When a manufacturer in the Building Products Industry realized its MRO inventories were growing at an unacceptable pace, and annual spend on MRO indirect materials was not being controlled, management wished to take action. The manufacturer thought its MRO inventory contained many obsolete items that could not be identified and were deteriorating while sitting in inventory. Cost was difficult to manage, as the company did not have any insight into the exact items it was purchasing due to inaccurate MRO item descriptions in the master catalogue.
Various critical issues related to their MRO, including an incomplete bill of materials (BOMs) for its assets, were also causing costs to spiral unnecessarily with uncontrollable stock and non-stock items. Due to poor MRO item descriptions, maintenance and operations teams had low confidence in the parts that were already assigned to the assets.
Facilitating a Solution
The company engaged Net Results Group to develop and implement initiatives to improve MRO practices and bring costs down.
The first step in the process was to create a project and business plan during a two-day planning session. Facilitated by Net Results Group, it included key stakeholders from the client company. The project plan developed into multiple workstreams:
- Approve NRG’s data dictionary of 5,000-plus noun/modifier templates for item master design.
- Cleanse and enrich item records remotely.
- Identify item records that had little information in the description and could not be cleansed remotely.
- Walk down storerooms in three plants to cleanse and enrich items where a remote effort was not possible or practical. Also, assign appropriate min/max values for each item.
- Once cleansing was completed, identify duplicate MRO item catalogue numbers and process the duplicates as inactive items to ensure item history was maintained.
- Load the new data into the JD Edwards ERP/EAM system.
- Start the process of assigning items to assets (BOMs) for all three plants.
- Identify parts on BOMs that are stock and non-stock.
- Complete BOMs and identify as obsolete those MRO items not assigned to an asset.
- Create and execute a plan to recover the value of obsolete parts.
Critical Project Results Produce Bottom-Line Benefits
The project was a success with numerous critical results:
- The storerooms of MRO items were all organized and secured.
- Inventory of existing items decreased by 11%.
- Items on BOMs that were necessary to stock were added to inventory, thus reducing production downtime significantly.
- First-year MRO purchase costs were reduced by 26% as a result of improved overstock inventory positions and enhanced buying power with vendors.
- Ongoing MRO materials costs were reduced 16% due to improved buying power with vendors.
- Maintenance productivity increased 20% as technicians spent more time turning wrenches rather than looking for the right parts.
- Master data of MRO materials resulted in accurate descriptions, and the procedures to maintain the data to keep it cleansed and relevant are being followed.
In the final analysis, the company achieved all of its MRO goals for this project. More importantly, it realized a return on investment (ROI) in excess of 20%.