The high cost of misalignment between MRO Supply Chain and Maintenance Strategies

The misalignment of MRO Supply Chain and Maintenance Strategies can result in increased operational, safety, and compliance risk and significantly impact production and profitability in asset intensive industries.

 A solid asset data foundation and an effective Asset Data Governance process as part of an overall Asset Lifecycle Information Management Strategy can help to minimise these risks, improve asset availability and increase profitability.

 Competing Interests And Misaligned Strategies

 Hundreds of millions of dollars are spent annually in asset intensive organisations performing projects to optimise maintenance and reliability strategies. Designed to improve asset reliability and performance, these projects typically result in a set of recommendations that outline the specific maintenance activities that should be performed, the recommended frequency of performance, and strategies to monitor performance for ongoing continuous improvement. These studies are normally commissioned by operations and maintenance stakeholders responsible for production and asset availability.

Separately, companies spend billions of dollars each year performing studies focused on optimisation of their internal supply chains. These projects are commonly sponsored by executives responsible for finance and supply chain; very different stakeholders than those who commission the maintenance optimisation projects.

The MRO supply chain materials (spare parts) critical to the execution of maintenance strategies are commonly lumped in under the umbrella of the corporate supply chain optimisation initiatives.The business drivers behind maintenance strategy optimisation projects and supply chain optimisation projects are frequently disconnected and sometimes directly in conflict. This misalignment creates problems in a number of areas. First, maintenance strategy optimisation projects sometimes recommend an increase in spares inventory; not less. Secondly, inventory reduction recommendations driven from supply chain optimisation projects mostly fail to consider the impact such changes will have on asset reliability and performance.

Companies who have not established strong alignment between maintenance and MRO supply chain strategies are poorly equipped to measure the impact such changes will have on cost and asset performance and thus have great difficulty making decisions that will balance these tradeoffs in the best interest of overall corporate performance.

Organisations who have been able to establish and maintain strong linkages between maintenance strategy and MRO supply chain strategy, including effective decision support systems and processes, are much better positioned to make decisions in the best interest of overall corporate performance; rather than only supporting one or another siloed initiatives.

 A Data Driven Approach To Achieve Strategy Alignment

There are many best in class technology products and best in class processes for performing maintenance strategy optimisation available in the market. None of them are of much use without good data.Therefore, one of the first and most obvious gaps that must be addressed before trying to establish strategy alignment is data; master data. It is common (in a Brownfield environment) to discover that greater than 30% of maintainable equipment is not recorded in a CMMS tool. It is also quite common to find more than 20% of unique equipment records in a CMMS are no longer in service.

The first step in establishing alignment between maintenance and supply chain strategies is to know what is actually being maintained, or should be maintained. Performing a maintenance optimisation process on the 20% of equipment no longer in use is hardly a productive use of anyone’s time and money. This first step must include an audit to establish an asset registry that everyone trusts. The safety and compliance risks associated with an inaccurate or incomplete asset registry are huge.

The next step is to ensure that all systems of record for asset data have a common and agreed upon definition of asset criticality. The majority of maintenance strategy optimisation projects will help define and assign criticality to equipment. It is very important to ensure that this criticality finds its way to the CMMS system and is an agreed upon standard. For example; Critical – High impact from failure; Not Critical – Low impact from failure.

This is the first opportunity to align strategies by aligning goals. If an asset is defined as critical and it fails, corporate performance is impacted and everyone should care.

Next, you need to look at all critical items and identify which have Bills of Material (BOM’s).

It is common to find only 30% to 50% of critical assets have complete and accurate BOM’s. There is a BIG difference between having a BOM and having a “Complete and Accurate” BOM. A complete and Accurate BOM is one which is fully aligned with, and supports the maintenance strategy. And don’t forget that the same equipment in different operating contexts do not always have the same BOM.

Equipment BOM’s and Maintenance BOM’s should be considered as part of this scope of evaluation.

The final step in this process is a review of materials associated with critical equipment BOM’s and ensure that the material records are valid and the materials in the warehouse match the materials referenced in the information system.

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One Response to “The high cost of misalignment between MRO Supply Chain and Maintenance Strategies”

  1. Aliasgar Babat Says:

    Very good article. Aligning supply chain strategies with business plans and MRO helps businesses to achieve cost redundancy, increased efficiency, productivity etc. Companies like Global4PL helps businesses in demand chain transformation, utilizing hard-hitting analysis to steer supply management policies through the complicated, yet critical, world of supply and demand chain enablement to gain competitive advantage.

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