The Inbetweener: purchasing MRO materials (part 2)
You may recall our first blog for procurement in which we outlined how to divide MRO into three logical elements when talking about procurement being (1) direct/critical parts, (2) consumables and (3) services. Doesn’t MRO ring a bell? This is the abbreviation for Maintenance, Repair and Operating supplies.
MRO is a topic that can be approached from different angles. One of these has to do with the title of this blog: ‘The inbetweener’. Why is it that processes around MRO materials are poorly supported by IT tools at many organizations?
Let’s imagine the ideal situation
Your MRO direct products, your consumables and services are available from one source where your engineers, contractors and supporting staff are working on. For MRO this is the service/plant maintenance order or project. You want to order everything at once from this single planning object, let’s call that the work order. It should be user-friendly and easy to use. You do not want to be bothered if stock is available or if a service purchase order has been submitted or not, nor what the available work hours for consumption are. You definitely do not want to go ‘offline’ and create separate shopping carts, purchase orders or temp labor orders. You just want to plan your engineers and ensure that the right parts are available at the right time. You want to manage all your procurement from one single source, the work order. Consumption of MRO should be easy to execute and directly visible and reported into your back office.
Let’s face the reality
In many organizations typically MRO is the inbetweener. It is not regarded as direct/ supply chain but also not seen as core indirect NPR related goods and services.
Traditionally ERP implementations were started a few decades ago, starting with the core process of the company which is the full end to end value chain from procurement to sales and billing supported by finance. Customer Service and Plant Maintenance were only part of the second wave. As such the default design of the business model framework is not build to support best in class CS and PM processes. Often this was compensated by introducing a lot of custom coded functionality.
When procuring from the above-described planning object or work order this immediately materializes. Some examples we encounter in daily practice:: When buying direct items from the work order in the more mature process you can plan materials and in the background a planned order will be created. This planned order will trigger various scenarios such as a stock reservation, purchase order or production order/subcontracting order. This is the easy part.
For the consumables it is less easy and standard. Consumables are not on stock so you just have to rely that enough material is available. This can be managed for example by central storage using visual Kanban with reorder points or decentralizing your stock e.g. by each individual engineer. Reordering needs to occur in a separate system such as SAP SRM or in SAP MM as text items.
For services the work order typically supports planning of resources compared to actual consumption but the procurement part of the service is dealt with outside of the work order.
How to simplify procurement of your MRO stuff
Let’s focus at the above described complex categories: the consumables and services. Technology to support these categories is getting more and more mature. There are SaaS catalog tools (e.g. Vroozi) on the market as well as end to end procurement solutions (e.g. Ariba by SAP) that can improve and simplify your process. This obviously depends on your process and your roadmap. This is typically where McCoy’s Procurement Scan can provide the clarity that you may be looking for. Curious? Check out McCoy & Partners and contact Martijn de Coninck and Ronald Versteijnen