Industrial MRO Standardization
With thousands of line items in place, maintaining optimum inventory levels per standards becomes a critical factor. Sheer diversity of spare parts, from fasteners to pumps and pulleys to lubricants, leads to huge amounts of data, consisting of line items with typical per unit spend size of a few dollars. For large organizations with global operations and billions of indirect spend, MRO is one of the most leverage-able spend categories, with possible cost savings from inventory control, reduction in dead stock and slow moving stocks, etc. But all these exercises require MRO spend data cleansing and standardization. Standardization becomes the base for improving productivity and efficiency within MRO Spend. In-efficient and in-accurate data management may lead to multiple challenges such as inefficient inventory planning, high dead stock and over stocking, non-availability of spare parts on time, increased maverick buying thus leading to overall reduced spend transparency, and reduced control over spend resulting into overall increased supply chain risk.
Standardization of data is a process driven activity, which requires standardized and consistent unique part numbers across the entire database with part attributes. Once unique part numbers have been assigned, the next step is to identify duplicate items and assign one common part number, in the process obsolete parts are also identified and removed from system. Once above mentioned steps are complete final list is reviewed and updated to system. Steps to data standardization includes segregation and standardization of data, followed by assigning and populating attributes and, lastly, removal of duplicate items and final review of the standardized data. Standardized and cleansed data contains a consistent format and nomenclature across the organization while also containing enhanced information and improved part identification systems.
Benefits of MRO data standardization include:
- Control over excess and obsolete inventory
- Removal of duplicate items
- Reduced maverick spend
- Reduction of premium freight and emergency ordering
Improved maintenance efficiency
- Increased equipment up-time
- Parts search efficiency
Improved data analytics
- Spend management and reporting capabilities
Inventory control such as maintaining optimum inventory, control over excess inventory as well as obsolete inventory is reduced, because with consistent part numbers, tracking and maintaining inventory becomes easy. With multiple locations across regions, increased inventory control becomes a must for MRO spend management. Duplicate items lead to maverick buying, multiple vendors etc. Removal of duplicate part numbers will lead to spend consolidation and supplier consolidation as well as inventory control. With consolidated volumes, cost saving opportunities increase. Maintenance efficiency improvement through increased equipment uptime, and ease with parts search is possible with common and standard part numbers across the organization and across locations. With standard parts, visibility of stock across organization increases drastically, thus resulting in increased efficiency. Incidents of premium freight can be reduced drastically and maverick spend and emergency spend can be put on check with standardized part management. All this will lead to direct and indirect cost savings, finally resulting in increased asset utilization.
For a sustainable efficiency and cost management mechanism, maintaining quality materials data is critical from a long term perspective. A system, which emphasizes maintaining data quality and consistency across the enterprise on an ongoing basis needs to be established with provisions for continuous improvement with change in external as well as internal environments. There are third party agencies offering data cleansing and standardization services, however internal commitment within the organization and strong coordination with dedicated internal resource is required to be able to execute data management successfully. Well managed data with modern analytics tools open a plethora of opportunities, enabling data driven decision making opportunities in maintaining inventory, thus reducing inventory carrying cost, wastages, over-stocking and many other direct and indirect cost saving opportunities.