By Bruce Hawkins, Senior Maintenance and Reliability Consultant, PCA

Reliability journeys are inherently cross functional. Maintenance, operations, engineering, information technology and procurement (to name a few) all have a role to play. This blog discusses the significant benefits we realized by reducing costs and improving service levels in our procurement processes.

Vendor consolidation was very important for us in the maintenance, repair, and operations (MRO) procurement area. Previous to this initiative, we were a big company acting like a small company. We had some 5,000 suppliers across those seven sites, because each site dealt with their local suppliers. We embarked on an effort to narrow that down to a few thousand, which were mainly OEMs, but we also set up about a dozen commodity suppliers that would supply the whole region for commodities such as pipe valves and fittings, power transmission equipment, electrical equipment, and the like, and put corporate agreements in place with those suppliers. We gained a lot of leverage in both pricing and service. I will come back to service a little bit later. But this was not without its change management issues. The folks at the sites liked their ball caps and coffee cups from their mom-and-pop suppliers, so we had a lot of resistance. We had to manage around this, but it did provide us a lot of a lot of business benefit, because about 80 to 85% of our spending was with those 12 suppliers.

We implemented point of issue storerooms that we call supply stations located in areas where it made sense, but it was inventoried and controlled, just like the main storeroom. This reduced a lot of travel time on the part of our craftspeople to get parts. Most had attendants on day shift, and they were locked on night shift. Access on off shifts was securely controlled.

We attempted to standardize all parts and equipment so that we further reduced our supplier base. For example, we standardized on one brand of mechanical seal and the mechanical seal supplier actually put a mechanical seal repair shop at one facility that had the highest mechanical seal usage. They would repair the seals, but also help us with root cause analysis of why the seals failed. That was free service to us that we received in return for all of our mechanical seal business.

We had automated purchasing and payment. We took a lot of work out of the purchasing and payment processes. Our Work Management process had a management approval process on the work order side, and we realized that requiring management approvals on the purchasing side was redundant. Our financial folks allowed us to delegate a certain level of approval authority to our Planners to speed up the procurement process for planned work. We also implemented kitting for planned work and probably did it the best with an external kitting area. Those were the procurement design elements.

We developed a centralized corporate purchasing group with a commodity manager for each one of those dozen core suppliers to manage the relationship. They also worked very well with the vendors to catch us on mistakes, like when somebody made a unit of measure ordering error, like ordered a dozen cases of something when they meant to order a dozen units. They helped prevent some of those losses. There was minimal staff at the sites; there was generally one purchasing agent at the site to handle those one-off purchases and also to handle any capital purchases for the site and a clerk to help manage the computer systems.

The material master was another big problem. We implemented SAP at seven sites in one year with at most a couple of months between sites. This meant that there was no time to compare each site’s legacy material catalog to the master to check for duplicates; we took the approach of just appending each site’s legacy catalog as we came to it. By the time we were done, we had over 200,000 SKUs in the item catalog with seven different descriptions for the same item. We had to assign resources at a corporate level for a period of years to deduplicate the catalog, and finally got it down to around 50,000 items. But what that meant was that every time they were to delete a material item number, we had to update the Bill of Material. We had our planners doing a lot of work that we could have avoided if we had we not made that mistake.

MRO materials management and procurement was a critical part of our reliability improvement journey, and it should be considered part of every reliability program. We derived significant cost savings through improve sourcing and MRO catalog consolidation. The interface between the storeroom and maintenance in the kitting process was also critical to realizing the efficiency gains from planning and scheduling.