A primary goal of MRO Supply Chain managers is to balance financial performance with risk mitigation. In order to achieve goals, however, quantifiable targets must be established and performance toward those goals must be measured. The difficulty is identifying ‘how to measure’ these balanced aspects of financial performance and risk mitigation. In other words, how do you know that you have optimized your spend in such a way to support the business’ requirement for the availability of MRO assets? Can you justify recent or historical inflation of costs, or has Supply Chain efficiency, or inefficiency, contributed negatively to asset or infrastructure availability?
Some clients look at these areas when measuring risk:
- Supplier and contractor risk (e.g., single source percentage, supplier performance, on-time delivery, number or percent of standard Ts & Cs exceptions)
- Process efficiency (e.g., cycle times, rogue buying, returns ratios, contract utilization)
- Synergy with operations (e.g., % of and cost to expedite orders, long lead time percentage, stock out percentage, percentage/time delayed due to waiting for materials)
Lately though our clients have also been focused on measuring financial performance including added value areas such as value created through negotiation and value created through contracts such as warranties. This is an intriguing corner of the MRO Supply Chain and Enterprise Asset Management (EAM) that promises a more holistic view of its value, challenges and opportunities. I look forward to helping customers measure and improve their “balance” in the year to come.
Find me next week at The Reliability Conference in Las Vegas.