Mro Connection Have The Experts Failed Us

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Reliability Web presentation given May 20, 2011See link to audio presentation:http://tinyurl.com/MRO-Monument

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Slide 1

MRO Inventory the

Experts Monument to Failure

Rich MacInnes Director, Professional Services Net Results Group, LLC

Thought Starter If you are what you eat

Then MRO stock is what we think we are going to eat!

So what statement is being made about your assets (equipment) or _______?

Poll Question 1

Q1: If MRO stock is "you are what you think you are going to eat,"

your MRO investment implies what about your asset (equipment) reliability ?

Its a Wonder our assets work at all

Its a Miracle We Are Still Alive

Stuff Happens, its better to be safe than sorry

Reliability Up, MRO Stock

Down

Non-moving MRO inventory typically G r o w s

at an annual rate of 6.7%

and nearly 68% of all SKUs purchased on an annual basis will never be used!

This is known as Waste!

Learn to See the UNASSEMBLED FACTORY

2007 estimates suggest that U.S. industries

purchased a staggering $136 billion in MRO

inventory that has yet to be consumed three

years later a not so welcome to 2010.

Sadly, cross-industry

statistics vary little,

where on average 58%

of MRO inventory

investment does not

move in any three year

period.

Only 6% of parts

account for 90% of the

MRO inventory

expenditures on an

annualized basis.

Hoarder's delight On average only 17% of new MRO item adds

to inventory will be used within the first

month, with the second use nearly 8 months

later.

It gets better for Hoarders as initial MRO

inventory orders > 2, 69% on average are not

issued within the first 3 years of acquisition.

Given that significant percentage of MRO

items can be acquired quickly enough to

mitigate production risk and still meet

resource scheduling objectives, why are

companies becoming their own storefronts?

Just ask the Hoarders!

Asset Lifecycle - Future Perfect

1. Only produce exactly what is consumed in the market.

2. Only invest in assets that produce that which is

consumed in the market.

3. Only invest in asset that never fail over their useful life.

4. Achieve zero Total Cost of Ownership (TCO) for all

assets

5. Only invest in resources that enable the first four

future perfect objectives

MRO Lifecycle Insights That Matter

1. 80% of your costs are designed in

2. Demand first - Supply second

3. A toilet is critical, but do you stock a spare?

4. Value in Use trumps Book Value

80% of your costs are designed in!

Storerooms list with

OEM spares

Q2 - Poll Question

Do you have an effective method for determining the initial investment in spare parts?

Poll Question 2

Q2: We have effective methods for determining the initial investment in spare parts and

consumables?

Strongly Agree Agree Not Sure Strongly Disagree Disagree

Q3 - Poll Question

Do you have effective methods for matching supply of MRO materials to asset (equipment) demands?

Demand First Supply Second

The asset (equipment) creates the demand.

Change Demand and Supply will follow.

You cant match supply to demand without knowing demand.

MRO Demand Patterns are sporadic and lack sufficient data.

Poll Question 3

Q3: We have effective methods for matching supply of MRO materials to asset (equipment)

demands?

Strongly Agree Agree Not Sure Strongly Disagree Disagree

A toilet is critical, but do you stock a spare?

MRO Stock is Supply Looking For Demand.

Todays supply chain models rely on Failure being more Reliable than the equipment.

The industrial supply chain is focused on pushing inventory forward dont play this game.

Maintenance Planners try to maximize labor utilization.

Apply Lean 5S methods for stocking locations

Q4 - Poll Question

Do you have effective methods for deciding what to stock and where to stock it?

Poll Question 4

Q4: We have effective methods for deciding what to stock and where to stock it?

Strongly Agree Agree Not Sure Strongly Disagree Disagree

Value in Use Trumps Books Value Define Excess MRO Materials Unknown MRO items are by

definition excess unless proven otherwise

MRO items beyond their shelf life MRO items that are obsolete MRO items that are deemed no

longer used and/or needed Readily available MRO items

regardless of criticality, in excess of one years worth of supply

Capital spares regardless of criticality, that have had no usage in the last three years nor a forecasted failure/replacement event to occur in the next one year

Focus on Consumption Rates Likelihood of Failure

Versus movement

Use Criticality Factor to adjust Service Levels

Drive Supply Efficiency Analyze Supply Surety

More surety isnt always good news

Q5 - Poll Question

We have effective methods for determining what MRO stock to keep or to dispose?

Poll Question 5

Q5: We have effective methods for determining what MRO stock to keep or to dispose?

Strongly Agree Agree Not Sure Strongly Disagree Disagree

Playing to Win Mentality Playing to Win in MRO materials takes a

mindset that does not accept equipment failures as fait accompli.

It views MRO inventory for what it is

Stock waiting for something to fail

before it has value.

Failure is the only opportunity to begin more intelligently Source: Fortune Cookie