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Increase Profits by Reducing MRO Spend

As part of digital strategy, companies are identifying the need to control the spend on Maintenance, Repair and Operations (MRO) items. Unlike for direct items, demand and usage for MRO items vary depending on equipment failures. Predicting equipment failure and the need for required spare items is difficult. Companies tend to overstock repair parts but can still face stockouts of critical parts. Overstocking increases expense budgets hurting the bottom-line.

In a typical scenario, lack of integration of MRO Supply Chain functions is the fundamental reason why MRO inventory is not optimized. The integration needs to happen between:

  • Asset Management

  • Inventory Management

  • Sourcing and Replenishment

ERP systems allow an integration at the transaction level; but focusing on end-to-end processing to include both planning and execution is essential. Lack of upfront planning leads to sub-optimal results after implementation of any solution. Master Data Management and Data Governance, in addition to actual transactional processes, should be considered at the planning stage.

 

Some of the areas to look at during the planning phase are equipment/asset master data, Bills-of-Material (BOM) linkages, preventive and predictive plans, inventory safety stock and ordering rules, storeroom layout and practices, and supply base and efficiency in performance of transactions.

 

Hamiltonian’s MRO Optimizer analyzes the MRO parts ordering rules including Min/Max and adjusts the necessary parameters to suggest the appropriate quantity for safety stock and replenishment. Finding the magic number for every part is key to optimizing MRO purchases. The safety stock levels and the purchase quantities derived by replenishment methods are based on certain assumptions and individuals’ subjective decisions. The forecasts which drive the ordering rules originally start with assumptions for initial inventory levels. Subsequent ongoing replenishment should be based on:

 

  • Actual consumption

  • Equipment Reliability and Usage

  • Preventive and Predictive Maintenance work orders

  • Asset Criticality

  • Material lead time

  • Future Cognitive Maintenance

MRO Optimizer addresses Oracle Min-Max Functional Gaps:

  • Full blown Min-Max functionality is not available for Enterprise Asset Management (EAM)

    • Sub-inventory level min/max will not add up demand from Work Orders

  • Min-Max cannot work across inventory organizations (useful in shared maintenance)

  • Planned Orders should be accepted entirely or not at all

  • No way to analyze/optimize lead times, quantities or suppliers

MRO Optimizer maximizes Oracle Min/Max value:

  1. Planned Orders allow changes to be made before creating requisitions

    • User-friendly interface to change the values

    • Suggestions and ranking based on where the item is used, asset criticality and customer order status

  2. Min-Max quantity adjustment suggestions can factor in:

    • Asset criticality

    • Equipment Constraints

    • Past Usage

    • Future Usage based on planed production/customer orders

    • Planned Maintenance (PMs/PdMs)

  3. Creation of Asset BOMs periodically from item issues

  4. Item lead times are optimized to:

    • Assign items to lead time buckets (ex: 1 Week, 2 Weeks, 4 Weeks etc.)

    • Change the lead time in items based on POs, receipts, and supplier response

  5. Min-Max can work across orgs/sub-inventories to:

    • Look at inventory from other orgs that can be transferred to cover immediate needs

    • Separate item needs for special projects