Keeping MRO on track

Improving MRO practice in the rail industry could help companies meet their efficiency goals

UK rail operators face a range of often competing demands from the government, passengers and employees. They are also affected by the pressures facing all sectors of the economy such as inflation and rising prices. Against this challenging backdrop, it’s crucial they seize any opportunity to improve efficiency – and one area for improvement is the procurement of supplies for maintenance, repair and operations (MRO).

Reducing inefficiency
It’s important for rail firms to look at the ways in which they can reduce inefficiency in the MRO process as they look to hit their targets.

The secret to getting your strategy correct is working with the right suppliers, according to Greg Sharp, Industry Sector Manager at RS. “Good MRO strategy is about controlling costs and consolidating suppliers and your supply base,” he explains. “In order to achieve this, you first need to understand how much you are actually spending on MRO, and then align the various areas of your business so that there is one clear strategy.

“I recently sat in a meeting with two procurement guys and the head of engineering at a rail firm. Procurement wanted the lowest possible price on products, whereas the head of engineering said the price should be irrelevant, because if a light goes, you need to replace it, or you will get a fixed penalty fine for the station being shut.”

The answer is somewhere in the middle, Sharp points out. Price is clearly not the only factor that should be considered, but by reducing the number of suppliers to a select group, it’s possible to achieve good prices while also ensuring the overall quality of the parts being bought.

“One of the massive risks in MRO is ‘maverick’ spend,” says Helen Alder, Head of Knowledge and Learning Development at the Chartered Institute of Procurement and Supply (CIPS). “There’s the chance that buying parts from a non-approved supplier will cost more, and possibly take longer to source, but the biggest issue is the quality of the parts. It’s not unknown for engineers or other employees to search the internet and buy parts that turn out to be counterfeit, or that don’t meet the required quality levels.

“Similar to consumers, there are people who will look up items online, see a ‘too good to be true’ price and not consider the possibility that it’s counterfeit. The only way to avoid this is to work with trusted, pre-qualified suppliers that can prove the quality of everything they sell.”

Communicate risks
The challenge for procurement departments is to help communicate the risks of maverick spending and the benefits of using trusted suppliers. Alder believes that the answer is for rail firms to make use of technology through eProcurement to make the process as simple as possible.

“There’s no excuse in this day and age to not have a centralised list for regular MRO parts so that employees have one approved source for this sort of regular purchase,” she explains. “This should cut down on the time it takes to order the parts, you know that there is no quality risk and the business as a whole can monitor spending more closely.

“It’s important that your procurement team works with engineers to identify what should be on this central list, and then once they put contracts with suppliers in place, they need to implement a system that makes it quick and easy for the end user to implement.”

Suppliers have an important role in this process too. As Sharp points out, companies such as RS have data about what their customers order regularly and they have sector knowledge so that they can help advise on the correct products, and in some cases, better substitute products that will save money for the rail company.

“A big part of my job is understanding the challenges and talking the rail company’s language rather than simply taking a vanilla approach,” he says. “For example, we understand that products need to be rail-approved so we only deal with manufacturers that have that approval. You need to be able to trust your suppliers and work with them to help improve the entire MRO process.”

Another area that suppliers can help rail companies with is stockholding. Many companies are still in the habit of hoarding MRO parts in their own warehouses, which costs money in terms of tying up working capital, space, and then the distribution of these parts to engineers. “I think there is an opportunity to sit down and think about whether you really need all the stock you hold,” says Sharp.

“Clearly, if something is a critical part that will need to be replaced immediately if something goes wrong, it may need to be housed on site but for most equipment it might be that next-day delivery, from someone like RS, works perfectly. By identifying these items it’s possible to free up warehouse space and working capital by letting your supplier hold the stock.”

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