Manufacturing plants, utilities and energy operations consume a lot of MRO products and critical parts. A lot of it sits on shelves or disappears out the “back door into a swamp,” per the observations of a global VP of indirect spend. And it still tends to be the Rodney Dangerfield of spend categories in many C-Suites. But that’s changing – faster at some customers than others.
In this week’s MDM Podcast, CEO Tom Gale talks with Net Results Group Managing Partner Lance Gilbert to get an insider’s viewpoint on the current state of indirect spend and MRO lifecycle management by end-user customers. While Gilbert outlines current best practices for MRO management across analytics, data, culture and processes, he also highlights some enormous opportunity for improvement, and how distributors can help customers “right-size” their MRO inventories.
Net Results tracks millions of MRO inventory SKUs across many verticals globally. Here are a few statistics aggregated from their customer base:
- 50% of storeroom items haven’t moved in 3-4 years.
- A newly acquired part will sit on a shelf an average of seven months before usage.
- 6% of SKUs account for 90% of their total movement.
Based on their analytics, Net Results has created KPIs for their clients around cost avoidances, inventory reduction and investment recovery. A former corporate CFO, Gilbert translates the inventory data into cleaning up the balance sheet and bottom line — getting the C-Suite to recognize the potential, citing one customer with $350 million on their balance sheet for MRO materials.
Gilbert also notes opportunities for distributors across a number of areas, but that too many are still selling parts without a deeper understanding of their lifecycle. “Distributors do a great job,” Gilbert says, “but they are incentivized to sell more parts. They need to look at that model… and part of that is understanding where those parts are being used, where a bearing is going to be used on which assets, which sub-systems or equipment.
“They can get a better understanding of what their customers really need, and right-size their inventory, rather than just saying, ‘hey, this customer sent an order for 20 of these bearings, I’ll fulfill that order.’ Let’s make sure they really need 20.”
Listen to the full episode via the audio player above, and check out all of our previous MDM Podcasts at our page here.