Published November 9, 2016
In the manufacturing process, maintenance engineers are responsible for providing reliable assets in order to provide a reliable plant. Process engineers are engaged in providing procedures that effect optimum efficiencies in the production process. Here is a true MRO supply chain case study; names are changed to protect the guilty.
The Acme Half Ball Company [AFBC] maintains multiple production lines to produce parts for the national game of Half Ball, AKA Stick Ball. In pursuit of excellence, their process engineers [P.E.’s] became aware of a production deterrent and a profit drain caused by the unreliability of the MRO storeroom. In the process of developing a “change for the better” program, all of the plant disciplines that touched MRO had many and diverse ideas as to how their change would resolve the problem. Dissidence and sometimes acrimony erupted, and so, corporate procurement and the plant manager engaged a third party expert [3PMRO] to operate an MRO inventory management program on site and be responsible for providing reliability the plant required for the MRO supply chain.
KPI’s were established to measure the effectiveness of the third-party’s performance. These included inventory optimization, high fill rates, reduction in supply chain waste, price control measurement, and asset performance improvements among others.
Normally, asset reliability has to do with plant machinery utilized to produce the company’s product; however, personnel on production lines are assets, too, and represent opportunities for improvement. The 3PMRO company maintained a system of control that allowed them to see which departments were using what products in what quantities and values. There were two production lines [A & B] assembling the same products; the assembly process required that the assemblers wear gloves. 3PMRO noted that line A was consuming twice as many gloves as line B and determined that the glove requisitioned was inadequate; Line A used two pairs of gloves while line B just put up with it and used but one pair. 3PMRO brought in a glove expert who recommended a higher quality glove.
The original glove was $1.00/pair; 10,000 consumed for a total cost or $10,000/year. The new glove is now $1.25/pair; new consumption is 6,000 for a total cost of $7,500….A direct savings of $2,500 plus increased worker efficiency, comfort, and satisfaction. This is an excellent example of the values that can be realized by recognizing that plant personnel are, in fact, assets and represent opportunities for asset and supply chain management improvement [In this case a KPI requirement for the 3PMRO supplier].
A cautionary: There may be some plant personnel who will complain that the glove price is now 25% higher [“Look… 3PMRO’s prices are high!!…We used to pay $1.00 for gloves]. The answer is to delete the SKU number for the lesser glove and create a new SKU for the correct glove.
Total expenditure must be the determinate of value.