When it comes to manufacturing, resource management is everything. You need to make sure your inventory levels are optimized so you always have the components you need when you need them. Otherwise, you’ll be faced with production lines that grind to a halt at the worst possible time. But as important as it is to make sure you have all the raw materials and parts you need to build your products, it’s just as essential to make sure you’re well stocked with essentials that never wind up in your products at all. This is what’s known as MRO procurement, and even though it’s not as visible to your customers as other aspects of your supply chain, it’s just as critical for smooth and efficient production.
MRO procurement refers to the process of sourcing and managing all the items that you need for maintaining and repairing your equipment. These include everything from replacement parts for robotic assembly arms to personal protective equipment for employees to basic cleaning supplies like mops and buckets. They don’t have a direct connection to the products you deliver to store shelves or customers, but if you don’t have them when you need them you may be at risk of significant downtime. Because your MRO inventory is so vital to your success, it’s important to know how it works and what the best practices are for ensuring a smooth and efficient process. Read on to learn more about MRO purchasing and management and why you should pay attention to it.
Understanding the MRO procurement process
Managing your MRO spend is in many ways no different from planning the strategic sourcing you use for your manufacturing activities. For instance, MRO management can be broken down into a similar progression of steps:
1. Developing your strategy — This involves determining which MRO materials and supplies you need to keep your operations running smoothly, as well as creating a budget for your spending.
2. Evaluating suppliers — Shopping around to find the vendors who best fit your MRO strategy is very important if you want to derive the highest possible value from what you spend.
3. Negotiating contracts — Establishing terms with your suppliers protects you from price fluctuations and ensures a streamlined purchasing process so you don’t have to start from square one with each purchase.
4. Placing orders — Whether automated or handled on a case-by-case basis, you need to have an efficient protocol in place for ensuring your inventory levels are kept within the ideal ranges.
5. Managing inventory — Keeping track of your current stock levels of all MRO items is critical for proper planning and avoiding stockouts.
6. Reviewing supplier performance — If you don’t keep an eye on how well your suppliers are meeting your standards, your MRO supply chain may not function as well as it could.
There are many ways you can streamline and optimize this process. For example, you can automate orders with the use of modern procurement software platforms. Adopting lean management principles can help you identify wasteful or unnecessary practices that may be getting in your way. By integrating a warehouse management system into your operations, you can make monitoring inventory levels much simpler and more accurate.
Inventory management techniques for MRO
Managing inventory is one of the most important elements of a successful MRO program in your manufacturing operations. Implementing certain MRO inventory management techniques and strategies can help you keep your costs down and improve the overall efficiency of this aspect of your supply chain, such as:
- Just-in-time inventory: This technique involves only purchasing supplies on an as-needed basis. Although this can cut down significantly on the amount of stock you need to keep in storage, it also requires an exceptionally high level of coordination with your internal teams and external supplier base.
- ABC analysis: By categorizing supplies by tiers in terms of which MRO items are used most frequently and their overall value to your operations, you may be able to cut down on stock levels and operate more efficiently than before.
- Automated reordering: Inventory management software can be configured to automatically reorder parts and supplies when stock drops below a certain threshold. This can be helpful in preventing unexpected stockouts.
- Centralized storage: When you have a single centralized location for all your MRO supplies, it becomes easier to track inventory levels.
- Vendor-managed inventory: Depending on your situation and your needs, you may be able to outsource your inventory management to your vendors. This means they will oversee monitoring stock levels at your facility as well as the strategic sourcing of replacements.
Cost-effective purchasing strategies for MRO
Another crucial aspect of an effective MRO supply chain is being savvy about purchasing. Some of the best strategies to improve your effectiveness when it comes to MRO purchases include:
- Consolidating vendors: Having a large base of suppliers can lead to inefficiencies and unnecessary spending. Instead, you may want to consider consolidating them down to a select handful of trusted partners to increase your buying power and get better discounts through volume.
- Spending analysis: If you don’t already do so, it’s a good idea to periodically review your spending and look for ways to reduce your MRO costs. This may require detailed analysis that may be best handled by a third party.
- Procurement software: Many platforms exist to help organizations streamline their purchasing. This can make it easier for you to compare prices while cutting down on human error.
- Component standardization: If at all possible, you should see if there are any opportunities to standardize the parts and supplies you need to purchase. This gives you more opportunities to leverage volume discounts and streamline your inventory.
- Preventive maintenance: Preventing a breakdown in the first place can save you a lot on purchasing the spare part you need to fix a machine.
Best practices for vendor and supplier management in MRO
The final element of a successful procurement strategy for MRO is how you manage the relationships you have with your vendors and suppliers. There are several ways you can ensure the companies that supply your MRO inventory are always working in your best interests, including:
- Clear contracts: Making sure the language in your contracts is clear and unambiguous in terms of expectations and needs can go a long way toward preventing mistakes and misunderstandings that can cause interruptions.
- Vendor diversification: Having too many vendors leads to inefficiencies, but having too few can be just as dangerous. Rather than putting all your eggs in one basket, it’s best to maintain multiple relationships to ensure continuity in case of issues with one vendor and gain more buying power.
- Performance tracking: Pay close attention to your vendors’ key performance indicators so you always have a clear idea of who is meeting expectations and who is falling short.
- Risk assessments: When vetting potential suppliers, make sure to consider risk factors such as the company’s financial solvency and compliance history. This could prevent you from falling victim to an unexpected disruption that’s out of your control.
- Open communication: Your vendors can be more helpful if you are transparent and loop them in on the decision-making process. Your relationships with them should be open and collaborative to ensure everything goes as smoothly as possible.
Although it doesn’t directly influence your production line, MRO procurement and inventory management nevertheless is an essential element of your manufacturing operations. As the leaders in industrial asset management and maintenance, ATS has the expertise and know-how to help you make the most of this side of your supply chain. Get in touch with us today to learn more.
