We can start by saying without fear of exaggeration that there is no good business management without MRO, that is, without Maintenance, Repair and Operations. In addition to taking care with deliveries, shipments and customer service, any business must pay particular attention to its internal workings and ensure that all departments have what they need and are ‘well looked after’.
The expression mens sana in corpore sano – Latin for healthy mind in a healthy body – can be applied in the same way as to the body to a company, for we must take care of what makes us, as a business, able to function. However, it is necessary to strike a balance: neither too little nor too much care, as we do not want to have hundreds of parts sitting in the warehouse just ‘in case something happens’. It is a better strategy to analyse what is likely to happen using MRO and current technology. If you want to know more about the maintenance and care you should give to your equipment and the benefits it could bring, read on! Today we explain it all.
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What does MRO refer to?
As mentioned above, the acronym MRO refers to the equipment, tools and activities to be taken into account in order to make the day-to-day running of a company run smoothly. It is not about having a specific part in stock in case one breaks, simply put, but about having a strategy for the overall operation.
That being said, MRO usually includes everything related to heating, air conditioning and/or ventilation systems, lighting systems, machinery, technology, furniture and even cleaning utensils. As you can see, what it does is a kind of general scan of the company’s situation from the inside, from what it needs to function and thus to produce.
Like many such inventions, which seek near-constant order and control of the situation,MRO was first applied or used in the military, specifically in the US Department of Defence to keep track of spare parts, tests, repairs, etc.
However, companies quickly saw this maintenance, repair and operations system as a more commercial outlet, which could help them improve internal management and optimisation. The MRO concept has evolved over time and with new applications to suit specific industries and companies. Currently, any material that is needed in an operational and/or production process that is not part of the final product is considered MRO.
This is why, as it is such a broad concept, it is often divided into 4 categories, as explained by Thomas, the industrial sourcing platform. Below, we explain them to you:
- Repairing and maintaining infrastructure is an essential step in ensuring that business facilities are operational and in good condition whenever needed.
- Any maintenance and repair of production equipment shall seek to ensure the operation of related equipment and systems.
- The maintenance of material handling equipment will be closely linked to the management of systems used in the transport of raw materials and final products to and from production lines.
- Managing tools and consumables also means overseeing any of them, manual or smaller, that are needed in day-to-day operations.
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MRO: types of maintenance
The MRO stock has 3 possible maintenance strategies, and one or the other will be employed depending on issues such as budget, available resources, the company’s own experience and objectives:
Preventive
The main objective of preventive MRO maintenance is to extend as much as possible the useful life of any asset by preventing or avoiding as much as possible problems or breakdowns. How can we achieve this? Through the use of technology, scheduling and scheduled maintenance based on asset usage. Depending on the software, a certain level of technology and experience will be needed to understand it.
Corrective
This second type is not intended to prevent, but to cure, hence it is also known as breakdown maintenance. It is initiated when there is a problem and a solution is sought after the problem has occurred, not before.
Ideally, of course, a company should try to stay as far away from this type as possible and anticipate failures before they occur. However, not everything can be prevented, and many businesses continue to operate on a corrective basis, where they prepare for unexpected events by having spare parts on hand. In this way we do not have to constantly plan and check for breakdowns, but we risk losing a lot of time, and in these cases the stock will have to be ready for use in service almost immediately.
Predictive
We have saved the best type for last: predictive maintenance aims to ensure that activities are performed only when specific conditions are met. The aim is not to rely on maintenance programmes, but to install tools and sensors that provide information about the condition of a specific item. All the data collected will be analysed to ensure that it is only activated when necessary and is not always running.
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Benefits of MRO
We promised at the beginning of this article that we would discuss the benefits of implementing an MRO. Although with the explanations we have been giving you have probably already noticed some of them, let’s take a closer look at what this system can do for you:
- Optimisation of operating costs. Because we know in advance which products will be needed for which interventions, we will save money because there will not be as many operational costs.
- Efficiency in response times. Turnaround time is reduced because of more efficient inventory and warehouse management.
- Increased productivity. If asset downtime is reduced, one of the first consequences is an increase in productivity.
However, the group that will ultimately benefit most are the customers, because if the internal management of a company improves, the production, quality and delivery of the products or services it offers also improve. MRO eventually becomes an added value to the business proposition.
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Manage MRO inventory
MRO strategies can help us better understand all the internal parts of our business and the materials needed to manage them. But how can we manage that inventory?
The key word is balance: we must find that middle ground between having spare products in stock without wasting money, as keeping parts in stock is one more expense that, if not controlled, can get out of hand. Therefore, we can neither be ‘over-prepared’ at the expense of spending nor leave everything to chance.
Managing MROs, as you can understand, is not as easy as it sounds. The first thing is to understand and have all assets located in their respective facilities: the spare part will be linked to the equipment to which it belongs and of which it will be a part in the future. If you have already taken the technological leap and have an inventory management software in your company, you will be a few steps ahead, as you have the option of configuring it to do the ‘dirty’ work for you (schedules, parts tracking…).
The first thing we need to be clear about are the priorities we want to be guided by, which will depend entirely on the company and its objectives. We recommend that you analyse the current situation of your business with the data you can get hold of and create KPIs for monitoring. With them, measure the performance of the MRO and ask yourself some questions: Is the part that this department may need available? If I order spare parts, do I receive them right away or does it take a few days? Are there any items you need to keep in stock?
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MRO in inventory
MRO can be completely different from one company to another, especially if they are from different sectors or have opposing objectives. However, if you are wondering if there is a minimum or correct amount of MRO inventory, here are some practices to apply in your company so that, in general, you will never run out of inventory (although we recommend that you apply all the procedures to your specific company):
MRO value as a percentage of RAV
If you are looking for a simple way to assess your MRO stock quantity you can always compare it to the value of the plant’s replacement asset. According to this technique, the MRO inventory should be 1.5% of the plant’s RAV. With this figure you can roughly calculate the value that the company spends on stock, but remember that when calculating the MRO value, raw materials and finished goods must be excluded.
A low percentage means that we are freeing up space for activities that generate more value. Of course, this result does not mean that less material is being used or that fewer activities are being carried out, but rather that there is a very good capacity to anticipate any problems or needs. The result of all these procedures is less money spent on maintaining inventory, physically speaking.
Economic order quantity
Second way to adjust inventory levels: calculating the economic quantity of the order. As the name suggests, it will seek to arrive at approximately the order quantity that will maximise the return on investment. We should always bear in mind that the level of ordering means an increase in maintenance costs, which may not be in our interest. However, ordering in bulk often saves a lot of money.
The mission of this calculation is to determine the order quantity that would be most profitable taking into account inventory costs and ordering costs, and to strike a balance between the two. The somewhat ‘negative’ part, so to speak, is that this method does not necessarily have to be applied to all MRO inventory materials. However, it is still very useful to draw out this calculation in order to use the data from a strategic point of view for some groups of items that may have a significant impact.
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We hope that this short guide to MRO and its application in a business has encouraged you to put some of the ideas into action in your own business. At MRO by Servitec we optimise your operational costs, offering solutions to improve your purchasing and supply management processes. We provide outsourced procurement, warehousing and value-added solutions for MRO and indirect materials to customers in the manufacturing, assembly and process industries.
If you have any specific questions or want to know what we can do for your company, just get in touch with our team, who will study your specific case to offer you services tailored to your needs.
