MRO spending: plan for the unplanned

04/26/2006


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.





Top Plant
The Top Plant program honors outstanding manufacturing facilities in North America. View the 2017 Top Plant.
Product of the Year
The Product of the Year program recognizes products newly released in the manufacturing industries.
System Integrator of the Year
Each year, a panel of Control Engineering and Plant Engineering editors and industry expert judges select the System Integrator of the Year Award winners in three categories.
February 2018
2017 Product of the Year winners, retrofitting a press, IMTS and Hannover Messe preview, natural refrigerants, testing steam traps
March 2018
SCCR, 2018 Maintenance study, and VFDs in a washdown environment.
Jan/Feb 2018
Welding ergonomics, 2017 Salary Survey, and surge protection
April 2018
ROVs, rigs, and the real time; wellsite valve manifolds; AI on a chip; analytics use for pipelines
February 2018
Focus on power systems, process safety, electrical and power systems, edge computing in the oil & gas industry
December 2017
Product of the Year winners, Pattern recognition, Engineering analytics, Revitalize older pump installations
April 2018
Implementing a DCS, stepper motors, intelligent motion control, remote monitoring of irrigation systems
February 2018
Setting internal automation standards
December 2017
PID controllers, Solar-powered SCADA, Using 80 GHz radar sensors

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

The Maintenance and Reliability Coach's blog
Maintenance and reliability tips and best practices from the maintenance and reliability coaches at Allied Reliability Group.
One Voice for Manufacturing
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 Maintenance and Reliability Professionals Blog
The Society for Maintenance and Reliability Professionals an organization devoted...
Machine Safety
Join this ongoing discussion of machine guarding topics, including solutions assessments, regulatory compliance, gap analysis...
Research Analyst Blog
IMS Research, recently acquired by IHS Inc., is a leading independent supplier of market research and consultancy to the global electronics industry.
Marshall on Maintenance
Maintenance is not optional in manufacturing. It’s a profit center, driving productivity and uptime while reducing overall repair costs.
Lachance on CMMS
The Lachance on CMMS blog is about current maintenance topics. Blogger Paul Lachance is president and chief technology officer for Smartware Group.
Maintenance & Safety
The maintenance journey has been a long, slow trek for most manufacturers and has gone from preventive maintenance to predictive maintenance.
Industrial Analytics
This digital report explains how plant engineers and subject matter experts (SME) need support for time series data and its many challenges.
IIoT: Operations & IT
This digital report will explore several aspects of how IIoT will transform manufacturing in the coming years.
Randy Steele
Maintenance Manager; California Oils Corp.
Matthew J. Woo, PE, RCDD, LEED AP BD+C
Associate, Electrical Engineering; Wood Harbinger
Randy Oliver
Control Systems Engineer; Robert Bosch Corp.
Data Centers: Impacts of Climate and Cooling Technology
This course focuses on climate analysis, appropriateness of cooling system selection, and combining cooling systems.
Safety First: Arc Flash 101
This course will help identify and reveal electrical hazards and identify the solutions to implementing and maintaining a safe work environment.
Critical Power: Hospital Electrical Systems
This course explains how maintaining power and communication systems through emergency power-generation systems is critical.
click me