What is MRO? An Introduction To Maintenance Repair And Operations
“Little things make big things happen”—in just a few words, this cliché sums up MRO and its benefits. But what are these “little things” and what effects do they have on your company’s bigger picture?
In the complex world of Maintenance, Repair, and Operations, answers to these questions are pretty much company-specific. How your company defines and measures the impact of MRO activities largely depends on the type of business you run.
In manufacturing and other asset-heavy industries, a lack of strategic MRO management can cause huge operational issues. For instance, up to 50 percent of prolonged unscheduled downtime is due to a lack of spare parts or stockouts, which are often the consequence of poor MRO practices.
By the end of this article, you’ll get a better understanding of:
what MRO stands for and how to define it for your specific operation
MRO meaning in supply chain and procurement
the four main MRO categories
how to manage certain aspects of MRO with CMMS (work, inventory levels, and costs)
What does MRO stand for?
MRO stands for Maintenance Repair and Operations. It encompasses all of the activities used to keep your facility (and equipment found inside it) in good operating condition. In other words, the main goal of MRO is to keep your business operations running smoothly.
Companies with a robust approach to MRO management will have better control over processes that affect their cash flow. This ensures:
Business continuity. Sudden equipment breakdowns disrupt business operations and can be a huge money drain. By managing your MRO, you can reduce your exposure by implementing proactive measures that will make resources (assets, parts, people) available when and where you need them.
Inventory control. Stockouts and overstock have differing and competing requirements in MRO management. Item overstock means you are holding too much inventory while stockouts can lead to costly downtime with uncertain return times. Both overstocking and stockouts come with a price tag. Proper MRO management needs to find a balance between the two to keep your inventory costs in check.
Proactive maintenance. Maintenance and repairs are inevitable in any industry. However, depending on which maintenance strategy is used, the maintenance costs and benefits can vary greatly. Focused MRO management fosters agile maintenance strategies that are proactive and not reactive.
Peerless Research Group runs an annual MROsurvey and its findings pretty much confirm what we just talked about – 94% of businesses think that MRO is important for their organization.
MRO meaning in supply chain and procurement
MRO acronym in supply chain management is often used interchangeably with MRO inventory. However, we would like to make a distinction here and separate the two terms. The easiest way to do that is to look at MRO inventory (a.k.a. MRO items) as items you need to perform different maintenance, repair and operation tasks.
In some cases, companies have a hard time distinguishing between MRO inventory and production items.
MRO items are those that contribute to the end product or service but are not part of the final product. They do not generate profit directly but are an essential expenditure that ensures production continuity/service delivery. As such, MRO costs will show on your accounting sheets under indirect spend.
Here is an example to get a better idea of what should be counted as MRO inventory. Consider pliers manufacturing using formulated steel. The formulated steel is the raw material that will pass through different machines where it is formed, cut, heated, polished, and painted until it becomes a pair of pliers.
Compressors, sensors, pumps, electrical equipment… – those are parts of the machines that are used to create the pliers. Things that are part of the pliers are the raw material from the formulated steel, the bolts, finishing paint, and so on. These items fall under direct spend, whereas the MRO products like pumps and compressors that just support the production process fall under indirect spend.
Four main MRO categories
Maintenance, repair, and operations activities can be roughly grouped into four categories:
1) Production equipment maintenance and repair
Machinery is the cornerstone of modern production. However, over time, wear and tear cause malfunctioning, delays, downtimes, and other setbacks that affect output. In asset-intensive industries (like manufacturing), these setbacks can adversely affect both profits and brand reputation.
Maintenance Repair and Operations activities in relation to production equipment include actions like routine maintenance work, emergency maintenance, spare parts inventory control, purchasing condition monitoring equipment, and vendor management.
2) Material handling equipment maintenance and repair
The production can’t start if the input material doesn’t find its way from the warehouse storage area to the start of the production line. So, if your forklift or pallet positioner are broken, you are in trouble.
In the same fashion, if your conveyor systems and robotics arms are poorly maintained and experience a malfunction, you will have a break in your production process where production line #3 will indefinitely sit idle waiting for input material/product.
Material handling equipment encompasses a range of different machinery. While some of the equipment might not be directly involved in the production, they are still essential elements that ensure a stable production process – and should be treated as such.
3) Tools and consumables
Tools and different types of consumables are used continuously in the background to perform quick repairs or preventative maintenance on mechanical and electrical assets.
Here are some examples of MRO tools and consumables:
power tools (drills, electric saws, grinders, sanders…)
hand tools (wrenches, sockets, pliers, cutters, clamps, screwdrivers…)
PPE (masks, safety glasses, gloves, face shields…)
These items are smaller than production and material handling equipment, making it easier to be displaced or lost. Good tool management is an essential part of MRO to ensure that all tools are on hand when needed and stored in an easy-to-access location.
There are different ways to effectively manage tools and consumables:
implementing an inventory management software that fits your business needs and following best inventory management practices
implementing vending machines and on-site kiosks that are regularly stocked by a third-party MRO supplier
Whatever approach is taken, the company should continuously track market trends and MRO inventory costs so they are agile enough to make fast changes without hurting their bottom line.
4) Infrastructure maintenance and repairs
Like everything else, infrastructure needs to be regularly repaired and maintained to mitigate degradation and to ensure proper facility upkeep.
As with all other types of MRO activities, you can either take care of it in-house or outsource to a third-party contractor. The direction you choose will largely depend on how much control and insight you wish to have over the maintenance process, your available budget, available in-house skills, and what is stated in your property licensing agreement.
The same MRO survey we referenced earlier asked the participants to vote for the benefits of each approach:
If you decide to do your repair and maintenance in-house, you’ll have to stock MRO inventory yourself. The frequency of maintenance (and consequently the amount and type of MRO supplies you need to procure) will depend on the assets and infrastructure’s age, prescribed recommendations, seasonal changes, operating conditions, and compliance requirements.
Managing Maintenance Repair and Operations with CMMS
Companies can leverage CMMS like Limble to manage all required maintenance work, set up an efficient inventory system, and stay in control of all maintenance-related costs. It might sound biased coming from us, but we strongly believe that implementing CMMS is a necessary step for implementing a proactive, efficient, and cost-effective asset management.
Let’s see how that can be put into practice.
1) Managing maintenance work and people
Features like maintenance calendar, work request portal, work order system, and push notifications enable teams to quickly address new maintenance work requests and stay on top of all routine maintenance work.
As a result, technicians can see which tasks should be completed, a description of work that needs to be performed, a list of spare parts they might need, and the time frame involved. Not only does this reduce the likelihood of duplicating workload, it also lowers the risk of human errors.
From asset location information, maintenance history, and part specification to compliance requirements for specific audits, all this information can be stored in a CMMS and accessed simply by having an internet connection and user permission.
2) Managing spare parts inventory
These days, digitalization and some level of automation are required for efficient MRO inventory management. When that is not the case, research from PRG shows that organizations can run into serious problems:
Instead of sweating over intermittent and variable demand challenges, teams can use CMMS with an inventory module to help them track how spare parts are used, get notifications about low stock levels, make accurate forecasts, and save important vendor information in one easy-to-access place. Reports can then be generated to provide an overview of the items ordered, the costs involved, historical purchasing information, and other relevant factors.
MRO represents a substantial cost for many organizations. Over 40% of respondents to that annual MRO survey noted how costs for maintenance, repair, and operations are a substantial expense for their organization.
The percentages above might not seem scary at first, but if you put these costs into perspective, they do add up over time. This is especially true for asset-intensive industries where electrical and mechanical equipment and other consumables are used for and during the production process.
To effectively manage MRO costs, a CMMS system contributes in three important ways.
Firstly, the spare parts inventory management pipeline is optimized by allowing teams to conduct strategic purchases when procuring parts and other items. Better inventory forecasts enable companies to send out bulk orders that come with a discount and to minimize the number of expensive emergency orders. Moreover, this also lowers the chance of stockouts and overstock that always generate additional costs.
The third way is MRO cost control. If you set it up and use it properly, CMMS reports can give you a detailed cost breakdown. You’re not only limited to seeing which assets are costing you the most but you can actually check maintenance logs and notes to find why it is costing you so much. Is the asset getting pushed too hard, are the cheaper replacement parts you are ordering faulty, or do technicians make mistakes during the installation process?
Finding the right remedy depends on finding the root cause of the problem.
As you can see, MRO is a complex subject for many businesses – not for all though.
If you run an accounting firm and just lease a couple of offices, you will have very little MRO costs. A manufacturing or construction business, on the other hand, can drown in maintenance, repair, and operations expenditures.
If you run the same risk, you have to make sure to implement the technology and best practices we talked about in this article. This will not only ensure your operational costs are kept in check, but will also create a more efficient and productive environment.