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© 2008 Eventure Events. All rights reserved.
Risk Assessment and Managementof MRO Inventory
Shane McLellanProject Leader – Business Performance & Planning
SaskPower
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Discussion topics:
• SaskPower– Vision, location, business, structure, and history
• Materials Work/Process Management Overview• The MRO Inventory risk assessment process
– Materials tie to PM activities– Assessment process development– Leveraging SAP Doclink to retain knowledge
• Summary of Current and future initiatives
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• Vision:– People and innovation. . . powering Saskatchewan to
a bright future.
is a fully integrated electric utility located in Saskatchewan supplying power to the entire province.
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Relatively Speaking…..
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generating facilities are strategically located:Hydroelectric – 854 MWNatural Gas – 538 MW
Wind – 172 MW
Coal – 1653 MW_______________________________
Subtotal – 3217 MW
Independent – 454 MW_______________________________
Total – 3671 MW
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Plant maintenance and major capital projects are required to enhance aging equipment, implement new technical processes and develop new generation solutions. These activities have a significant impact on inventory holdings.
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Materials Overview @ PPBU SaskPower
• Significant $ provision for obsolete inventory• > 150,000 MMRs (>95,000 with stock)
– Adding ~ 6,000 per year
• > 120 material groups• De-centralized structure for managing materials
and most inventory purchasing functions
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MRO Inventory Required For…
• Maintenance– Planned maintenance activities
• Preventive maintenance• Weekly, monthly, quarterly, annual, etc.
• Repair– Unplanned break-fix maintenance activities
• As occur
• Operations– Consumables
• Used along side Maintenance and Repair or alone• May or may not be on BOMs
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Inventory Decision?... Balancing Risks
• Do not Stock…potential for unit outage– Public / employee safety
• Forced brown-outs, essential services, extreme weather
– Reliability– Revenue: potential loss of generation capacity
• $70/MWh X MWh capacity of unit(s)
• Stock…potential for wasted resources– Lost capital
• Limited capital resources
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Why do Inventory Assessments?
• Legal requirements (accounting rules)– Accurately value assets
• item cost $5000.00 ten years ago;• no longer required; and• no market value;• valued at scrap value minus disposal costs
• Business benefits (increase productivity)– Reduce non-value-added costs:
• initial purchase price• carrying charges• physical storage• administrative
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PPBU $ Provision for Obsolete Inventory
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…more on Business Benefits
• Identify obsolete materials– Recognize true inventory asset value– Utilize freed up space and resources for value added
activities including:• Procuring and maintaining required inventory;• Regularly assessing dead stock items;• Updating and managing SAP master data.
• Identify opportunities to reduce min/max stock levels (slow moving & costly items)
• Identify items that may be under stocked
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% Dead Stock / Active Stock
• Is obsolete inventory identified and removed regularly?
• Presently, “No”; responses heard:– Too difficult!– Not enough resources!Or worse…– May need it some day.– Might be able to scavenge something from it.Careful!!– Its a slippery slope!
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% Dead Stock / Active Stock• A slippery upward slope!
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Process Optimization
• So how can we optimize the management (including assessment) of MRO inventory?
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The Materials (MM) Process
Specify
Source
Buy
Inventory
Use
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The Maintenance (PM) Process
Initiate
Plan
Schedule
Execute
Complete
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Integration ofMM and PM Processes
Specify Source Buy Inventory Use
Initiate Plan CompleteExecuteSchedule
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Plan : Specify & Source
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Decision; Schedule : Buy
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Plan, Execute, Complete : Use
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SAP Functionality to Manage Inventory
• The Material Master Record (MMR)– Material Resource Planning (MRP)
• MRP Type• ABC
– Bill of Material (BOM)– Document Linking– Classification– Serialization
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MRP Type – Material Resource Planning
• V1: min / max maintained– Slow or fast moving critical items– Fast moving non-critical items
• PD: required items ordered at WO release– No stock maintained– Typically not a critical item
• ND: maintain record for information purposes– Not currently used but may be used in the future– May have been used in the past (contains history)
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ABC – Analysis of MRO Inventory
• Separating essential from non-essential– A: Essential stock items that:
• Are directly critical to generation of MW• May be fast or slow moving (usually slow)• Are typically high value (not always)
– B: Non-essential stock items that:• Can be ordered at WO release• Typically have shorter lead times
– C: Essential Stock items that:• Are not directly critical to generation of MW• Would significantly impact business if stock-out occurs• Are fast or slow moving (usually fast)• Are typically low value (not always)
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ABC Indicator & MRP Type
• Classifying essential and non-essential– A: items critical to generation of MW
• MRP of V1 (min/max maintained) with Lot Size HB• Slow or fast moving (usually slow)• Typically high value (not always)
– B: items can be ordered at WO release• MRP of PD (no stock maintained) with Lot Size EX• MRP of ND (no stock maintained) with no Lot Size
– C: items not directly critical to generation of MW• MRP of V1 (min/max maintained) with Lot Size HB• Non-critical items used frequently (high quantity)• Typically low value (not always)
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BOMS
BOMs tie Materials to Plant Maintenance
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Document Linking in SAP
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Document Linking in SAP
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A Picture is Worth a Thousand Words…
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Other Tools• Spares Optimization System (SOS)
– Proprietary software– Used 2000 – present to varying degrees– Comprehensive– Resource intensive– No workflow
• SaskPower’s Material Assessment Database (MAD)– Built in-house– Used 2006 to present– Less comprehensive than SOS– Resource friendly and fast– Newest version contains workflow
• Other ….
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SaskPower’sMaterial Assessment Database• Key Requirements of Assessment Tool
– Workflow• Move documents through assessment process
– Integration• Maintain key information including photos
– Transparency• Provide for easy tracking of process
At SaskPower we built an assessment tool based on previous knowledge and the above identified requirements.
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Slow Moving Material Assessment ProcessA
gent
Age
nt’s
Sup
.P
lant
Con
tact
Pur
chas
eD
ept.
MM
/PM
BP
P
ASSESS ?
REVIEW
MANAGE
APPROVE
Maintain orDispose
Y
Y
DESIGN
N
COMPLETE
REPORT
ASSIGN
N
N
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Views – Plant Contact View• Choose assessments to assign
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One click to access the tasks in “Your Responsibility” View
Views – My Responsibility View
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Views – Other Views that are Available
• By Plant & Role
• By Plant & Owner• Supervisor View• Sortable View
• By Plant & Status
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Material Overview
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BOM information…
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Used on past work orders…
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History of material movements….
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Link to Functional Location Structure
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Recommendation only
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Link Assessment to MMR in SAP
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MAD is One of Many Current Initiatives
• Process Development / Improvement– SAP MM/PM (ABC, M Status, S.Proc., offset)– Sub-processes (receipts, issues, salvage…)– Block Maintenance– Training
• Material Risk Assessments– Controlling function / operations management
• Standard Supply Agreements• Measures & Dashboard
– Lotus Notes
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Future MAD Plans
• New MMR / Change MMR• Risk calculator
– Factor in cost of replacement energy, MWs impacted and lead time to replace
• Move process to SAP Portal• BI / BOb reporting
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New / Change Material Request Assessment Process
RE
QU
ES
TM
AN
AG
EM
EN
TP
UR
CH
AS
ED
EP
T.
ASSESS ?
REVIEW
Approve
MAINTAIN
Y
CLARIFY
MM
/PM
NOTIFY
NOTIFY
N
Goal for December 2008…
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Risk Calculator
• Cost of replacement energy: $70/MWh• MWs impacted: derate or outage
– 10 to 300 MWhs
• Lead time to replace– 10 days to 2 years
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SAP Portal – MAD:Assess, Create, Change
• Workflow and authorizations• Integration of information (transactions)• Transparency of assessment history
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Boundary Dam
ManagerA B
C
D
TurbineCoal
Purchasing
Stores
Legal
There Are Lots of Players…
Finance PPBU
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Power Production
BPP0001 0002
0003
0004
0005Eng. Services
Ops. Support
HR
Legal
…and it gets more complicated
Finance
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Key Lessons:
• SAP is only as good as your data…and your management of work and process.
• Process is key:– Ownership required at the plant (all levels)– Effective MM/PM work/process management tools– Supported by BPP, Purchasing, Legal, etc.
• Opportunities exist for utilities to reap huge benefits from MRO inventory risk assessments.
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© 2008 Eventure Events. All rights reserved.
Shane McLellanProject Leader – Business Performance & Planning
Power Production; [email protected]