Mro Connection Have The Experts Failed Us
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21-Oct-2014 -
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Transcript of Mro Connection Have The Experts Failed Us
MRO Inventory the
“Expert’s Monument to Failure”
Rich MacInnes Director, Professional Services Net Results Group, LLC
Thought Starter • If you are what you eat…
• Then MRO stock is what we think we are going to eat!
• So what statement is being made about your assets (equipment) or _______?
Poll Question 1
Q1: If MRO stock is "you are what you think you are going to eat,"
your MRO investment implies what about your asset (equipment) reliability ?
It’s a Wonder our assets
work at all
It’s a Miracle We Are Still
Alive
Stuff Happens, it’s better to
be safe than sorry
Reliability Up, MRO Stock
Down
Non-moving MRO inventory typically G r o w s
at an annual rate of 6.7%
and nearly 68% of all SKUs purchased on an annual basis will
never be used!
This is known as Waste!
Learn to See the UNASSEMBLED FACTORY
2007 estimates suggest that U.S. industries
purchased a staggering $136 billion in MRO
inventory that has yet to be consumed three
years later… a not so welcome to 2010.
• Sadly, cross-industry
statistics vary little,
where on average 58%
of MRO inventory
investment does not
move in any three year
period.
• Only 6% of parts
account for 90% of the
MRO inventory
expenditures on an
annualized basis.
Hoarder's delight… • On average only 17% of new MRO item adds
to inventory will be used within the first
month, with the second use nearly 8 months
later.
• It gets better for Hoarders as initial MRO
inventory orders > 2, 69% on average are not
issued within the first 3 years of acquisition.
• Given that significant percentage of MRO
items can be acquired quickly enough to
mitigate production risk and still meet
resource scheduling objectives, why are
companies becoming their own storefronts?
Just ask the Hoarders!
Asset Lifecycle - Future Perfect
1. Only produce exactly what is consumed in the market.
2. Only invest in assets that produce that which is
consumed in the market.
3. Only invest in asset that never fail over their useful life.
4. Achieve zero Total Cost of Ownership (TCO) for all
assets
5. Only invest in resources that enable the first four
future perfect objectives
MRO Lifecycle Insights That Matter
1. 80% of your costs are designed in
2. Demand first - Supply second
3. A toilet is critical, but do you stock a spare?
4. Value in Use trumps Book Value
80% of your costs are designed in!
Storerooms list with
OEM spares
Q2 - Poll Question
Do you have an effective method for determining the initial investment in spare parts?
Poll Question 2
Q2: We have effective methods for determining the initial investment in spare parts and
consumables?
Strongly Agree Agree Not Sure Strongly Disagree Disagree
Q3 - Poll Question
Do you have effective methods for matching supply of MRO materials to asset (equipment) demands?
Demand First – Supply Second
• The asset (equipment) creates the demand.
• Change Demand and Supply will follow.
• You can’t match supply to demand – without knowing demand.
• MRO Demand Patterns are sporadic and lack sufficient data.
Poll Question 3
Q3: We have effective methods for matching supply of MRO materials to asset (equipment)
demands?
Strongly Agree Agree Not Sure Strongly Disagree Disagree
A toilet is critical, but do you stock a spare?
• MRO Stock is Supply Looking For Demand.
• Today’s supply chain models rely on Failure being more Reliable than the equipment.
• The industrial supply chain is focused on pushing inventory forward… don’t play this game.
• Maintenance Planners try to maximize labor utilization.
• Apply Lean 5S methods for stocking locations
Q4 - Poll Question
Do you have effective methods for deciding what to stock and where to stock it?
Poll Question 4
Q4: We have effective methods for deciding what to stock and where to stock it?
Strongly Agree Agree Not Sure Strongly Disagree Disagree
Value in Use Trumps Books Value • Define Excess MRO Materials – Unknown MRO items are by
definition excess unless proven otherwise
– MRO items beyond their shelf life – MRO items that are obsolete – MRO items that are deemed no
longer used and/or needed – Readily available MRO items
regardless of criticality, in excess of one year’s worth of supply
– Capital spares regardless of criticality, that have had no usage in the last three years nor a forecasted failure/replacement event to occur in the next one year
• Focus on – Consumption Rates – Likelihood of Failure
• Versus movement
– Use Criticality Factor to adjust Service Levels
– Drive Supply Efficiency – Analyze Supply Surety
• More surety isn’t always good news
Q5 - Poll Question
We have effective methods for determining what MRO stock to keep or to dispose?
Poll Question 5
Q5: We have effective methods for determining what MRO stock to keep or to dispose?
Strongly Agree Agree Not Sure Strongly Disagree Disagree
Playing to Win Mentality • Playing to Win in MRO materials takes a
mindset that does not accept equipment failures as fait accompli.
• It views MRO inventory for what it is—
“Stock waiting for something to fail
before it has value.”
• “Failure is the only opportunity to begin more intelligently” – Source: Fortune Cookie