Visibility and control: Two key words in MRO’s future
The MRO supply chain metrics is a just-in-time delivery system that is often overlooked, yet accounts for a volume of transactions. By planning for the unpredictable, you mitigate risk and increase efficiency. This article is a discussion from the New Jersey chapter of ISM where each participant shares their take on MRO’s future in supply chain management.
Earlier this year, the New Jersey chapter of ISM sponsored an online discussion of where visibility and control are in MRO practices. Participants were Ron Fijalkowski, senior vice president at MRO specialist SDI, and Andrew Kelly, chief commercial officer at IoT supplier BoxLock. Bob Trebilcock, executive editor of Modern Materials Handling, was the moderator. The following is condensed and edited for clarity and brevity.
Trebilcock: When you’re purchasing automated materials handling systems, there are dimensions to consider beyond features and functionality. The most common ones here are uptime and reliability, especially in our just-in-time world. Quite simply, the pressure is on to do everything we can to minimize the impact of repairing and replacing parts. Thats where MRO comes into play. In fact, its mission critical. I’d like to start this discussion by setting a baseline for the status of MRO today.
Fijalkowski: MRO is all about maintenance, repair and operations. It focuses on facilities and equipment. In most cases, MRO is in the bottom 20% of budget items, so it’s often overlooked. But it accounts for 80% of transaction volumes. MRO is a very messy area with lots of low-cost items and many purchase orders. The number of contracts is often in the hundreds or even thousands, depending on the materials needed by your operations. All of which is much more complex than procurements common desire to with one or two key contractors. Furthermore, MRO is often indirect expenditures, but not all of them. For instance, PPE has in the past year become a key expenditure here for MRO. Quite simply, MRO is not getting simpler, but becoming more complex.
Trebilcock: And as supply chain operations become more complex, we typically want more visibility into how they work. So, when we’re thinking about MRO, why is visibility so important?
Kelley: It really comes down to being smart about the investments you have made in your equipment and the products that you produce. Making that work relies on demand planning. On the procurement side, if you’re pursuing best pricing or shortest lead time, you need to also demand plan to ensure there is visibility both in your department as well as upstream and downstream. That information has to be communicated to all involved. That’s really, really important.
On the control front. First of all, control is a relative term. There are degrees of control that you can have. But what you’re really after is a level of predictability. A level of resiliency that you have when things don’t exactly go as planned.
Depending on who you are in the MRO context, both visibility and control can mean different things to you. But they are both important. Not always in equal measure. But it depends on your specific function and where your department sits in the organization.
Trebilcock: Let’s look at that in a little more detail. I think everyone understands visibility. When we think of control in the supply chain, what does that mean to you?
Kelley: If you have a global manufacturing base you may not have control from raw feedstocks to finished parts. Controlling raw feedstock or materials upstream is probably one of the easiest things. But things can get mixed up in the plant. So, the wrong screw goes in the wrong assembly, and the best-case scenario is rework at the end of the line. The worst-case scenario is releasing the part and paying a fine for the wrong assembly. Clearly, there are implications for the loss of control in your plant.
Trebilcock: Let’s look at visibility within the four walls. Talk to us about what visibility and control mean to you.
Fijalkowski: When I think of visibility from an MRO perspective, I think of two key elements. One is inventory visibility, and the other is supply chain visibility.
From an inventory perspective, the problem with MRO is that it is very difficult to identify what is on anyone’s inventory shelves. While a simple bar code identifies retail items and is universally used, MRO has never gotten to that level of practicality. Instead, supplier part IDs are used, making it very difficult for the consumers of the inventory to know what they have on hand. They may even be getting the same part from two suppliers and not know it.
As to supply chain visibility, I think that as consumers none of us would buy anything if the expectation was it would show up when it shows up. However, MRO has been plagued by a lack of supply chain visibility for as long as I’ve been in it. For some reason, MRO doesn’t give you the same tracking information as a consumer gets for something being shipped.
And 80% to 85% on-time delivery is the norm for MRO. You don’t get tracking numbers for all of your materials. And you spend way too much of your time finding out where the order is and when it will arrive. This is a key problem that has been plaguing the industry. We would be much better off if we moved to much more of a just-in-time delivery system that lets people know the status of their order. Trebilcock: If visibility and control are so important, and both of your companies are in that business, how do we achieve that in MRO? Is that a technology play? How are we going to gain visibility and control here?
Fijalkowski: Part of the answer is technologies that exist and cobbling them together. Whether it’s electronic data interchange (EDI) or any other technology used to identify and track shipments from a plant is equally applicable to MRO.
There is a second part having to do with some new and advancing technologies. Blockchain is ahead of us yet, but it’s coming. Direct communications between purchasing and delivery is coming along. The final piece of that is integrating all of this with your back-end systems including enterprise resource planning (ERP) to eliminate manual efforts. You need to open up your communications with your supply chain. And get away from the piles of paper on people’s desks. We aren’t asking for information that doesn’t exist. We just need to have it provided differently and completely to the customers.
Trebilcock: What’s your take on this, Andrew?
Kelley: Ron said it just right. From my perspective, you need to have frank conversations and dream big. You need to ask why not accept why not. The fact it has always been done this way is not the answer. It has never been easier to build technology. Your three-letter acronym soup of all the technologies we use every day have never been a better position to talk to each other.
Information silos are what create the lack of visibility in the first place. The human desire to protect data is the currency of your fiefdom within most any organization. That may inadvertently lead to information silos as people try to protect their career, protect their team. It’s frank conversations that are needed. It’s never been easier to get out of the silo business and into the visibility and control business.
Trebilcock: When you two talk about piles of paper and the acronym soup of supply chain management, the solution goes to digital transformation. What are a couple of mindsets you recommend for a digital transformation in MRO?
Kelley: Two concepts that immediately come to mind are agile and digital thinking. Agile lets you update systems every two weeks, for instance, instead of once a quarter. It gets you out of big bang developments. With agile thinking, you are making incremental improvements as you go.
Trebilcock: Let’s move back to your piles of paper, Ron. How do we digitize all that record keeping?
Fijalkowski: I don’t understand the reason for the paper today. There is no purpose to paper. You can’t find it. You can’t sort it. So, the first step is to move away from the paper. The technology is clearly there even for the smallest organizations. This is a journey and getting started here will mean that a lot of your data is unstructured, which will be difficult. But that journey is not insurmountable. You just need a commitment to start the journey. Much like any other journey in life.
Trebilcock: How has MRO changed as result of the consumerization of the supply chain?
Kelley: In supply chain and logistics, Amazon has probably been the biggest innovator for some time now. With their planes, trucks, routing, they have set an expectation on the consumer side for visibility. That has instilled the idea that there is a greater level of visibility possible. With some big carriers, you might have a visibility window of a half a day. If you know to within four minutes when your soup will be at your door, that’s just different.
On the MRO side, the ability to have more fine-tuned granularity and where the micro-inventory is so you can get access to it, that gives you a higher level of sophistication and an ability to get closer to just-in-time operations so you can reduce the inventory you’re carrying on your balance sheet month to month. That opens up capital to be used otherwise.
Fijalkowski: It’s all about expectations. As personal consumers, we all buy things and know where they are on their way to us. That’s not the case with MRO. Andrew talked about getting it down to a few minutes for delivery. Well, MRO is closer to within three days. It’s almost laughable. That’s not acceptable. It’s got to change. Or many organizations are going to see that they are left on the wayside. People are getting to the point where they will not accept what has been going on for years.
Trebilcock: MRO has long had a lot of just-in-case and what-if inventory. If I can get better visibility and control, can I start to buy and carry less inventory?
Fijalkowski: In MRO, we have a considerable amount of extra inventory on hand. There’s still a place for inventory-critical spares and for long-lead time items. But it’s not for standard parts that are readily available that can be delivered in three to five days. Excess inventory is just an excuse for not having supply chain visibility, in my mind.
Trebilcock: All the time, we hear “focus on your core competencies, and outsource those things that aren’t a core competency.” It’s a make it or buy it question. And it applies to MRO. What are the considerations when making the make it or buy it decision in MRO?
Fijalkowski: It comes down to what’s the return on your investment? Now MRO is the bottom 20% and few companies care about streamlining MRO. It’s hard to justify. Your returns just aren’t there. The question is: Are you going to give it lip service or are you actually going to attack the problem?
Trebilcock: Clearly, there a lot of exciting developments underway in this space right now. Visibility and control are sure to remain dominant in the continuing drive to enhance MRO practices. Thanks for a great conversation.
This article was written by Gary Forger from Modern Materials Handling and was legally licensed through the Industry Dive publisher network. Please direct all licensing questions to firstname.lastname@example.org.