Maintenance, Repair And Operations

Computerworld - The average businessman might hear MRO used by office mana-gers, purchasing agents or even CEOs. They might see it on financial reports or hear it in budget meetings.

Still, many people don't know what the acronym means. It stands for maintenance, repair and operating/operations, which are the purchases a company needs to make to keep its operations running smoothly. Although the term isn't commonly used in most business circles, MRO items have a tremendous impact on a company's efficiency and bottom line.

"It's very crucial to have the right inventory levels and to procure items efficiently" to hold down a company's operational costs, says Walt Vanderlaan, vice president of strategy at MRO Software in Bedford, Mass.

Manufacturers have two basic types of purchases: direct and indirect materials. Direct materials (also called direct spend) are the items that go into the product the manufacturer sells. An automaker would put a seat's upholstery in this category.

By comparison, indirect materials are "all the things you use to essentially operate your business," says George Rimnac, vice president and chief technologist at W. W. Grainger Inc. in Lake Forest, Ill. "MROs are a portion of those indirect materials."

MRO items include everything from replacement parts for machinery to safety products for workers and cleaning products for the physical plant.

"Many of the products we sell are products our customers didn't know they needed until today," Rimnac says.

For example, a customer might need to replace a 15-year-old pump that broke unexpectedly. The customer might be surprised to learn that he also needs safety goggles, gloves and special tools to install it. All of these examples are MRO items. Some companies also classify items such as paper clips and staples as MRO products, although others say those items are usually covered by their office supply budgets.

In any event, MRO encompasses a tremendous variety of items. Grainger, with $5 billion in sales of MRO-related products and related information last year, lists 220,000 items at its Web site, including floor scrubbers and paper towel dispensers.

Managing MRO

MRO items might seem pretty mundane. After all, how crucial are fluorescent light bulbs? But proper management of MRO inventory can save a company tens, even hundreds of thousands of dollars, while poor management of such inventory can create waste and tie up capital. Manufacturers are well aware of this, industry experts say, and are adopting MRO software to track inventory, schedule maintenance and list procurements, making MRO oversight more efficient.

"To some degree, it's hard to estimate the demand for MROs," says Norbert Ore, vice president of purchasing at Chesapeake Display & Packaging in Winston-Salem, N.C., and chairman of the Manufacturing Business Survey Committee at the National Association of Purchasing Management in Tempe, Ariz.