MRO Storeroom Best Practices at Hershey

Transcription

1 Orange County Convention Center Orlando, Florida June 3-5, 2014 MRO Storeroom Best Practices at Hershey Linda Dietzel, C.P.M.

2 Hershey, a global company $6.6 billion net sales in 2012 ~13,000 employees around the world Products available in over 70 countries around the world Hershey products manufactured in 17 countries

3 Hershey, Iconic brands With Iconic Brands

4 And Strong International Brands and Partners

5 With unique and proud history With a Unique and Proud History.

6 Milton S. Hershey Milton S. Hershey The first person to link Commerce with Compassion -Johnny O Brien, 65 MHS graduate MHS President

7 Milton s Model Town & Milton Hershey School The Town of Hershey Milton s Model Town & Milton Hershey School Milton Hershey School Founded in 1903 as a model town for workers at the worlds largest chocolate factory Founded in 1909 by Milton & Catherine Hershey as a home for orphan boys Tree-lined streets included housing, education, cultural activities and recreation Today, Hershey is a vibrant, nationally-known corporate town and tourist destination In 1918, Milton donated his entire fortune to fund the school for perpetuity Today, nearly 1,900 boys and girls of all races, from backgrounds of severe poverty and social need, attend grades pre-k through 12

8 Milton Hershey School Milton Hershey School Serves more than 1,800 students Provides a home, clothing, food, health care and a quality education at no cost Healthy lifestyles instruction Youth recreation areas Year-round learning opportunities Agricultural & environmental education Required career & technical education Internships & co-ops for older students Transitional services for seniors & recent graduates 8

9 LEARNING POINTS What is MRO? Why do we care? Why is an effective Storeroom important? What does it take to have an effective Storeroom? What improvements can you make? Key points to Take Home Questions

10 so what is MRO? MRO is a common term used to describe the materials and/or services used to keep an asset performing its required function and hopefully, at its best operational efficiency MRO is a cross industry term defined as Maintenance, Repair and Overhaul or Maintenance Repairs and Operational Supplies In all cases, the concept is the same where asset or service reliability influences performance; the ready access to spare parts or supplies is very important and in many cases critical. 10

11 Why is an effective Storeroom important? Improved Planning and Scheduling Contribute to improved equipment reliability and availability Contribute to reduced maintenance costs Inventory value reduction Reduced Spend through optimized inventory and leveraged procurement Reduced Time acquiring materials Improved Parts availability Improved Customer relations. Improved Visibility for analysis and controls

12 Think of your Storeroom as a Business Business Objectives Vision Mission/Purpose Objectives/Goals Organization structures Centralized/Area/Combination Roles and Responsibilities Staffing levels Skills/Training In-house staffing/contract staffing/combination Performance measures

13 Set the Vision Create the Storeroom Vision o What will the SR be in the future. Deliver parts Maintain Parts Enable efficient maintenance planning Create the Storeroom Mission o Why does the SR exist? Operating supplies (shop n shop) Maintain the parts Zero parts losses Lowest effort for the site Develop a Storeroom Master Plan o Plan links to PM Master Plan o Purchasing Master Plan should link to the Storeroom Master Plan Page: 13

14 Six key points to have an effective Storeroom? Organization/Layout Master Data/Data Integrity KPI Measurements and Monitoring Proper Staffing/Training Proper Maintenance/MRO relationship Best practices as it affects MRO procurement

15 Organization/Layout Considers both current and future needs Location design Optimize receiving, shipping, kitting and stocking and issuing Located near dock doors Interaction with internal and external partners Security design Closed or Open Card Reader Environment design Dust (product or naturally occurring) Moisture (rain or humidity generated from plant ) Temperature

16 Organization/Layout Room for Staging Issue/Shipping & Receiving/Rebuilds/Kitting 5S (Storeroom appearance) Safe Clean Contamination Free Orderly Bright Easy to find A safe, clean orderly storeroom helps to increase morale, efficiency, spare parts quality, and overall storeroom results.

17 Organization/Layout

18 Organization/Layout 18

19 Organization/Layout Shelve and Bin Identification Put in place to make easy to Find part Store part Bin identification is linked to the part master material number Standard numbering convention Standard bin label information Page: 19

20 Hershey status.. Parts are organized generically by commodity. For us that means that bearings are stored together, power transmission parts in one place, belts, etc. Rule of thumb is if it can be purchased off the shelf, it is not equipment specific. The machine specific parts are organized by OEM and stored together. Rule of thumb is if we have to purchase it from the OEM, it s put in that location. Consumables, ie: factory supplies, safety, maintenance supplies, are stored together and close to the issue window. Utilization of the 5S principles, very visual Storerooms are locked and staffed

21 Based on Hershey experience How would you improve Assess Storeroom using key points covered and develop standards When building new manufacturing facilities we take advantage of building the best functional storeroom allowable SQF Audit to confirm standard processes are being followed

22 Master Data/Data Integrity You pointing at it won t help. I still have to create the material master, add it to it s B.O.M., receive it, release it, stage it, transfer it and confirm it. Come back a week on Wednesday

23 Master Data/Data Integrity Material registration principles and procedures Materials that are exactly alike in form, fit, and function will have the same material master number. If it will be purchased more than once and/or it goes onto a B.O.M., it should have a Material number whether stocked or not. Standard process to determine: What parts should be stocked How many parts should be stocked How many should be ordered, when needed Maintenance parts should be on a Bill of Material Assessment process to update material records and correct errors

24 Master Data/Data Integrity Manage New Part Additions Standardized approach to determine whether a part should be stocked. New Item request process o To include where used so it can be added to BOM Understand Inventory Cost o All components that make up true cost of the part Determine inventory levels required New materials are entered into SAP o o Parts that will not be stocked are coded accordingly Parts with no estimated consumption will not go to Purchasing Attach the material number to a BOM (Bill of Material) Measure the material master effectiveness. o o Do not want to create Out-of-Stock incidents Do not want to create excess material

25 Hershey status.. Each plant is responsible for completing a material master request form. Currently spreadsheet that replicates what is needed to create and extend all the views. Proposes the noun, modifier, and attributes Purchasing and MRP values Equipment number and quantity required for each Approval by plant maintenance manager to add to inventory All requests are processed through a central material master specialist (MMS). They review for completeness and accuracy of data Responsible for creating new material master records and any extensions Most change requests are also processed by the central MMS

26 Based on Hershey experience How would you improve A sensible Taxonomy should be adhered to that can drive and support a sensible naming convention that can be easily recognized by all affected end users Develop a standard process for adding new, modifying existing, and deleting MRO materials If it is on a B.O.M, it has a material number. Develop audit and periodically assess, develop and execute improvement plan Implement a master data governance program

27 KPI Measurements and Monitoring Fill Rate Goal 98% PO s >60 Days Goal 0 On-time Delivery Goal MRO = 95%; OEM = 90% Number of Items Added Inventory Value (% of increase) Inventory Accuracy Goal = 98% Slow moving parts identified $/ Obsolete Sarbanes Oxley Number of items on a Bill of Material Program Savings Cost savings, cost avoidance, Reverse Engineering

28 KPI Measurements and Monitoring $5,299,893 $5,251,375 $5,262,073 $5,286,077 $5,317,033 $5,358,182 $5,363,110 $5,343,723 $5,326,726 $5,384,885 $5,500,000 Inventory Value $5,400,000 $5,300,000 $5,200,000 $5,100,000 $5,000,000 $4,900,000 $4,800,000 $4,700,000 $4,600,000 $4,500,000 September Top Impactors: Impactors: High Dollar Issue Outs October Top PUMP PDISPL #130 WAUKESHA $ 9, BELT CNVR 18" X 145' #14727 MIR $ 5, PUNCH LONG DIE MED EGG WITH SPRING $ (5,017.39) CHN UPR DISCH # SIG $ (4,893.15) DRV 30FPM 460V #6.55G.EBI.CBA JOKI $ 4, HEAD PRINT # MARKEM 9860 $ 4, VALVE 1" #KEA73-PTSUSS.2 SPIRA-TRO $ (4,695.18) SHAFT DRV RLR TARGET SI #M D $ 3, Restock Items from Previous Month

29 Cycle Count & SOX Custom transaction ZCYC Compare number of items counted vs. number of items adjusted Report provides easy method that can provide both summarized percentage view of accuracy and detail view of adjustments Report monthly YTD figures Allows us to review repeat offenders and understand the true root cause of discrepancy

30 Custom Accuracy Report Last 12 Months Custom Accuracy Report Last 12 Accuracy Months Accuracy

31 MRO Completeness Report Internal Audit required report to query items not counted within cycle

32 MRO Completeness Report Detail

33 Based on Hershey experience How would you improve Identify KPI s, how they will be calculated, who will calculate them, how often each will be calculated, the purpose of the KPI, and what action will be taken by whom based on the resulting measure. Develop audit and periodically assess, develop and execute improvement plan Use of standard SAP delivered reports MC.1 Plant Stock Inventory analysis for given time period, performed monthly MC50 Dead stock - The dead stock key figure provides a tool to review inventory and focus on items that have had no movement based on parameters MC46 Slow moving - Provides the number of days since the last issue against each material. Used to analyze items that inventory levels can be adjusted. MC.3 Inventory Turnover Measures how fast your inventory is turning based on time period

34 Proper Staffing/Training Storeroom Leader Storeroom Issuing/Attendant Storeroom Receiving/Attendant Storeroom Cycle Counter MRO Buyer

35 Proper Staffing/Training Prepare to Build a Capable Staff Understand the roles needed Be aware of Internal Control/Security considerations Work Processes required to run a storeroom Number of parts to manage Assess skill & Ongoing Capability Management Job aides Training Classes Work & Development Plan Link to business results

36 Proper Staffing/Training Many Roles One Person Determine sufficient roles to meet business needs then figure number of people required.

37 Roles Proper Staffing/Training Think about Role Responsibilities Receiving Counter issues Parts delivery Inventory count Housekeeping Rebuilds Stocking Kitting

38 Proper Staffing/Training Understand the roles Storeroom Leader Accountable for Storeroom operations Perform MRP and review/adjust MRO requisitions Modify MRP/Storage Material Master Data Development of Storeroom Policies & Procedures Leads/Supports Issuer/Attendant and Shipping/Receiver Reports/KPI s On-going training needs Issuer/Attendant Shipping/Receiver MRO Buyer Perform Goods Issues and Returns Put-a-way process Assist internal customers Inventory Cycle Counting Back-up Receiver Maintain Housekeeping Perform Goods Receipts, Returns, Quality Inspection Contacts requisitioner Back-up Issuer/Attendant Customs Administration Quotes and Sourcing Create PO s and place Orders Follow-up and expediting Monitor Vendor Performance A/P Exceptions (pricing)

39 Hershey status.. Insourced/Outsourced Storeroom Supervisor Accountable for Storeroom operations Review/adjust MRO requisitions Request/maintain Material Master Data Development of Storeroom Policies & Procedures (Corporate governance) Reports/KPI s On-going training needs Storeroom Attendant Responsible for all inventory transactions: issues, receipts, returns, cycle counting Barcode labeling and putaways Maintenance Kitting Housekeeping

40 Hershey status.. Insourced MRO Buyer Quotes and Sourcing Create PO s and place Orders Follow-up and expediting Monitor Vendor Performance A/P Exceptions - GR/IR

41 Hershey status.. Outsourced 3 rd Party Buying Quotes and Sourcing Processes PO s and place Orders All EDI Follow-up and expediting Monitor Vendor Performance CI programs Central MRO Sourcing A/P Exceptions GR/IR Reverse Engineering All exception purchasing

42 Based on Hershey experience How would you improve Assess skill & Ongoing Capability Management Job aides Training Classes Work & Development Plan Work & Development Plan Ensure role/work process responsibilities are documented Link to Business Results Link to the roles within the department Link to Storeroom Metrics Partner with 3 rd Party partner for industry expertise

43 Proper Maintenance/MRO relationship Achieving business objectives is a joint Maintenance/Storeroom activity Reliability improvement: Improve equipment availability Maintain equipment at lowest cost Managing inventory: Eliminate obsolete inventory Eliminate excess inventory Make full use of Planned maintenance Consolidate stock Meet regularly to identify issues, make improvement, and track progress Storeroom MRO Supply Chain experts Maintenance Equipment experts

44 Proper Maintenance/MRO relationship Differentiate responsibility when it comes to MRO materials: Storeroom MRO supply chain experts Handles all MRO goods receipts, shipping, and returns to vendor Owns MRO material quality Maintenance Planning & Scheduling best practices Defines what needs to be stocked and how much No off the books inventory Maintenance & Storeroom No purchasing w/o Purchase Requisition or Purchase Order Follow defined Emergency PO process, when required

45 Based on Hershey experience How would you improve Process owner defined for work processes Well defined, documented work processes with clear responsibilities Hershey & 3 rd Party Periodic audit to periodically assess system health, develop and execute improvement plan Involve maintenance in the review and design of the business process. Core storeroom roles, repairs, and kitting Communicate, Communicate, Communicate!

46 Best practices as it affects MRO procurement Identified work processes Process owner identified w/responsibility to audit and improve process Documented work process with clear responsibility MRP work processes and automation Right Part, Right Quantity, Right Time, Right Price Nightly batch jobs for MRP Auto-PO process Purchase Requisition approval process Purchasing owns sourcing and vendor relationship Defined guidance for and disciplined use of P-card Involve purchasing in weekly/monthly meetings to improve relationships

47 Hershey status.. MRP runs nightly to generate requisitions Review and Adjust MRO Requisitions Requisitioner Completes Requisition Form completely Mechanic/Planner Plans / Allocates materials to Work Order Pick List Approval levels clearly defined for different regions Purchasing resources involved in the sourcing of new and existing spares

48 Hershey status.. Insourced Requests for Quote (RFQ) and sourcing Creates Purchase Order (PO) and places Orders Follow up and expediting Outsourced For all materials that have either been created or changed a file is sent every night to 3 rd party partner Auto PO is active for ALL materials that are sourced by 3 rd party partner At 1 PM all open requisitions are passed via EDI to 3 rd party partner, thus converting them to a purchase order in our ECC system Follow on updates from 3 rd party are done via EDI back to Hershey s system Corporate MRO sourcing group is system owner

49 Based on Hershey experience How would you improve Document process and be clear on responsibilities; e.g., buyer owns sourcing, maintenance defines what is needed and when, storeroom owns whether purchase requisition is needed Use auto-po, particularly for low cost, high turn materials Use MRP to improve efficiency and effectiveness Simple yet comprehensive MRP Review should be a part of your routine when materials call for replenishment Monitor vendor performance, particularly On-time delivery Correct material, correct quantity, correct price Disciplined use of P-card

50 How to improve and get to World Class Manage the Storeroom as a Business Vision Mission Strategy Objectives/Goals/KPI s Organization & Staffing Roles & Responsibility Training Defined work processes Owners Audited Continuous improvement

51 Key Point #1 Get the Storeroom properly Organized/Layout Clean Neat Consolidated Secure Develop a Master plan Page: 51

52 Key Point #2 Assess and improve Master Data/Data Integrity Identify owners for MRO data governance Review current process for bottlenecks in flow of data Develop a taxonomy following Noun, Modifier and Attributes Work with O. E. M to provide spare parts list with generic manufacturer information, eliminating duplicates Page: 52

53 Key Point #3 Define and put in place Storeroom KPI s Define KPI s They can change over time as the organization matures Measure KPI s Review KPI s Set priorities for improvement based on KPI s Track results and adjust, as needed

54 Key Point #4 Define proper Staffing and Training Define roles and responsibilities Assess Storeroom Skills Look at skills Develop required job documents for Storeroom resources How are skills supported Develop a system that provides quick to find and easy to use job aides Page: 54

55 Key Point #5 Establish proper Maintenance/Storeroom relationship Assess current status Define work processes Periodic joint review of issues Develop improvement plans Communicate

56 Key Point #6 Establish MRO procurement best practices Define work process, roles, and responsibilities Assess current system Monitor Vendor performance Involve OEM from beginning of Capital Project

57 Key Learnings Manage your Storeroom like a business Six key points for effective Storeroom operations Evaluating your Storeroom versus these six key points Making improvements using these six key points Develop Vision, Mission, Strategy, KPI s linked to higher level business objectives Common themes for each of the six key points Identify the work processes/systems Identify a process owner for each with defined responsibilities Document work process and train those with responsibilities in the work process Measure performance of the work process Audit the work process and develop improvement plan

58 FOLLOW US

59 THANK YOU THANK YOU FOR PARTICIPATING Please provide feedback on this session by completing a short survey via the event mobile application. SESSION CODE: 1403 For ongoing education on this area of focus, visit