The pandemic has shaken our confidence in MRO (maintenance, reliability and operations) spares supply chains. The drivers of supply chain uncertainty are here to stay for the foreseeable future. Organizations must tighten up their MRO spares programs to avoid repeated unwanted surprises.
By Peter Munson
The 2020 shutdowns snarled complex value and supply chains. The backlog of goods, along with shifting consumer patterns, overwhelmed global shipping and port capacities. Nearly two years later, ongoing COVID waves and labor shortages continue to exacerbate these problems. Supply chain uncertainty will outlast the immediate effects of COVID. Larger structural issues such as skilled labor shortages, inadequate infrastructure, and patchwork attempts at reshoring and improving resilience will make for a lengthy period of supply chain instability.
For plant management, this means that there is significantly increased supply chain risk to plant availability. Appropriate management of this risk can be a differentiator. It is time to pay more attention to MRO spares, starting with these six key activities:
1. Do your homework on criticality and spares usage.
While many plants get by without formally identifying critical equipment, this exercise is a must for prioritizing your efforts on more advanced improvement efforts. To manage MRO spares inventory properly, your plant team needs a common, formally defined understanding of what equipment is critical to safety, environmental, and production performance. This effort should also define the cost of downtime, which will enable fully informed supply chain risk decision-making. For critical equipment, identify the critical spare parts needed to address likely failure modes. Finally, gather and clean data on spare parts and materials usage, which will enable you to establish data-driven inventory management parameters.
2. Get farther left on the P-F curve to reduce time pressure on critical spares.
The P-F curve describes the interval between when you identify a potential failure and when functional failure occurs. Proper use of operator rounds and inspections, condition monitoring, and predictive analytics will progressively move identification of potential failures farther to the left on this curve. Earlier identification of failures gives you more time to order spare parts – not to mention avoiding cascading failures that result in more parts replaced or even a complete overhaul. In sum, this reduces inventory requirements and gives you more time to mitigate supply chain risk.
3. Exercise ongoing vigilance to identify and mitigate supply chain risks to your production critical assets.
Having blind faith that critical spare parts will be there when you need them can result in an expensive surprise. In today’s environment of supply chain disruptions, even spare parts that have not historically been a problem to source can come up dry. You must do more than look at movement reports and historical lead times. For critical spares, periodically recheck lead times with suppliers, adjust inventory levels and reorder points, and establish backup plans with alternate sources as applicable. When looking at slow moving inventory, consider market availability. It may be wise to retain that critical part that has not moved in 10 years if replacements are no longer available. Outside shop rebuild and refurbishment services should be re-evaluated, as well. Shops are facing the same supply chain and skilled labor challenges as you are. Finally, consider technologies such as laser scanning and fabrication of long-lead or unavailable parts, or even 3D printing, which can now create some parts on demand. It is important to note that such parts, as well as those from non-OEM or non-standard suppliers, should be carefully evaluated to ensure that the materials and quality are sufficient for the application. A recent report highlights that counterfeit parts have even found their way into critical applications in highly regulated nuclear power plants.
4. Enhance your partnership with suppliers to improve supply chain awareness and transfer risk.
You cannot achieve the next level of supply chain visibility and resiliency without robust partnerships with suppliers. With the right agreements in place, some suppliers can help you to improve your inventory requirements forecasting, while also allowing visibility into their stocks. Additionally, where your historical data is lacking, many suppliers can help by analyzing your purchase history with them. Armed with your critical spares requirements, you can transfer some of your supply chain risk to trusted suppliers through agreements for them to hold certain levels of items for you in their inventory, with service level agreements on specific delivery time requirements by part.
5. Protect the spares you have on hand.
Poor inventory control and a lack of reliability practices for stores can lead to loss or damage of the inventory in your warehouses, exacerbating your challenges. Apply good inventory management practices, not least of which is ensuring that kits provided for maintenance work do not include “the kitchen sink” just in case, and that unused materials are safeguarded and turned back in promptly. Conduct regular audits, splitting inventory items into ABC categories based on item values and volume. The most valuable items are audited most frequently, while lower value, but high-volume items coming next in terms of audit frequency, and so on. Finally, use good reliability practices to safeguard spares, such as a rotation schedule for large electric motors, appropriate storage to avoid damage and contamination, and climate control for sensitive spares.
6. Continuously improve data and processes to further enhance your resiliency.
MRO spares optimization requires more than just inventory and warehouse management. All of your maintenance and reliability processes, such as good work order management, reliability-centered maintenance tools, and a reliability-based maintenance program, must be fine-tuned to get the most out of your inventory forecasting and avoid the breakdown events that force reactive repairs and lead to no-notice materials requirements. Additionally, as you see the value of your data in enhancing your risk awareness, the organization will be incentivized to improve data quality and find new ways to use it. Once basic processes are fine-tuned and data is cleaned, adding advanced analytics and control tower-type systems can take your MRO spares program to world class levels of performance.
Following these six steps will help your plant to focus efforts on the right spares, mitigate supply chain risks, and eliminate avoidable downtime due to mismanaged spare parts inventories.