The purchasing and management of spares for the daily operation, maintenance and repair of production equipment is often a complex, time- and resource-consuming issue, but remains critical to maintaining production continuity and avoiding downtime.
This complexity often means internal purchasing and engineering maintenance teams spend significant time dealing with immediate requirements to keep production lines running. This impacts significantly on productivity and effectiveness, meaning time to focus on proactive and strategic projects to improve MRO procurement, or maximise production output and efficiency, can be scarce.
However, a proactive approach to optimising spares management can deliver significant operational and financial benefits for manufacturers. Recognising the complexity and opportunity for improvements is leading more and more companies to outsource some or all of this function.
For example, a plant’s spares requirement normally involves many thousands of stock-keeping units (SKUs), many technically complex and only used on specific equipment. They vary greatly in volume and value, meaning an organisation must be able to economically order, receive, handle and store components costing from a few pounds to thousands of pounds. Most MRO items have an erratic demand pattern, with only around one-third of consumption repeating in consecutive years. Frequently, items come from a wide range of companies, meaning the organisation rarely enjoys any purchasing leverage.
Another key issue is the relative roles of buyers and stores personnel. At worst, “promiscuous buyers” court multiple quotes from different suppliers to get the best deal on the day – failing ever to leverage the potential of focusing on one or two key sources, while also building excess transactional costs and overhead inefficiencies into the purchase ledger function. Similarly, “stores squirrels” acquire greater quantities of items than necessary, to obtain a volume discount – ending up with piles of non-moving stock which tie up cash and ultimately become obsolete and written off. This is often compounded by a “just in case” mentality where, to avoid downtime, parts are held in unnecessary quantities as insurance against a possible sourcing delay.
Focusing on lowest price per item is rarely the best policy for engineering components – in fact, in almost all cases, total ownership cost is at least as important.
Best practice is geared around both optimising inventory held on site, which should be routinely profiled to ensure accuracy and alignment with key component consumption, and a focus on standardising key products and technologies throughout the plant. Leading-edge manufacturing companies harness the independent advice available from professional MRO distributors in both areas. Whether it is identifying the best product that can deliver efficiency benefits - such as extended life, faster changeover, reduced maintenance intervals or reduced energy consumption; or providing real time analysis of spares demand patterns to enable stockholding to be optimised and ‘bad actors’ to be identified on the shop floor, the role of the professional MRO distributor can add serious value..
With the ever-present need to minimise business costs it has to be questioned how much time it is worth spending on making phone calls or sending emails to save a couple of pounds here and there. Not only will introducing additional suppliers ramp up business costs further, but an approach based solely on lowest price may result in companies unwittingly choosing unauthorised distributors to supply their requirements – meaning products may not be to the latest specification, may have been incorrectly stored or handled, and may even be counterfeit.
Outsourcing the entire process can remove all these issues – but once the decision is made to outsource spares management, how should it be implemented?
One proven solution involves establishing a dedicated site-based service (or ‘InsiteTM’), geared entirely to meeting the customers’ needs in terms of inventory management, expertise and technical support. Total acquisition costs are significantly reduced, as the company now deals with only one supplier for all MRO requirements, and real business benefits are delivered from the process improvements, stock management systems and technical support provided through this partnership approach.
This frees up in-house procurement, engineering and maintenance teams to focus on other more valuable activities, while allowing the company to access impartial advice and added-value services which can impact strongly on operational performance and profitability.
Reliable management reporting will track component usage, creating greater transparency and providing the basis for stock profiling, redundant stock analysis and targeted reductions in inventory and purchasing costs. Stock profiling, combined with vendor-managed inventory, will result in product and brand rationalisation, reducing spares stockholding and working capital.
Meanwhile, technical consultancy and application advice that can identify process improvements, improve energy efficiency and provide products with a lower total ownership cost are further examples of how this approach can help ensure downtime is minimised and plant operational efficiency optimised.
Outsourcing MRO spares management to an authorised, professional distributor such as Brammer represents far more than just a way to deliver short-term savings through reduced administration and supplier liaison – it ensures continuity of supply and allows the l MRO partner to enhance the customer’s cashflow and reduce working capital through optimising spares inventory. Perhaps most importantly, it delivers an environment where customer and supplier can engage proactively to deliver operational performance and profitability improvements to manufacturing operations whilst eliminating risk.