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What does MRO Stand for?
The term MRO is an acronym that stands for maintenance, repair, and operations. The term is used to describe the set of operations and activities that are associated with the upkeep of a plant or facility which can include the physical maintenance of the structure or building, the systems that operate within the facility, and the equipment used to produce the plant or facility’s primary business output.
In this article, a review of MRO activities will be discussed against the overall operations and supply chain management functions that exist to run a business on a day-to-day basis.
Types of Facility Operations and Procurement Spend
If you consider a manufacturing plant or facility as an example, there are a variety of different operations and activities that take place within that facility on a daily basis. Production lines are operating which take materials and parts from suppliers and machine them or assemble them into finished goods that are the main output of the business. Incoming shipments of materials and outgoing shipments of finished products are being managed. Production line workers are consuming different types of personal protection equipment, or PPE, as they operate machinery. Lubricants, oils, and cutting bits are being consumed as production machinery operates. Computer systems and servers are running the plant’s automated operations as well as supporting the overall IT functions within the plant. The finance department is preparing reports, consuming paper, and printer ink. The facility’s janitorial staff is consuming cleaning supplies and replenishing bathrooms with toilet paper and towels. And the facility manager is working to keep the HVAC system operating, the lighting system functioning, and the external landscaping maintained.
To support all of these operations, plant managers, engineers, and procurement professionals must secure a variety of products and services to enable the facility to remain operational, for the staff to have the supplies they need to do their jobs, and for the plant to continue to produce its products or services that it sells as its output.
The purchasing of the different materials, products, and services that are needed can be divided into two primary classes of spend – direct spend, and indirect spend. Direct spend is defined to be the purchasing of materials, parts, and services that are directly associated with the production activities of the business. If the plant were manufacturing boilers for residential use, then the direct spend activity would be focused on the acquisition of items such as:
All of these items are examples of direct spend because these parts and materials are directly used in the products being manufactured by the plant, namely residential boilers.
Indirect spend, therefore, represents all of the other types of materials, parts, products, and services that get purchased which are consumed during the day-to-day operations of the plant or facility, but which are not directly used to produce the end products that are manufactured by the plant. This might include spending on landscaping services, roofing repair, HVAC maintenance, or coffee services.
MRO, therefore, is a component of indirect spend as it relates to the upkeep of facilities and systems used within those facilities. A large portion of indirect spend is classified as being MRO, however, not all indirect spend would fall under the classification of being MRO. General business services and activities such as legal services, accounting services, payroll services, or marketing services are examples of indirect spend that would not be considered MRO.
Types of MRO
MRO concerns itself with the maintenance and repair of a plant or facility, which can be subdivided into several areas, that include:
- Infrastructure repair and maintenance
- Production equipment repair and maintenance
- Material handling equipment maintenance
- Tooling and consumables
Infrastructure repair and maintenance
Infrastructure repair and maintenance include activities such as repairing the roof, doors, windows, and loading dock bays, landscaping the grounds around the building, maintaining the asphalt in parking lots and garages, snow removal, pest control, servicing the HVAC systems, maintaining the lighting systems, and general maintenance such as waste pickup services and janitorial services.
Depending on the nature of the business and whether the facility is leased versus owned by the business, there can be different approaches to accomplishing infrastructure repair and maintenance. Procurement professionals may purchase or contract with third-party service providers for some or all of these types of maintenance and repair activities, or any number of these activities may be accomplished by using personnel who work directly for the company. In the former case, a roofing company contracted to perform roof maintenance would be an example of an indirect service that is procured. In the latter case, if roof repair is not outsourced as a service, then indirect materials and tools will need to be purchased for use by company maintenance staff to repair the roof in lieu of purchasing the service. These tools might include roofing cement, trowels, squeegees, flashing, or other materials and parts.
When a facility is leased by the business and not owned, the responsibility for some of the infrastructure repair and maintenance may shift to the building owner, depending on the contractual agreements in the lease.
Production equipment repair and maintenance
The second area of MRO activity concerns the maintenance and repair of production equipment. This area of MRO is designed to maintain the vital machinery and systems used to produce the products and services sold by the business as its primary output. Having unscheduled downtime in a production facility can be extremely costly. Depending on the amount of output, the cost of downtime in a large manufacturing operation may result in tens of thousands or even hundreds of thousands of dollars of lost revenue for each day during which the facility is offline.
Manufacturing operations utilize a variety of different types of equipment that form the means of production for the company’s products. This machinery can be mechanical, electromechanical, or electrical/electronic in nature, each of which will require different types of maintenance and repair.
Production equipment examples that are mechanical or electromechanical in nature include machinery or systems such as:
Mechanical systems typically contain components that wear with repeated use and which need to be replaced when they are at their end of life. Also, many systems utilize lubrication that requires periodic replacement or servicing.
Maintenance activity can be viewed as being either reactive or proactive. Reactive maintenance is also called corrective maintenance. This type of maintenance is associated with an event that caused a machine to fail that was unanticipated, and usually leads to unscheduled downtime. Facilities managers and plant engineers work to minimize the occurrence of corrective maintenance actions, because these can result in machines being inoperable and because repair may be delayed by the need to order replacement parts or to secure maintenance services from an outside vendor or the OEM for the machine.
Proactive maintenance policies are therefore put into place with the goal of minimizing unscheduled downtime on production machinery. Two forms of proactive maintenance are called preventive maintenance and predictive maintenance.
Preventive maintenance refers to maintenance tasks performed on a schedule, usually based on calendar time, or run time for the machinery or system. Similar to the routine maintenance that is performed on motor vehicles such as oil changes or tire rotation, the goal of preventive maintenance is to preclude potential unexpected events from causing failures and downtime by intervening with an activity that helps to reduce or eliminate those risks. Regular lubrication of a mechanical component to prevent it from overheating and seizing up during operations is an example of a preventive maintenance task. Calibrating a mechanical instrument on a planned schedule rather than waiting until it drifts out of calibration and is no longer capable of providing an accurate reading is another example.
While preventive maintenance functions on a time schedule, predictive maintenance uses data that is collected and analyzed to establish the current health of a component or system, with the goal being to detect when conditions have degraded and failure of that component or system is likely. In the Industrial Internet of Things (IIoT), the ability to use sensors and PLCs to collect and analyze a large amount of data in real-time is helping to push the boundaries of predictive maintenance to new levels. Thermal and vibration sensors mounted on a bearing assembly can be used to record temperature readings and vibration amplitude. Analyzing those readings can help plant personnel spot changes in the thermal characteristics that could indicate increased friction or vibration levels that serve as a potential marker indicative of the component wearing out and in need of replacement. Predictive maintenance and preventive maintenance are preferred over the reactive approach of corrective maintenance since the former options reduce unscheduled downtime and allow plant and facility managers to schedule maintenance services for optimal periods which result in minimal disruption to plant operations.
For electrical and electronic systems and equipment, MRO plays a role as well, although end-of-life fatigue is less often an issue with these types of systems. One example of MRO for electrical/electronic-based systems is calibration. Systems that use electrical and electronic components may need calibration services to assure that the readings being provided by the equipment are accurate. Periodic calibration may be needed to verify that the equipment has not drifted from its initial settings and is continuing to perform as intended. Calibration can be done by outsourcing the activity to the OEM or to a competent calibration service. Or businesses can maintain their equipment by performing calibration using company personnel and equipment. The decision is a function of cost, convenience, the amount and variety of equipment for which calibration services are required, as well as whether the equipment in question is leased or owned.
Examples of electrical/electronic-based equipment include:
Material handling equipment maintenance
In some businesses, the third area of MRO concerns the maintenance and repair of material handling equipment. Material handling equipment encompasses a range of systems and machinery, from permanently installed conveyor systems to movable equipment and machines such as forklifts, pallet positioners, bulk containers, and storage systems. It can also include jacks, Hi-lows, and automated equipment such as robotics for pick-&-pack operations. Keeping this equipment in good repair is essential for transporting raw material and components to the production lines, and for taking packaged finished goods to warehouses or loading docks for shipment.
Tooling and consumables
The fourth area of MRO activity concerns tooling and consumables. This generally refers to materials and tools that are smaller than the machinery and equipment discussed earlier in the section on production equipment repair and maintenance. These items are often used or consumed as part of production activity but are not part of the finished product hence are not classified as direct spend. Specific examples would be:
- Powered hand tools (drills, drivers, circular saws, jigsaws)
- Manual hand tools (wrenches, socket sets, screwdrivers, hammers, pliers)
- Cutting bits (drill bits, replacement cutting blades and tooling bits used in production machines)
- Clamps and joining tools
- Consumable items
- Adhesives and glues
- Abrasives such as sandpaper, emery cloth, or grit
- Welding, brazing, or soldering supplies (flux, rods, solder)
- Personal protection equipment (PPE)
- Hand protection (gloves)
- Face shields
- Eye protection such as goggles or safety glasses
- Respiration protection (dust masks, FFRs, PAPRs)
- ESD protection
- Janitorial supplies
- Cleaning solutions
Businesses usually maintain a tool crib or similar secured area where production workers can go to access needed tools and supplies for their job. These areas are typically monitored and controlled to prevent theft and loss of these materials, tools, and consumables as well as to preclude workers from taking these items for personal use outside of the plant or facility.
In some instances, this area of MRO is extended to cover the management of the raw materials and components that are part of the direct spend category discussed earlier. Hence there is a blurring of the lines in some cases as to whether that activity falls under MRO.
The control of materials and tools is a high priority for many businesses. In many cases, this responsibility is outsourced to third-party MRO management service companies. For example, so-called Vendor-Managed Inventory or VMI involves the supplier being on-site to manage and control the MRO inventory of tools and consumables. This strategy can provide peace of mind while allowing for volume discounts through the consolidation of all MRO spend with a single supplier.
Other approaches for the management of MRO materials involve on-site kiosks or vending machines that are stocked and run by a third-party MRO supplier.
Establishing a set of performance indicators (KPIs) can be very helpful in tracking and monitoring costs, savings, and overall trends. Companies armed with this knowledge have an upper hand, as they are able to make changes in real-time to MRO inventory and strategies.
Although the exact MRO definition may vary from company to company, it’s crucial for businesses of all types to develop a full understanding of what their specific MRO needs entail, and how to best monitor and manage MRO inventory, suppliers, costs, and services.
This article provided a look at the definition of MRO and how the different types of procurement spend relate to the business activities and processes within a facility. To learn more about procurement topics, visit Thomas Insights, and subscribe to our daily newsletter, the Thomas Industry Update.
To locate MRO suppliers, visit the Thomas Supplier Discovery Platform, where you can locate thousands of suppliers of all types of maintenance services, as well as specific MRO products such as janitorial equipment and supplies.
Note – This article was originally written by Helen Carey and updated by Ed Edwards.