Background: How important is the standardization of processes to the MRO supply chain? For one life sciences company, an aggressive growth-through-acquisition strategy exposed and even created a lack of standardization processes across the supply chain.
Over the last decade or more, the company has expanded its portfolio and manufacturing presence across North America and beyond, mostly through the acquisition of other companies and products. That rapid growth created challenges in establishing and sustaining manufacturing efficiency. While beneficial to the company’s bottom line, the acquisitions meant that plants now working together, or at least coordinating production, were dealing with different processes and systems – ERP and maintenance alike.
Instead of streamlining processes, the lack of alignment and standardization compounded existing inefficiencies, leading to increased production costs.
Over the last several years, the company has consolidated manufacturing locations, eliminating duplications, closing unproductive facilities, consolidating, and reducing workforce, and implementing SAP as the ERP system of record. That final step alone eliminating three or four other systems previously in use across the enterprise.
The company also hired an MRO integrated supply services company.
The Challenge: Initial engagement with the integrator was limited to two sites in the U.S. Both were original to the company and had limited processes in place to manage the MRO supply chain. No reliable means for tracking purchasing history or inventory beyond Excel spreadsheets.
At one site alone, encompassing three buildings, there were 16 different storeroom locations with free access to site employees. A site assessment at the time of initial engagement revealed that maintenance technicians were spending 25% of their time on tasks related to sourcing, purchasing, stocking, and managing inventory. That lost wrench time translated to tens of thousand of dollars lost in actual maintenance time. That same site also reported no:
- Dedicated storeroom resources
- Min/max values
- Standard storeroom metrics
- Critical spares identified
- Equipment asset lists or bills of materials
Additionally, poor data quality contributed to 15% of materials being out of stock when needed. That resulted in additional resources spent using P-cards and expedited freight to sustain production.
Adding to the challenge was the lack of confidence in the existing CMMS software that was recently installed. More than 8,000 SKUs existed in the system with an estimated 4,000 more items scattered throughout the plant and not in the system at all. Additionally, Accounts Payable used a different software, meaning all requisitions and Purchase Orders had to be created in the second system.
And that was one site. A similar situation was reported at the second pilot site across the country. In all, the two sites had an estimated combined $4 million in annual MRO spend.
The Solution: Gaining control of the situation at both plant locations took time and patience and required starting from the ground up. Synovos broke down the existing storerooms, taking inventory of existing parts, building the data file required for world-class MRO supply chain management, establishing min / max levels, and setting KPIs against which performance could be measured.
It was a full wall-to-wall inventory count at both plant locations, consolidating storerooms into a single hub where materials were received and issued. Data was entered into Synovos SYNC™, a proprietary supply chain software system, and later integrated to the client’s Accounts Payable system.
Meanwhile suppliers familiar with how the client operated had to be introduced to the integrator and new suppliers brought in to leverage overall spend, bringing initial hard savings almost immediately.
All of it was accomplished while sustaining plant operations without any stock outs of critical spares.
Results: Each site was brought online in the same manner, using the integrator’s standardized practices.
Initial program ramp up took months, but as improvement plans were initiated, savings mounted. Savings topped more than $600,000 in the first full year, exceeding previous earned savings – pre-integrator – by more than 10 times.
Inventory fill rate consistently topped the monthly goal of 98%, while non-stock on-time delivery rates also beat the established goal of 95%.
The delivered savings convinced the client to roll out additional production sites, including multiple locations in Canada. Several of those sites replaced incumbent service providers that were failing to meet savings expectations.
Today, the client relationship has expanded to 11 sites, with more than 30 employees managing a combined spend in excess of $15 million yearly with an inventory valuation of over $26 million. That confidence is returned with established KPIs and guaranteed savings year over year.
To date, initiating a standardized supply chain management program has netted the client nearly $5 million in savings.