Maintenance, Repair and Operations (MRO) is by all accounts one of the most over-looked, disrespected areas of the supply chain. A tiny, lowly, ball bearing can bring an operational industrial site to a halt. If a replacement part can’t be quickly found, the result can be disastrous.
In fact, one large CPG company confirmed that if its plant goes down, it loses $20,000 per hour.
It’s absolutely true that MRO is disrespected, said Christopher Moore, Executive Vice President of Field Operations for SDI Inc., a Bristol, Pa.–based integrator of MRO supply chain services to more than 1,200 facilities.
“MRO is the often-ignored stepchild,” said Moore. “It has low visibility and it’s not direct-material related. It isn’t core products but it can shut down the production line quickly. It’s often ignored until [that happens] but after it’s resolved, it’s back to the status quo and everyone forgets about the little emergency that just happened.”
Quite simply, MRO, is an indirect spend that includes materials and services that don’t go directly into the end product but are used to maintain, repair or operate the processes and machines that manufacture the product.
Lessons learned from the field
One of SDI’s customers is Ascend Performance Materials LLC, a Houston-based chemical company with five U.S. plants producing Nylon 6, 6 and its derivative chemicals. In the 1950s, Monsanto formed its chemicals division, which included the production of Nylon 6, 6. In 1997, Monsanto spun off its chemicals division to form Solutia Inc. In 2009, a private investment firm purchased Solutia’s Integrated Nylon business and established Ascend Performance Materials Operations LLC.
Nylon 6, 6 is frequently used when high mechanical strength, great rigidity and good stability under heat is required. Applications include carpet fibers; apparel; airbags; tires; zip ties; ropes; conveyor belts; and hoses.
“There are many categories of expenses that management needs to focus on and act on,” said Tom Barrett, Indirect Procurement Leader, Ascend Performance Materials LLC. “Raw materials are most always critical to the business and operations. The percentage of indirect spend to direct is less and MRO is even less than that. When you look at the MRO space, its 10 to 15 percent of that indirect spend.”
Ascend’s MRO spend represents about 10 percent of SDI’s total managed spend. The MRO opportunity was identified following the final spinoff from Solutia—five plants (two based in Alabama and each of the other three in Texas, Florida and South Carolina) had five operations acting in a silo.
“They were doing what they needed to do to keep each plant running,” explained Barrett. “They had their own local suppliers and initiatives—multi-suppliers, different suppliers, different terms.” In other words, a lot of vital products often can’t be located quickly, leading to expensive downtime.
“MRO is the fuel that feeds the beast,” Barrett added. “It’s the needs and supplies of our business: filters, lubricants, safety supplies, lab supplies and batteries. When [supplies] are used up we need to correspond with the maintenance group—whether it’s a pump, gasket, belts, filters, all the things we need to run a chemical plant, even software, hardware, servers and applications for SAP.”
SDI began with a refit of the largest storeroom at the Pensacola plant. It was ramped up, centralized and running efficiently in nine weeks, primarily via a pick-and-pack model that reduced walk time and wait time.
“We brought them into the modern century by implementing a fully integrated electronic solution that includes a full service online catalog with a user friendly shopping cart,” explained Moore.
The quick timeline was essential for Ascend, as was SDI’s experience. And as a third-party provider, there were limited formal supplier relationships.