How come our MRO spend is over budget? Can it be that “Bearing Room” by chance?

Published February 14, 2017

A malfunction in a company’s MRO supply chain was determined to have negative effects on its profit goals. This was the situation that existed and the solution the company implemented to correct it.

An aircraft equipment manufacturer was faced with a highly competitive market and needed to expand its EBITA rate to satisfy the board. The plant manager was optimizing plant assets to maximum reliability and cutting costs in other areas except in the MRO supply chain. Each maintenance discipline had budget goals; however, to deliver a reliable process flow, down time of any asset could contribute to plant failure.

The maintenance function depended on an efficient MRO supply chain that did not exist. MRO requisitions that were sent to Purchasing were never questioned because Purchasing did not want to be blamed for down time due to a lack of parts; inventory expanded. MRO requisitions are placed for two categories of parts: parts for inventory replacement and spots buys, so-called noninventory, one-time buys. Often, these one-time buys were for parts with existing inventory SKU’s; they were placed by requisitioners for emergencies and as insurance, because of the unreliability of the MRO supply chain [a study showed that issues from stores were only 74% of those requested]. This meant that 26% of the time, requisitioners went away without the parts they needed.

Critical to the manufacturing process was the availability of power transmission parts…mostly bearings. The lack of availability of the proper bearing in the quantity needed was a major cause of production maladies. Maintenance was well aware of bearing criticality and established a “Bearing Room” where bearings were supposed to be organized without duplications, i.e. named properly and reordered to proper min/max quantities with a sustained trackable process.

In reality, the Bearing Room was chaos. Duplications existed to the point where there were as many as five and six different locations for the same bearing under different descriptions from different manufacturers. When a repair part [bearing] was needed, requisitioners would look into the Bearing Room and find it virtually impossible to locate what was needed ON TIME! [remember, these parts are critical in reducing mean time to repair…MTTR]. The quicker way was to create a “one-time” req. and have it rushed in from the local supplier. But wait, if five bearings were needed for the job, the requisition quantity was upped [to 12 for instance] for insurance, for a better price and/or to satisfy package quantity minimums. Five were used for the job; where did the other seven go? You guessed it; dumped into the Bearing Room without any attempt at organization acerbating an already dire situation. The plant manager came to recognize that the bearing scenario, when added to similar MRO situations, constituted a major cause of his profit dilemma. What to do? There was no one available to solve the MRO problem, because all were working on emergencies caused by the MRO problem, ergo the situation continued.

The solution:

A third-party MRO [3PMRO] expert was hired to manage the MRO supply chain [in total] from the manufacturer through to maintenance for installation into the asset. The Bearing Room was the first order of business; 3PMRO found 245 listed SKU’s and another 62 bearings with no listed number at all. Using a protocol (Synovos calls it Master Data LeadershipSM), to properly describe each part, the number of actual SKU’s was reduced from 307 to 87 [some bins were piled high with the same bearing from different manufacturers with different part numbers [still the exact same bearing]. The effect of applying the protocol resulted in efficient and immediate availability of parts needed to reduce MTTR and increase reliability. In addition, the company found it unnecessary to purchase bearings for quite a long time; they had them, they just did not know it. This new integration applied the same process to all other categories of MRO located in the storeroom and found in insurance sub stocks throughout the plant. Planned activities connected management of the MRO storeroom and engineering services with maintenance goals which achieved asset reliability. The MRO storeroom management operation went from a drain on profits and a detriment to a reliable plant to a profit contributing activity supporting plant reliability. Total cost of ownership was reduced in all areas of MRO cost.