MRO spending: plan for the unplanned


Unplanned maintenance — it can be the bane of a plant engineer’s existence. It can lead to hours spent on the Internet, on the phone or both, searching for suppliers that not only can supply the part needed, but supply it in a timely manner. And this can be the least of the plant engineer’s concerns. Depending on how long this process takes, the costs in lost production can be enormous.

“A lot of times, the process costs associated with getting a product is a lot more than the cost of the product itself,” said Ken House, regional sales vice president of W.W. Grainger, Inc. “Studies show that, by the time an engineer recognizes a need and goes through all of the steps to acquire the part — from identifying a supplier to getting approvals and initiating a requisition, to receiving the item and paying the invoice — it can easily cost as much or even more than five times the cost of the item.”

House defined an unplanned purchase as a product or repair part that a company does not know it needs until the need arises. “Companies consistently tell us that the purchasing situation that is most difficult for them to manage is the unplanned purchase. It’s consistently the situation that takes the most time, is the most frustrating and most challenging for them to have to respond to.”

And unplanned purchases affect the bottom line more than most might think. According to House, more than 40% of the dollars spent on maintenance requirements are directly related to unplanned needs. “They happen in every single category, and most companies don’t fully understand the impact that unplanned purchases have on the costs of their overall business,” House said.

Most unplanned purchases happen less than five times a year, according to House. “In the studies that we’ve conducted, we’ve learned that only 25%%MDASSML%%30% of a company’s unplanned needs are going to repeat from one year to the next. You can imagine how costly it would be if a company were to inventory those items that aren’t going to be used very often. It can have a huge impact on the business. So its’ really not in a company’s best interest to stock those rarely needed items,” House said.

However, managing multiple suppliers for unplanned needs can be extremely costly and time-consuming as well, so it’s in the company’s best interest to manage as few as possible. “When a company does that, it can really leverage its buying volume and its buying power and maximize its opportunity,” House said. “It’s impossible to maximize your unplanned purchasing power when you’re working with dozens and dozens of suppliers in that unplanned area of your MRO business.”

“What companies are looking for is suppliers that can inventory their unplanned needs for them, suppliers that they can turn to for all of their unplanned needs,” said House. “What’s most important to companies when they’re trying to fulfill their unplanned needs is working with suppliers that have a broad selection of products available locally. These kinds of suppliers can get products to a customer’s facility very quickly, typically the same day or the next day.”

That translates to fewer headaches for the plant engineer and a better bottom line for the company.

No comments
The Top Plant program honors outstanding manufacturing facilities in North America. View the 2015 Top Plant.
The Product of the Year program recognizes products newly released in the manufacturing industries.
The Engineering Leaders Under 40 program identifies and gives recognition to young engineers who...
Safety for 18 years, warehouse maintenance tips, Ethernet and the IIoT, GAMS 2016 recap
2016 Engineering Leaders Under 40; Future vision: Where is manufacturing headed?; Electrical distribution, redefined
Strategic outsourcing delivers efficiency; Sleeve bearing clearance; Causes of water hammer; Improve air quality; Maintenance safety; GAMS preview
SCADA at the junction, Managing risk through maintenance, Moving at the speed of data
Safety at every angle, Big Data's impact on operations, bridging the skills gap
The digital oilfield: Utilizing Big Data can yield big savings; Virtualization a real solution; Tracking SIS performance
Applying network redundancy; Overcoming loop tuning challenges; PID control and networks
Driving motor efficiency; Preventing arc flash in mission critical facilities; Integrating alternative power and existing electrical systems
Package boilers; Natural gas infrared heating; Thermal treasure; Standby generation; Natural gas supports green efforts

Annual Salary Survey

Before the calendar turned, 2016 already had the makings of a pivotal year for manufacturing, and for the world.

There were the big events for the year, including the United States as Partner Country at Hannover Messe in April and the 2016 International Manufacturing Technology Show in Chicago in September. There's also the matter of the U.S. presidential elections in November, which promise to shape policy in manufacturing for years to come.

But the year started with global economic turmoil, as a slowdown in Chinese manufacturing triggered a worldwide stock hiccup that sent values plummeting. The continued plunge in world oil prices has resulted in a slowdown in exploration and, by extension, the manufacture of exploration equipment.

Read more: 2015 Salary Survey

Maintenance and reliability tips and best practices from the maintenance and reliability coaches at Allied Reliability Group.
The One Voice for Manufacturing blog reports on federal public policy issues impacting the manufacturing sector. One Voice is a joint effort by the National Tooling and Machining...
The Society for Maintenance and Reliability Professionals an organization devoted...
Join this ongoing discussion of machine guarding topics, including solutions assessments, regulatory compliance, gap analysis...
IMS Research, recently acquired by IHS Inc., is a leading independent supplier of market research and consultancy to the global electronics industry.
Maintenance is not optional in manufacturing. It’s a profit center, driving productivity and uptime while reducing overall repair costs.
The Lachance on CMMS blog is about current maintenance topics. Blogger Paul Lachance is president and chief technology officer for Smartware Group.
This article collection contains several articles on the vital role of plant safety and offers advice on best practices.
This article collection contains several articles on the Industrial Internet of Things (IIoT) and how it is transforming manufacturing.
This article collection contains several articles on strategic maintenance and understanding all the parts of your plant.
click me