MRO Procurement Process Streamlining

Streamlining the MRO Procurement Process in Mfg/Pro
Joe Drouillard
Principal/Consultant
Avenue Systems
(248) 894-7093
www.avenue-systems.com

There are many third-party software programs which improve the MRO (maintenance, repair, operations) procurement process in Mfg/Pro. But I have found it much more effective to maximize and supplement the functionality already in Mfg/Pro to greatly reduce manual effort in the request, approval, purchase, putaway and issuance of MRO items. This post includes a rather detailed project plan which will give you ideas for the many ways of improving the MRO process in Mfg/Pro. Many of these project items can be implemented separately and in any order in a process of continuous improvement.

A typical manufacturer will spend more time and more money procuring MRO (Maintenance, Repair, and Operations) items than on component parts and raw materials. Examples of these parts include tooling, machine repair, maintenance, office, and packaging materials. It is possible to greatly reduce the time and energy spent in this endeavor, even without modifying QAD source code.

MRO items are usually purchased with much hands-on tending in Mfg/Pro, even when using the blanket order and purchase request functionality. But, it is possible to introduce task-reduction and automation improvements throughout the procurement process.

First, lets reduce this process to its component steps, which are not limited strictly to Purchasing. Each of these operations is prone to bottlenecks and errors. And, all require incessant attention to avoid shortages, excess, shrinkage, and obsolescence.

Procurement Steps inside and outside Mfg/Pro:

The recognition of the need for more of an item.
The request for a purchase.
The generation of a Purchase Order.
The transmission of the Purchase Order to a supplier.
The receipt of the item, and the transmission of the item to the requestor or to inventory.
If from inventory, the issue of that item for use in the plant, warehouse, lab, or office.
The processing and payment of the supplier invoice.

Each of these can be automated with measurable benefits in Mfg/Pro. I will propose a project to automate these activities using several different system automation tools. These project items can be implemented in a different order, and perhaps some of the steps can be skipped or minimized based on the specific needs of your company or industry.:

Implementation of a custom version of the Purchase Request screen, with data entry, editing, and approval features meeting a company's unique requirements.
Automation of the creation of purchase requests for frequently purchased items.
Automation of the transfer of Purchase Requests into Purchase Orders.
Delivery of P/Os to suppliers through automated faxes and e-mails out of Mfg/Pro.
E-mails from Mfg/Pro to notify approvers of P/Rs awaiting approval.
E-mails to purchase requestors, notifying them that their parts have been received.
Automation of material issues through the judicious use of simple and economical bar code label and scanning solutions.
Automation of receipts from frequent suppliers.
Automation of the A/P processing of invoices from frequent suppliers.

Why implement computerized Purchase Requests?

If a Purchase Request (P/R) is entered into the computer in the same amount of time as it would have taken to write it on paper, then a task has been eliminated. I.e., Purchasing will not need to enter it into the system. Therefore, this is clearly the elimination of a step where error can be introduced, and where a bottleneck may develop. There are many more users generating requests than there are people in Purchasing, so the data entry will be more widely distributed. Freeing Purchasing from data entry will enable them to direct more energy to vendor selection and sourcing, and the activities discussed below in totally automating the P/R process for frequent suppliers.
A knowledgeable user entering a P/R, with intrinsic functional knowledge and system lookup tools, will more likely enter information correctly than Purchasing, and is probably more able to enter informed comments and remarks. The requestor is also the most interested in purchasing the correct item. With computers easily available to all, why should purchase requests and approvals still be done with pen and ink, only to be keyed into the computer by a central authority? Furthermore, Purchasing will maintain ownership of master file information, such as the default supplier for each item, negotiated prices, target inventory levels, etc. Purchasing will also have final review over each P/O before transmission to the supplier.
The sooner the recognized need for an item is in the system, the sooner task automation can begin. For example, by introducing the procurement into the system earlier, the entire approval process can be streamlined and automated using system tools.
Note: Users will not spend an inordinate amount of time entering P/Rs. With the enhancements implemented as detailed below, most P/Rs will be generated automatically by the system.

A project list follows of programming and implementation milestones necessary to achieve the goal of MRO procurement automation. These items are listed in the recommended order of implementation.

Project List: Streamlining MRO Purchases:

Many Mfg/Pro installations would benefit from a project to part number substantially more MRO items.
The purchase of non-part numbered "memo" items can be streamlined, but not totally automated. You can only store a default supplier, price, location, and target inventory level for an item if it has been part-numbered.

Any items that are stored after purchase for later use, or are purchased on at least a semi-regular basis with the same manufacturer part-number, or are usually purchased from a predictable vendor at a constant price, should probably be part-numbered in Mfg/Pro.

Parts that are not stored in inventory, are not purchased regularly, and are purchased from different vendors at varying prices, should probably not be item numbered. See Note IV, below, for some tips on automating the addition of MRO items to the part master file.
Implement a custom Purchase Request (P/R) entry screen using Mfg/Pro's P/R file structure. It should have the appearance of your printed P/R form, with lookup tools and editing to help the user find the correct supplier and part. One important feature of this screen will be to encourage/enforce the use of the default supplier and price for part-numbered items.

Integrate into this screen a custom P/R approval process to meet the specific requirements of your company. Perhaps, assign each requestor a main approver with one P/R limit, then backup approvers at higher limits. Enforce daily and monthly limits for G/L accounts (or account groupings). Limits can be further placed on projects with multiple purchases from many suppliers over an extended time span (E.g.: a marketing program, a new product launch, or a computer room upgrade).

The Mfg/Pro P/R data layout is single-line. You can still develop a multi line form, however. Just keep in mind that you are really generating multiple P/R records. This is a limitation of Mfg/Pro.

Other features to consider: a) Warn the user if there is already an open P/O or P/R line for the same item. b) For memo items, allow the user to select a supplier, and raise an error condition if the supplier is inactive (see Note II, below). c) Develop a text-based part lookup to help users search the item master for part-numbers, so users can easily find the correct item. Also, a text-based memo-item lookup, searching through recent P/Os to find the most recent supplier and price.
Write a load utility to automate the transfer of P/Rs to P/O lines. This will be run daily in Purchasing. In standard Mfg/Pro, you must add P/R lines one at a time to a P/O. But, it is a relatively simple programming task to batch load all approved P/R lines to P/Os, one P/O per supplier. This can be done using Progress input redirection in a shell program. See Note I, below. I highly recommended that you not use custom programs to directly create P/O lines or headers. Benefits: tremendous time savings in Purchasing, and a reduction in the total procurement time.

In this way P/Rs from different requestors will be combined into a single P/O for each supplier on a daily basis. However, each P/O line will retain information from the original P/R, such as the requestor and approver IDs, remarks, taxable status, etc. If the user enters a zero price on a memo item, this program should send it to the P/O with a comment asking the supplier for a price quote and returned approval before shipping.
Write a load utility for Purchasing to run daily to automatically create P/R lines for frequent suppliers, based on qty-available and min and max inventory targets. See Note II, below for ideas on how to designate which suppliers are in this category, and how to specify what day or days of the week to generate P/Rs for each supplier. All parts with a frequent supplier listed as the default supplier on the part master will be candidates for automatic P/R generation. Use the item master inventory min and max fields to replenish up to the maximum level once the inventory on-hand has been reduced to below the minimum level.  So, if there is more than the minimum currently on-hand, a new P/R will not be generated.

This will make replenishing these items a hands-off task, with great time savings in the requesting departments, and in Purchasing.   No manual P/R or P/O will be required for these items!

As a further improvement, consider creating a custom P/O printout for these items, in order to give more background information to your frequent suppliers, perhaps showing them the current quantity on-hand and recent usage.
Longer term objectives for Purchasing: Reduce inventory "max" levels, to allow for the reduction of inventory. Raise the "min" levels, to trigger more frequent supplier shipments. Work with suppliers who are willing to always make "ship complete" shipments (see 9, below). Also, request that shipping charges be included in pricing, to speed A/P processing of invoices. Eventually, you may wish to implement payment on receipt, eliminating the processing of invoices for these suppliers altogether. Increasingly, you will add more items to these high-volume, high-quality suppliers. You should be rewarded by better service and pricing.
Enable your Purchase Order print program to send the P/Os via e-mail or fax, based on each supplier's preference. This will result in a time savings because Purchasing will no longer need to dedicate so much time to feeding the fax machine. See Note III, below, for a few thoughts on enabling e-mails and faxes out of Mfg/Pro, even without any specialized hardware or software.
When a P/R is generated, create an automated e-mail to notify the approver. This will speed up approvals, and shorten total purchase time.
Create a function which automatically E-mails P/R requestors within the company when parts are received. Receiving will run this function throughout the day as receipts are completed to notify users that their purchased parts are available. This will speed up the delivery of parts, and help eliminate parts delivered to the wrong individual or department.
"Ship Complete" suppliers' receipts can be fully automated. Receiving will process the receipt using the existing Mfg/Pro "receive entire P/O" option in the receiving function. Benefit: Faster receipts - with no need to enter all items on the packing list into the system.
Bar code label incoming items as part of the receiving function. Implement bar code scanning for inventory issues of MRO items out of the tool crib and office supplies cabinet, etc.

Create a custom program to print bar code labels for inventoried items on a receipt. Attaching a label to each item or carton will verify the correctness of the receipt, and will enable the benefits of bar code scanning of inventory issues.

Create a custom shell program to scan bar-codes through Unplanned Issues screen (see Note I, below) to reduce inventory as parts are issued from the tool crib or office supplies area. Then, develop a manual procedure where bar codes are removed and placed in a box as parts are taken. On a daily basis, the labels can be retrieved from the box, then scanned into this custom function using an inexpensive "wedge" scanner at an Mfg/Pro terminal/PC.

In my opinion, it is much easier (and more likely) for a user to remove a label and toss it into a box than any alternative, such as filling out a form, or scanning or entering the data directly into the computer. The bottom line is that a simple bar coding solution can help you achieve very accurate inventories, at a low cost.

By working through this project plan, you should be able to reduce manual P/O preparation hours dramatically, while improving many other processes important for the smooth operation of your business. Employees requesting purchases will spend less time fussing with paperwork, and guessing when parts are received. An ever-increasing number of items will not even require direct user involvement in the procurement process!

Notes:

Input Redirection Using a Shell Program. This is a commonly used mechanism of giving an Mfg/Pro module a custom front end, without modification or access to source code. A custom program, often with fewer than 200 lines, obtains input from a file or process, and feeds the information "through" the standard Mfg/Pro screen. Therefore, the data gets all of the same data editing and multi-file updates as if it had all been keyed by a user into the Mfg/Pro screen. This is similar to using the CIM interface utility provided by QAD, but offers the flexibility of user submission with immediate error reporting, and the update of user fields in the target file.
Inactivating Suppliers/Supplemental Supplier Information. Mfg/Pro does not offer a mechanism of inactivating suppliers. Storing supplier active/inactive status and other supplemental data about each supplier can be done in a custom screen/table. Supplemental data might also include e-mail/fax information, frequent supplier status, and "ship complete" status, and for frequent suppliers, which days of the week to automate the creation of P/Rs, and transfer of P/Rs to P/Os.

This information can then be used in the P/R process. For instance, a "lookup" function in the supplier-id field of the P/R screen could display a warning that an inactive supplier had been chosen, and approval of the P/R would not be allowed until the supplier was activated by Purchasing.

This data can also be loaded to P/O user fields as part of the P/R to P/O load (see project item 3, and Note I, above) after which it can be included in custom reports.
E-mail and Fax-Enabling Mfg/Pro. Click on this link for a description on how to email and fax directly out of Mfg/Pro.
Automating the Creation of MRO Parts: Many Mfg/Pro installations would benefit from a project to item number substantially more MRO parts. To accomplish this with less manual effort, create a simplified entry screen for Purchasing/Materials to enter new part number candidates, with the minimal information usually supplied for non-production supplies (part-number, product-line, description, price, min, max, etc.). These new parts should not be loaded directly to the Mfg/Pro part master, but instead should be loaded to a work file. Create a report to display open candidates. Finally, create an automated function to load candidates through the part-master maintenance program. Use redirected input processing in a "shell" program (see Note I, above) to be assured of the same editing and file updates, as if these parts had been entered manually into the Mfg/Pro part maintenance screens. This function will be run by Accounting or Engineering (whoever is responsible for part additions to the database), after review and approval of the MRO part candidates.