Making the business case for MRO

InTech, Aug 2005 by Stall, Steve

Evaluating the installed base of equipment and associated spare parts also can provide statistically calculated spare part recommendations to better match storeroom inventories to production needs.

By tracking new and repairable sparepart orders and analyzing part-usage levels, the installed base evaluation allows managers to determine lifetime ratios of machines and machine components and optimize spare parts inventories and overall MRO spending.

It also enables managers to better utilize warranty programs, particularly when a pattern of failures occurs.

Metrics for ROI

Developing a set of methodologies for measuring and communicating the ROI is the final step in any well-built MRO program and will further support your case for new initiatives.

Know what your weaknesses are and what will need to be overhauled first. Moreover, determine what you need to fix and how much it will cost. Be sure to communicate how you plan to show results.

It is also important to know who sets the expectations for ROI. Is it management? Or do customers set the course? ROI can provide the closing rationale management needs to support your efforts and provide the financial resources you need.

You may want to find a common ground both management and MRO can use for evaluating project success by considering the metrics used to measure performance.

For example, while management and MRO may measure equipment availability, inventory turns, uptime, and meeting production goals, management alone may focus on production per unit of maintenance and RONA.

On the other hand, plant floor metrics that typically measure performance most likely will include schedule compliance, maintenance cost reductions, budget compliance, mean time between repair (MTBR), and mean time to repair (MTTR).

To show success, agree with management upfront on how you are going to measure performance.

Justify strategy

As manufacturers continue to align MRO activities with company goals and profitability, the value of MRO initiatives will increase, as will the role of MRO managers.

More than ever, MRO managers must be able to effectively communicate the value their department brings to the organization, and ultimately the customer, and why investment in MRO initiatives makes solid financial sense.

MRO managers can learn to bridge the communication gap and be an effective translator between the front office and the plant floor. In the end, it is about tying MRO activities to the organization's business goals and performance measures.

So what happened to my son's bid for a new PC? After relentless badgering to purchase a new computer, my son and I sat down to discuss all of the reasons why I could support his proposition and the obvious reasons why I was suspicious of his true motivations. After clearing the air, we agreed on the true need for a new computer and laid out specific goals and objectives for putting it to good use.

Justifying the need in a professional environment, RONA is one method MRO managers can use to tie cost savings and expense reductions directly back to a financial investment to show bottom-line profit.