improve profits with supply chain management software by Epiq Tech

Supply Chain Software III

Manufacturers know that MRO (Maintenance, Repair, and Operating) expenses can be some of the largest expenses the company records. After all, keeping complex but critical machinery up and running safely and properly is no easy task in the modern factory. What most manufacturers don't know, however, is that there's a good chance that these companies could cut some of those expenses and could actually end up saving money on their MRO needs.

Excessive MRO costs are often caused by a number of issues. First, is the tendency of workers to stockpile maintenance or repair materials for future use outside of the main inventory. They do this for their own convenience, so they'll be assured that those materials are available when and if they need them. However, since those goods no longer appear in the inventory, they are being reordered even when enough of them are actually still unused.

Another cause of MRO waste is inefficient purchasing strategies. In many manufacturing firms, the person or persons responsible for placing MRO orders are the people who use those goods themselves. The end result is that people in different departments end up ordering the same materials. Plus, the MRO employee ends up spending their valuable time dealing with vendors instead of maintaining the equipment.

Finally, MRO costs are often exaggerated because of their Enterprise Resource Planning (ERP) systems. When companies implement their ERPs, they often feel that it will be the big solution they've waited for. Unfortunately, if the ERP modules related to MRO procurement are not properly configured or if the MRO employees are not properly trained on how to make use of the system, then problems and excess costs can result.

While the extra expenses these problems add to MRO budgets vary from company to company, all manufacturers can find ways to reduce these expenses effectively. For example, financial leverage can be an asset to MRO budgets if all purchasing goes through a central department instead of being spread out through the entire factory and/or different plant locations. If one department orders 200 pairs of goggles and another department in a different plant orders 300 pairs of goggles, they will pay a higher fee per pair than if both orders were combined. Another way for manufacturers to save money is through improved materials management. Instead of allowing employees unlimited access to the MRO goods so that stockpiling becomes a possibility, the company needs to implement strategies to prevent employees from removing more of these items from the inventory than what are actually needed. Employees may resist such changes, but if inventory levels are maintained consistently, the need for stockpiling becomes a dead issue.

There are additional areas where MRO savings can also be generated. First, manufacturers can determine which of their MRO goods have a short life span and can find an alternative with a longer life cycle. This change alone can cut costs significantly. Another method to reduce expenses is through more efficient inventory monitoring. With supply chain software implemented, vendors can track the amount of MRO goods a company has in stock so that they can ship them when necessary.

One of the most effective ways to reduce MRO expenditures is to choose an effective supply chain partner. Some vendors simply are not willing to or capable of getting on board with innovative supply chain management objectives. These sellers end up costing manufacturers more in the long run. Before choosing a vendor with whom to collaborate; therefore, the manufacturer needs to carefully examine the seller and lay out a plan for their joint work. Questions about quality certification, current technology, and price mark ups should be discussed before any supply chain agreements are finalized.

The bottom line is that no manufacturer needs to put up with wasteful MRO spending. A few changes in procurement strategy can cut costs and improve profit margins significantly.

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