Uncovering hidden savings
Published: 09 November, 2013
From a manufacturing perspective, PWE looks at how much every aspect has changed over the past twenty-five years. Simple processes have now been replaced by complex automated machinery and the pen and paper method of transactional reporting and inventory control has been replaced by expensive applications.
Applications such as enterprise resource planning (ERP), enterprise asset management (EAM) and computerised maintenance management systems (CMMS) are now commonplace within manufacturing companies. Also the organisational structure has branched off into full departments dedicated to analysing and improving business performance. The reality for companies is that they are living in a world driven by data. Competition is rapidly increasing and companies must find every way possible to reduce costs and improve efficiency.
In the manufacturing industry, one of the commonly overlooked cost saving opportunities lies within the maintenance department and its maintenance repair and operation (MRO) inventory data. Through preventative maintenance and emergency repairs, this important department holds the responsibility of maintaining operations. When every second of equipment downtime can cost the company thousands. it is absolutely crucial for inventory data to be accurate, reliable, and readily available.
However, the unfortunate reality for most companies is that this critical MRO data is often corrupt with inconsistent, incomplete and inaccurate information, causing significant inefficiencies and high maintenance costs. Most companies can most likely relate to many, if not all, of the following:
Duplication
Excess inventory
Equipment down-time
False stock-outs
Maverick purchases (direct buys)
Multitude of suppliers
Inability to search for and locate parts
Inaccurate reporting capabilities
If left unaddressed, these major issues can worsen and lead to increased costs. In this case, it is important for companies to focus on resolving the root cause – corrupt data. In order to do so, a data cleansing project should be implemented to transform corrupt information into a cleansed, standardised and enhanced form - the Corporate Item Master - with no duplications and inaccuracies.
Before a cleansing project begins, manufacturing organisations would work with their service provider to establish a standard operating procedure, which would address their specific ERP configuration, naming system, and classification requirements. During the cleansing process, every item will be identified by a description with corresponding attributes, manufacturer names and part numbers are segregated, existing information is analysed and standardised, any spelling mistakes are corrected, and text is converted to preferred case. Each item is then assigned a new corporate part number, linking all sites of the organisation into a “virtual warehouse”, while legacy Item/ID numbers remain in tact for local and future reference.
After the cleansing process is complete, duplicate items are identified by direct match and “fit-form-function” similarity. Direct duplicates, as the name suggests, include two or more items possessing the same manufacturer name, part number and description, whereas, fit-form-function duplicates include two or more items possessing different manufacturer names and part numbers, but identical descriptions, as illustrated in the table.
Dependent on client preference, items can be classified by various international and client-specific identification systems, enabling deeper reporting capabilities. The final information deliverable is formatted to comply with specific configuration requirements of the chosen ERP, including field name, type, and character limitation.
The results of data cleansing should now be obvious as the data will now clearly maintain one consistent format and system throughout the entire organisation, while containing enhanced information directly from the manufacturer and OEM catalogues.
The real benefits however, are those that may not be as visually obvious but present the greatest return on investment. The most lucrative benefits are those that come from the ability to identify and remove excess, obsolete and duplicate items from the inventory, as well as, quickly search for and locate parts when needed.
Key benefits can include:
• Cost reduction
Identification of excess and obsolete inventory
Identification and elimination of duplicate items
Reduction of equipment downtime
Reduction of maverick purchases
Reduction of expedited part orders
• Improved Maintenance Efficiency
Efficient Part Searches
• Maximum ERP/EAM/CMMS Benefits
Accurate Reporting Capabilities
Case Study
A Canadian Pulp and Paper company was able to identify tens of thousands of dollars in cost savings within the first six months following data cleansing.
After being introduced to I.M.A. Ltd. at an industry conference, this large pulp and paper company recognised the need for data cleansing services and set out to create one common corporate catalogue of accurate inventory data.
At the company, each of the eleven sites operated autonomously, with responsibility for managing their own inventory. The decision to implement a new computerised maintenance management system (CMMS) company-wide brought the corporate catalogue issues to the forefront and the need for data cleansing became increasingly evident.
A cross-functional team was created consisting of members from maintenance, purchasing, IT and stores. Working with the team, I.M.A. Ltd. tailored inventory data to their specific business requirements. On a site-by-site basis, data was cleansed, standardised and enhanced, then migrated into a corporate database prior to the system going live.
At each site, duplicates and overstock items were identified and the payback was almost immediate. Within the first three to six months of implementation, savings accumulated to roughly $500,000 per site and maintenance efficiency improved significantly. Additionally, data cleansing had set the stage for many future cost reduction opportunities, including inventory optimisation and supplier consolidation.
The company’s IT director said: “I.M.A. Ltd. worked with us to design and implement a process whereby rapid and easy access to a single view of stores inventory is available. We can now identify opportunities to reduce stores inventory levels, as well as, report on vendor performance across all units.”
Today, I.M.A. Ltd. assumes all responsibility for the day-to-day catalogue activity, ensuring long-term data integrity and consistency.
MRO inventory ties up a large amount of time and money for manufacturing organisations. It requires a specific data cleansing process and long-term data governance strategy to transform corrupt legacy data into a consistent corporate item master. A maintenance department can only be as efficient as the data they have to work with. Without quality data, it is nearly impossible to control costs and make strategic business decisions.
For further information please visit www.imaltd.com
