Making the business case for MRO

InTech, Aug 2005 by Stall, Steve

Limited resources, lack of understanding of maintenance strategies are barriers to asset management.

The changing market forces manufacturers to lean initiatives and more efficient processes. Increase margin and stock value or get out.

Managers at all levels must consider every possible resource to maximize operational efficiency and minimize effort so they can concentrate on core competencies.

Increasingly, one of the most common targets of these cost-savings initiatives is a company's maintenance, repair, and operations (MRO) practice.

MRO managers have come to realize success isn't necessarily production goals alone. They must now consider every purchase and maintenance decision has a direct impact on their company's profit margin, as well as their own department's measurement of success.

For today's maintenance managers, the directive is clear: Find ways to optimize and streamline.

This is a tough situation for MRO departments. According to a recent survey, limited resources and management's lack of understanding of maintenance strategies are two of the most often sited barriers keeping organizations from implementing a more comprehensive asset management program.

Additionally, the survey illustrated there is no universal methodology to measure the performance of MRO activities.

Let's look at the different techniques available to improve MRO activities and how to communicate to management the strategic benefits and investment justification and develop a methodology for calculating and reporting return on investment.

Download music faster

When you live in an age of company downsizing, justifying major expenses to the keeper of the checkbook is a fact of life. Whether you're buying a new computer or expanding an MRO program, a compelling argument needs to be made before the writing the check.

Building a solid expense justification recently hit home when my teenage son lobbied for a new computer. While his older PC was getting the job done, he was vying for a newer Pentium 4 model. He justified the expense by saying it would help improve his schoolwork and keep his computer skills up-to-date.

As the checkbook holder, I was skeptical of his reasoning and had difficulty realizing whether his request was need-based just something he wanted. As a parent who didn't just fall off the proverbial turnip truck, I had the sneaking suspicion the true reason for his request was to have a machine that could download music faster and play more advanced multimedia computer games.

At age 13, my son lacks the business savvy to effectively make a case for the return on investment (ROI) that might potentially arise by a new computer. He may have received a better response from management-Dad, in this caseif he had provided tangible examples of how he could improve his academic performance with a new PC. He also might have improved his chances of success by citing instances where his current PC had inhibited his capabilities, such as repeated loss of schoolwork due to computer crashes or inability to download research data due to slow processor speed. Additionally, he probably should have helped me, as management, fully understand how the computer would achieve the organization's (family's) greater goals. For instance, would a new computer help him earn a college scholarship? Alternatively, could it give him extra time to participate in other activities?

For many MRO managers, the situation with my son parallels scenarios repeated in manufacturing organizations around the globe: The MRO department struggles to communicate the benefits of its needs in terms management understands. In addition to knowing what the drives market demand for a company's products (customer needs and wants), making a business case for MRO initiatives requires mutual understanding and communication, strategic planning, and performance measurement to show ROI.

Achieving mutual understanding

In the manufacturing environment, limited resources and management's limited understanding of maintenance strategies are the reasons MRO managers most often cite for not implementing new MRO initiatives and programs. The fact is management holds the checkbook. Moreover, if they don't understand the impact MRO can have on an organization, it is difficult to justify the additional expense. Resolution to this situation is possible taking management's perspective and adopting the following simple rules:

Eliminate the "us"versus "them" mentality.

To achieve maximum success within any organization, all departments must act as one, in unity, on their business objectives. The mindset of "MRO versus management" must drop off the radar because it undermines the success of the whole organization. Both groups should unite behind achieving the goals of the company as a whole.

Speak front-office language.

Naturally, each group has its own lingo and communicates and pursues business objectives from different perspectives. In many cases, distinct differences in manufacturing terminology and front-office language leads to misinterpretations and a general lack of understanding between both groups.