What is MRO
26 Jan

What is MRO and why is it important? A Complete and Updated Guide

You might be wondering, “What is MRO?” or perhaps you’ve come across terms like “MRO supplies,” “MRO in manufacturing,” or “MRO in purchasing,” and are seeking clarity. Well, you’re in the right place. In this blog, we will explore the meaning of MRO, shed light on MRO supplies, and demystify its role in both manufacturing and purchasing. So, let’s dive in and address these inquiries in an informative and comprehensive manner.

 

What Is MRO and Why Is It Important?

 

MRO’s Definition

 

Most manufacturing and service firms and processes have a significant component called MRO (Maintenance, Repair, and Operations Supply). Even though these components aren’t a direct component of the final product, they support maintaining appropriate operational standards to guarantee that all various business sectors have access to what they require to operate effectively.

 

The term “MRO,” which stands for “Maintenance, Repair and Operations Supplies,” is used in the context of supply chain management to refer to a range of operations and activities pertaining to the upkeep of a facility, including the physical upkeep of structures or buildings, the systems operating in the facility, and the production-related equipment. In other words, an MRO product might be anything that is employed in the manufacturing process of the final good.

MRO refers to any machinery or procedure used by businesses to maintain a facility. As defined by Walt Vanderlaan, vice president of strategy at MRO Software in Bedford, Massachusetts: “It’s very crucial to have the right inventory levels and to procure items efficiently.”

 

The term MRO is also used to describe a method of reducing unit price expenses for high-volume, low-value purchases, which is a crucial but short-sighted strategy.

 

It is crucial to comprehend how each component affects the complete business. In addition to enabling the manufacturing process by improving visibility, cutting down on plant downtime, raising operational productivity, and guaranteeing overall equipment performance, it may also deliver extraordinary savings, end-to-end efficiency, and unheard-of control.

 

In order to have a successful MRO approach, not only are parts needed, but the company must also seek ways to optimize its maintenance, repair and operation processes.

 

When you examine the MRO Supply Chain Management, you will see how crucial it is to optimize the real value, standardize business procedures, identify the key performance indicators (KPI) that provide the most useful data, and then incorporate the appropriate technical tools (such as procurement software packages) to assist in bringing about this change.

MRO will be the business’s rescue strategy to streamline its operations, keep up with the rapidly evolving industry, and, of course, prevent massive resource waste.

 

What Is MRO Inventory?

 

MRO inventory, also known as Maintenance, Repair, and Operations inventory, refers to the stock of supplies, parts, and materials required for carrying out maintenance, repair, and operating tasks within an organization. The equipment and infrastructure that make up the entire operational system must be supported and maintained even though these components are not directly used in the finished goods.

 

Depending on the industry and unique requirements of the organization, many types of MRO inventory may be used. To illustrate, consider these instances:

 

  1. Spare parts: Items like motors, valves, bearings, belts, filters, and seals that are used to replace or repair broken or worn-out equipment.
  2. Consumables: Products that are constantly consumed or utilized in daily operations, including safety gloves, welding rods, adhesives, cleaning products, fasteners, and lubricants.
  3. Tools and equipment: A variety of hand tools, power tools, measuring instruments, diagnostic tools, and testing devices are needed for maintenance and repair jobs.
  4. Safety and maintenance materials, including fire extinguishers, first aid kits, safety glasses, hard hats, ear protection, lubrication tools, and maintenance chemicals. Also included are essential safety items, signage, and maintenance-related supplies.
  5. Facility maintenance supplies and materials: These include things like lighting fixtures, electrical parts, plumbing supplies, HVAC filters, and equipment for maintaining buildings.
  6. Calibration equipment, which includes calibration weights, pressure gauges, temperature probes, and flow meters, is used to calibrate and ensure the accuracy of measuring instruments and equipment.
  7. Office supplies: Although not exclusively related to manufacturing operations, MRO inventory can also include office supplies including paper, printer ink, pens, folders, and computer accessories that are needed for administrative and operational reasons.

 

It’s crucial for businesses to manage their MRO inventory well in order to keep essential supplies close at hand, reduce downtime, keep costs under control, and maintain operational effectiveness. This entails putting inventory management systems in place, keeping an eye on stock levels, doing routine audits, and streamlining the purchase process to fit with maintenance and operational requirements.

 

How Does MRO Affect Inventory Management?

 

Industrial firms are currently subject to a wide range of substantial risks with regard to their MRO Supply Chain in the event of non-control in all categories of transactions:

 

  1. Unexpected equipment failure
  2. Dissatisfied stakeholders
  3. Inflated finished goods inventory 
  4. Bundle working capital in obsolete or unnecessary inventory 
  5. High shipping cost 
  6. Loss of productivity of maintenance workers 

 

What is MRO Inventory

 

The significance of managing and maintaining the inventory becomes clear when all direct and indirect costs are taken into account. As a result, the Supply Chain Manager must take into account the following common situations:

 

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Backlog Excessive Inventory (Overstock)

 

While trying to avoid out-of-stock by ordering extra parts, the Warehouse Manager finds out that they are rarely used. The excessive inventory (called also Overstock) is placed on the shelf, further making the storage room gather dust. Worse, he/she cannot get back the money spent which is logical.

 

[insert banner for excess and obsolete inventory]

 

Productivity Loss

 

The impact of MRO inventory management on daily operations shouldn’t be ignored or denied. Technicians are estimated to spend up to 25% of their time repairing parts. Even while there might just be a tiny amount of downtime added each time, it gradually adds up. As a result, it can be very frustrating to be unable to locate the parts you require.

 

Production Shutdown

 

Production halts if supplies and resources run out. Operators and technicians await for the delivery of the parts. As a result, expedited transportation must be paid for by the Production Manager. The total cost of maintenance skyrockets due to the significant increase in downtime.

 

If you can’t wait to restore the assets, you must adopt dangerous workarounds that might compromise the quality or safety of the final project.As may be obvious, MRO’s basic function should be to maintain the efficiency of the manufacturing and supply chain. The system can suffer if maintenance, repairs, and overhauls are neglected. However, businesses that keep MRO inventories can offer their clients higher-quality goods.

 

MRO purchase is typically handled by the maintenance team rather than the purchasing department. This, in my opinion, is incorrect because they lack expertise in either procurement or purchasing. Supply Chain folks must therefore be involved in the management and reduction of spending.

 

How Does MRO Affect Spend Management

There are a number of well-considered remarks that could be made if we examine the contemporary industrial setting.

Some businesses cannot optimize their MRO even if they promise to make improvements.

This outcome occurs frequently as a result of their failure to carry out a complete and fruitful spending analysis. A thorough analysis of previous spending and expenditures served as the basis for the creation of new, strategic approaches.

The purchasing department can gain a basic awareness of its historical purchases in a category and find ways to lower short- and long-term expenses through proper expense analysis. But with high-volume goods like MRO, the procedure frequently looks too difficult to buy, let alone try.

Values of MRO Spend Management are primarily focused on: 

 

  1. Choosing the appropriate objectives for expenditure analysis and procurement
  2. Reevaluating the traditional approach of controlling and managing MRO expenditures.
  3. Choosing the right politic to analyze MRO expenditures.
  4. Effectively gathering and categorizing expenditure data.
  5. Finding chances for cost cutting.
  6. Encouraging suppliers and stakeholders to create data collection procedures that are more efficient.

Examples of MRO and MRO Materials

As was previously noted, the majority of manufacturing and service organizations depend heavily on their MRO strategies. Even though these components aren’t seen as being a direct component of the final product, they support suitable operating standards by guaranteeing that all divisions of the company have the capabilities needed for regular operation.

Some products could be depicted as spare parts for machines and vehicles, lubricants, office supplies, consumables, industrial equipment, computers, or work wear like boots, uniforms, vests, and helmets.

These components make up a sizable portion of the money allocated to procurement by the firm, depending on the nature of the business. To get the most value out of these purchases, these elements should be used productively while being purchased, processed, and stored. MRO management is frequently a component of Enterprise resource planning (ERP) systems, which can assist businesses increase the effectiveness of this crucial business activity.

MRO is involved with the upkeep and repair of factories or other facilities, which can be broken down into the following categories:

Material Handling Equipment Maintenance 

This area of MRO in some businesses entails the upkeep and repair of material handling machinery. It covers a variety of equipment and systems, including stationary conveyor systems as well as mobile machinery. Transporting components and raw materials to the production line, for instance, depends on keeping this equipment in good working order.

Infrastructure Repair and Maintenance 

Roofs, doors, windows, and loading dock brackets are among the infrastructure items that need maintenance and repair. Different techniques can be employed to finish the repair and maintenance of the infrastructure depending on the type of business and whether the facility is leased or owned by the business.

Maintenance Supplies

The third area of MRO activities involves the maintenance and repair of production equipment. It simply aims to maintain the main machinery and systems used to produce the products and services sold by the enterprise and use them as the main output. Unplanned downtime in production equipment can be very expensive.

Tools and Consumables 

It involves tools and consumables. This usually refers to materials and tools that are smaller than the machinery and equipment discussed earlier in the repair and maintenance section of production equipment. These items are usually used or consumed in production activities. Still, they are not classified as finished products, so they are not classified as direct expenditures such as consumable items (Ex: Adhesives and glues), personal protection equipment (Ex: Face shields), etc.

MRO Functions

  1. The members of the procurement team make orders with MRO suppliers as required.
  2. Enterprise resource planning software, a material resource planning system, or a warehouse management system are typically not used by businesses to handle MRO purchases.
  3. MRO inventory and costs are typically excluded from the company’s periodic reporting, which prevents the company from knowing what MRO initiatives are currently in progress.
  4. This can be fixed by keeping track of a comprehensive list of all necessary MRO products, required delivery dates, MRO item usage and consumption rates, etc.

How To Make MRO More Efficient 

Improve MRO Procurement Process 

Changing business culture and policies can be difficult, especially if Top Management (or senior management) is dedicated to doing so. However, you may streamline and enhance the MRO supply chain and its associated costs if you’re ready to adopt and put into practice some best practices. 

  • To identify and track key performance

We won’t be able to assess the success of MRO procurement without benchmarks and standards. Setting up KPIs gives the business the data it needs to concisely communicate to senior management and other stakeholders the benefits of its activities in the monthly/quarterly report. Procurement budget, vendor performance/supplier contributions, amount of stock-outs, etc. could all be considered key performance indicators.

  • To Research, Approve and Integrate Purchasing Software Solutions 

The purchasing staff has to start using software if it doesn’t already for managing supply chain and MRO spending. The tracking, management, and control of inventory and transaction requests, approvals, and verifications are made simple by modern software. As a result, the team will be able to better manage inventory, access crucial data, evaluate potential suppliers (and monitor the performance of current preferred suppliers), cut the number of suppliers in the supply chain, and lower procurement budgets while still generating value.

  • To streamline Procurement with Preventive Maintenance 

Once the inventory is located, you can schedule equipment downtime (connected to benchmarks and KPIs) and order enough equipment in accordance with needs and situational requirements to ensure the system runs as efficiently as possible without keeping excessive inventory. Because each member of the team can recognize buying trends and make plans in accordance with them, the team will discover that budgets and projections have also significantly improved.

MRO Procurement Best Practices

The first and most crucial step in maximizing the value and cost savings produced by an MRO project for a firm is to prioritize and support MRO inventory management and MRO procurement in the same manner as the company’s direct procurement. As a result, the company will realize significant and long-lasting savings by: 

  1. Simplifying expense analysis by removing rogue expenditures, producing more precise financial predictions and improving strategic planning.
  2. Improving data management and working together to boost output and involvement from all parties
  3. Reducing work time and process efficiency by removing unneeded complexity from work processes. Barriers and human errors can be significantly reduced when combined with automation.
  4. From tactical cost reduction to strategic total cost of ownership reduction, incentive programmes, economies of scale, and alliances with reliable suppliers are used.
  5. The manager must have a strong commitment to customer service and purchasing expertise.

Using the proper “supplier relationship management” techniques is equally as critical as meeting the manager’s requirements for any other category. It is most practical to identify the mission-critical, highest-risk MRO projects and suppliers and make sure that a select number of vendors are directly drawn, given that there may be thousands of MRO project suppliers.

Having proper metrics and performance tracking processes is essential. Target metrics and performance will inform actions regarding procurement and inventory.

Active inventory management is essential. Most importantly, the most critical business MRO projects need to be analyzed and managed based on demand patterns and lack of supply impact. Intelligently storing these mission-critical items will reduce downtime, reduce costs, and save management time. Finally, it is important to ensure compliance with expenditure control.

Conclusion

These blogs should have adequately answered your question about what MRO is. MRO’s importance and necessity as a component of any purchasing organization or even a straightforward operation becomes more apparent.

All businesses, whether large or small, must invest in this field and sector in order to develop the business procedures, infrastructure, and strategies that will support and promote the use of MRO standards. If not, the business will have to spend more time putting out flames and disasters brought on by poor management.

Therefore, you must remember that it is now necessary to establish and adhere to MRO best practices. We admit that it can be challenging to alter the company’s culture so that our Supply Chain Management department can initially build the idea of value.

Hopefully, these blogs answer the question of what is MRO. It becomes clearer that MRO is a crucial and indispensable aspect of any purchasing organization or even a simple operation.

Best practices only work if they are followed.

In light of this, it appears very crucial to consider the procurement team (MRO personnel), to whom we should impart proper instruction on the use of procurement software as well as a thorough description of the advantages and rewards of value-driven business processes.

FAQS

What Does MRO Mean?

The acronym MRO stands for “Maintenance, Repair, and Operations.” It describes the materials, tasks, and practises involved in upholding and supporting the operational standards of a facility or firm. MRO includes effective inventory management and procurement procedures in addition to the physical maintenance of systems, production equipment, and buildings. Its goal is to streamline processes, boost productivity, and avoid resource waste by optimizing maintenance, repair, and operations.

What Is The Work of  MRO?

For equipment, systems, and facilities to operate at their best, MRO (Maintenance, Repair, and Operations) personnel must maintain and make repairs. In order to reduce downtime and guarantee smooth operations, it involves controlling inventories, obtaining necessary supplies, performing preventive maintenance, and taking care of repairs quickly. To enhance the general efficacy and efficiency of a business or facility, MRO work also entails optimizing procedures, ensuring compliance, and managing expenses.

What Are MRO Materials?

MRO materials, or Maintenance, Repair, and Operations materials, are items and supplies necessary for the upkeep and maintenance of facilities, equipment, and systems within a business. They include components such as tools, spare parts, lubricants, cleaning agents, safety equipment, and other consumables required for maintenance and repair tasks. MRO materials ensure the continuity of operations, improve equipment reliability, and support the overall functionality of a business.

What Is MRO Procurement or Purchasing?

The process of acquiring the MRO (Maintenance, Repair, and Operations) supplies, materials, and services required to support the upkeep and operation of a facility or business is known as MRO procurement or purchasing. It entails tasks including locating suppliers, getting and comparing estimates, negotiating contracts, and placing orders for MRO products and services. Effective MRO procurement seeks to serve the overall operating operations and maintenance requirements of a business by ensuring timely availability of high-quality supplies, cost effectiveness, and strategic vendor management.

 

About the Author- Dr Muddassir Ahmed

Dr MuddassirAhmed is the Founder & CEO of SCMDOJO. He is a global speakervlogger and supply chain industry expert with 17 years of experience in the Manufacturing Industry in the UK, Europe, the Middle East and South East Asia in various Supply Chain leadership roles.  Dr. Muddassir has received a PhD in Management Science from Lancaster University Management School. Muddassir is a Six Sigma black belt and founded the leading supply chain platform SCMDOJO to enable supply chain professionals and teams to thrive by providing best-in-class knowledge content, tools and access to experts.

You can follow him on LinkedInFacebookTwitter or Instagram

 

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