Inventory Strategies using SAP IBP for MRO: Optimize Asset Uptime and Working Capital

Recent McKinsey research has shown that companies are missing out on significant opportunities to increase the value of their maintenance efforts, while maintenance costs are often higher than necessary due to the use of outdated maintenance strategies.?

Maintenance, repair, and operations (MRO) activities for asset-intensive organisations can be divided into large commissioning of projects or planned turnarounds, daily operations and maintaining uptime through timely planned interventions, and smaller planned tasks that are budgeted for.?

In addition, there are unplanned shutdown events that can be caused by more traditional reactive maintenance strategies, where parts or equipment are run to failure.?These principles also apply to many manufacturing companies.

The adverse health and safety, financial, and organizational impacts of unplanned turnaround and maintenance activities are often significant for asset-intensive companies.?

How can companies scale out the use of more preventative maintenance strategies with SAP to improve asset uptime and working capital levels??

Modernizing Maintenance Strategies with SAP IBP for MRO and EAM

In recent years, companies have actively focused on moving from reactive maintenance to preventative maintenance, and even reliability-centered or condition-based maintenance (CBM), to improve reliability, improving service levels for their assets while reducing costs.

Companies looking to implement CBM strategies need to evaluate their maturity, resources, equipment connectivity, monitoring and data platforms to support CBM’s levels of optimization and transformation.?

CBM can be technically enabled at scale with SAP’s integrated Enterprise Asset Management (EAM) suite, and SAP partnerships to enable asset connectivity,?for example with Software AG’s Cumulocity industrial IoT platform.?

CBM relies on improved information, collaboration, and digital data from monitored equipment to drive more timely interventions and maintenance plans, avoiding unnecessary MRO tasks.?

Unnecessary MRO tasks, for example regularly replacing machinery filters that normally have a far longer lifespan, have a high cost due to inflated inventory levels and the wasted use of highly skilled technicians to complete these tasks.?

SAP Asset Performance Management (APM) is used to set the conditions for more proactive asset management strategies based on historical data and equipment analysis. SAP APM integrates these conditions into more proactive maintenance plans in SAP S/4HANA EAM.?

The financial benefits of a data-driven CBM strategy build from the reduced over-maintenance of assets and production loss or potential fines for unplanned asset downtime that also drive more predictable budgeting outcomes for resource allocation and inventory strategies.?

SAP Integrated Business Planning (IBP) for MRO?can holistically simulate the inventory network to identify improved safety stock levels with equipment mean-time between failure rates, to reduce inventory and related carrying costs, which can support business decisions on the optimal inventory network to fulfil CBM strategies for individual assets.

Using the SAP IBP for MRO process and platform, teams across the organization can align and design maintenance scenarios and strategies for assets over weeks, months, or years on the same data,?combining SAP Project Systems (PS) and Plant Maintenance (PM) bills of materials, locations, and related resources in one planners’ workspace.?

The SAP IBP process and embedded analytics helps teams determine the optimal timing for maintenance overhauls or larger shutdown-turnarounds for assets based on production plans, capacity, resource constraints, transportation lead times, space limitations (e.g. on an offshore platform), third-party workforce requirements and many other factors.

These attributes and key figures can be aligned to CBM strategies' service levels in SAP IBP for MRO to identify safety-stock levels, balancing spares lead times and availability across the full supply network with working capital availability for reinvestment in other assets or smaller projects.?

Automatic target inventory positions or reorder points can be set in the SAP IBP Inventory Planner Operator workspace using the embedded Poisson distribution algorithm?to further support automated decision gates for unplanned inventory requirements.

At an aggregate level, the MRO inventory planning team can use SAP IBP to recommend pooling points and levels for common inventory with high demand such as valves, pumps, or compressors for oil & gas clients.?

Custom MRO inventory alerts can be set using SAP IBP's Control Tower, to automatically notify maintenance planners and teams when inventory levels are approaching safety stock levels to cover intermittent demand, or for other EAM key figure alerts.?

Combining one view of automatically extracted PS and EAM data and key figures for commissioning projects’ decision gates and planned asset lifecycle can also save on data and project handover costs from Projects to Operations teams, further saving planners time and costs for the organization.?

CBM rough-cut savings and profitability analysis for optimized service levels can all be defined and communicated at an executive level with SAP IBP for MRO and fully budgeted with integrated SAP Analytics Cloud (SAC) Planning scenarios for CFO, Procurement and Treasury teams.?

SAP supports Inventory and Working Capital Optimization at scale

Accurately costed safety stock scenarios across asset networks, with the integrated real-time value of SAP IBP and SAC Planning, give Operations and Finance leaders the ability to maintain validated MRO inventory availability and resilience, while releasing working capital.

Using these budgeted scenarios with SAP Supply Chain Finance and Inventory capabilities, customers can decide and plan for future inventory requirements to be more demand-driven, with calculated future quantities held off-balance sheet by third-party logistics partners with support from SAP Taulia.?

Planning future true sale inventory requirements in detailed time periods financialized in SAP’s extended Planning and Analytics (xP&A) platform, with firm orders placed via SAP S/4HANA, means multi-funder banks have granular predictability of end-to-end to support investment grade proven processes.?

With more effective long-term plans in place with SAP IBP for MRO, companies can start to diversify sourcing strategies to cost-efficient countries with longer lead times, with the support of?SAP Taulia’s Inventory Finance.

Improving your supplier collaboration and commit process over long time horizons combined with SAP Taulia’s platform and multi-funder network enables ‘always available’ 3rd-party consignment or vendor-managed inventory, providing additional safety stock for unplanned MRO requirements.???

Conclusion

With SAP IBP for MRO’s integrated platform and processes supporting segmented automated reorder points and quantities connected with SAP Taulia Inventory Finance, customers can now mix just-in-case and just-in-time inventory strategies to enable supply chain resiliency at scale while moving to more?asset-light outsourced maintenance scenarios.?

For more information on our end-to-end SAP capabilities to support modernizing your MRO strategies while optimizing inventory availability and working capital, please get in touch.?