention to detail in work.
Sustainability & waste reduction
Good MRO is about pinpoint accuracy: forecasting maintenance needs and parts replacement, then buying just the right amount – no more, no less.
This leanness isn’t just a financial win, it’s an environmental win. With every surplus purchase comes extra packaging, energy consumption and carbon burning through the shipping and transport process.
With a strategic MRO partner, you can improve sustainability and reduce your carbon footprint by:
- Streamlining your supplier network – ship more parts in fewer C02-burning trips.
- Cutting out redundant purchases.
- Specifying what kind of suppliers you want to buy from and making sure all purchases meet your in-house sustainability commitments.