MRO, which stands for Maintenance, Repair, and Operations, is a word that one often comes across in the world of operations and procurement. Most do not realize how important it is for the successful operations of a company.
The importance of the MRO industry has immediate significance when a production line is affected due to a lack of an MRO item.
What is MRO and What is its significance?
One casually throws around this phrase to mean an umbrella term that covers miscellaneous expenditure associated with running operations. Companies do not give MRO much thought, and usually provide limited support when it comes to this industry. A lack of it can result in risky purchases and ill-informed buying behavior.
The definition of MRO explains it as consumables that include:
- Supplies utilized in the production process but do not come under the end-product or are integral to the output of the firm.
- Cleaning, office, and laboratory supplies.
- It also includes industrial supplies like compressors and pumps.
- Upkeep supplies: lubricants, repair tools, and such.
- Computers, furniture, etc.
Examples of some other items included in MRO are:
Workwear, gloves, etc
Why is MRO management vital?
MRO expenditure usually ranges between 5-10% of the costs of sold goods. This cost may seem less, which is also the reason why MRO is oft-ignored. So, what is the result of not managing MRO properly?
If there is a shortage or lack of an essential tool, chemical, or component in a production process, the production line will halt to a standstill. When this happens, it cannot resume until one resolves the issue.
Hundreds of employees are left to wait, and it leads to costly loss of revenue in terms of missing customer revenue and performance penalties. One will lose money and have to spend thousands to mend the damage.
In the case of the shortage of safety equipment, the company inadvertently risks the lives of the workers. Should anything more be said? MRO is vitally important.
Due to the lack of proper MRO procurement, supplier management, and inventory management, one can put their company at the risk of losses that will threaten its entire survival.
How to manage MRO effectively?
There are various techniques to manage MRO. The most important quality is that it requires dedicated attention so that the company does not overlook anything. A dedicated team of experts can deal with this in the required manner.
It is essential to have a supplier relationship management program. One might even say that there are thousands of suppliers for MRO items, and it might be a herculean task to find the most critical MRO items and give such suppliers the needed attention.
A few things to look out for are, a good metric set and a necessary performance tracking process. Inventory levels, downtime costs, replenishment and delivery, supplier performance, and expenditure levels are only a few of the essential metrics that a company needs.
Performance tracking and metrics help in making decisions and drive actions concerning stocking and sourcing. Being proactive is a sure way to avoid risks and save costs. So managing inventory proactively, has its benefits.
For example, one can regulate vending machines with the aid of MRO. The supplier stocks the machine, and items are re-stacked as and when needed based on the signals from the machine.
More importantly, essential MRO items have to be analytically managed, according to lack of supply, demand patterns, and restocking time. Category performance helps in assessing each category and making the necessary choices.
Stocking the essential items will mitigate unproductive time and reduce costs, guard customer deliveries, and save time. It is vital to ensure spending control compliance. The risk of buying defective MRO items from unreliable sources is relatively high.
Due to different issues, people might go beyond their usual area of responsibility and buy for the sake of keeping the production going. But this act is dangerous, and such impulsive buying denotes insufficient resources and a lack of control or proper management.
Finally, the MRO industry is an unavoidable, essential part of all operations and procurement in an organization. Companies should spend a sufficient amount of time to allocate and analyze each segment, which is best left to be done by experts.
Necessary infrastructure and support have to be dedicated to MRO regardless of the size of the company and firm. Otherwise, companies will spend more time putting out the fires rather than proactively preventing them in the first place. Having a dedicated team of experts or an excellent technological system in place that monitors MRO ensures smooth functioning.