Orange County Convention Center

Orlando, Florida | June 3-5, 2014

MRO Storeroom Best Practices at Hershey

Linda Dietzel, C.P.M.

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

Hershey, Iconic brands

With Iconic Brands

And Strong International Brands and Partners

With unique and proud history

With a Unique and Proud History.

Milton S. Hershey
Milton S. Hershey

The first person to link

Commerce with Compassion
-Johnny OBrien,
65 MHS graduate
MHS President 2004-2008

Miltons Model Town & Milton Hershey School

Miltons Model Town & Milton Hershey
School

The Town of Hershey

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

In 1918, Milton donated his entire fortune to

fund the school for perpetuity

Today, Hershey is a vibrant, nationally-known

corporate town and tourist destination

Today, nearly 1,900 boys and girls of all races,

from backgrounds of severe poverty and social
need, attend grades pre-k through 12

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

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

 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

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

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

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

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

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

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.

Organization/Layout

Organization/Layout

18

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

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, its 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

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

Master Data/Data Integrity

You pointing at it wont help. I
still have to create the material
master, add it to its B.O.M.,
receive it, release it, stage it,
transfer it and confirm it. Come
back a week on Wednesday

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

Master Data/Data Integrity

Manage New Part Additions

Standardized approach to determine whether a part should be stocked.

New Item request process

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

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

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

KPI Measurements and Monitoring

Fill Rate Goal 98%
POs >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

KPI Measurements and Monitoring

September Top Impactors:

Impactors:

High Dollar Issue Outs

$5,384,885

$5,326,726

$5,343,723

$5,363,110

$5,358,182

$5,317,033

$5,286,077

$5,262,073

$5,251,375

Inventory Value
$5,299,893

$5,500,000
$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

October Top
90039-248 PUMP PDISPL #130 WAUKESHA

10072-740
90066-889
90144-557
90118-783
90035-772
90170-236
10003-310

$ 5,286.50
$ (5,017.39)
$ (4,893.15)
$ 4,742.49
$ 4,729.57
$ (4,695.18)
$ 3,924.00

BELT CNVR 18" X 145' #14727 MIR

PUNCH LONG DIE MED EGG WITH SPRING
CHN UPR DISCH #54752091 SIG
DRV 30FPM 460V #6.55G.EBI.CBA JOKI
HEAD PRINT #0827890 MARKEM 9860
VALVE 1" #KEA73-PTSUSS.2 SPIRA-TRO
SHAFT DRV RLR TARGET SI #M013142 D

Restock Items from

Previous Month

9,772.49

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

Custom Accuracy Report Last 12 Months

Custom Accuracy Report Last 12

Months
Accuracy

120

100

80

60

Accuracy

40

20

0
1001

1001

1003

1004

2907

1009

1013

1013

2916

1017

1019

3401

3201

MRO Completeness Report

Internal Audit required report to query items not counted
within cycle

MRO Completeness Report Detail

Based on Hershey experience How would you

improve
Identify KPIs, 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

Proper Staffing/Training
Storeroom Leader
Storeroom Issuing/Attendant

Storeroom Receiving/Attendant
Storeroom Cycle Counter
MRO Buyer

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

One Person

Many Roles

Proper Staffing/Training

Determine sufficient roles to meet business needs

then figure number of people required.

Proper Staffing/Training

Roles

Think about Role Responsibilities

Receiving

Counter issues

Parts delivery

Inventory count

Housekeeping

Rebuilds

Stocking

Kitting

Proper Staffing/Training
Understand the roles

Storeroom Leader

Issuer/Attendant
Perform Goods Issues and Returns
Put-a-way process
Assist internal customers
Inventory Cycle Counting
Back-up Receiver
Maintain Housekeeping

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/KPIs
On-going training needs

Shipping/Receiver
Perform Goods Receipts, Returns,
Quality Inspection
Contacts requisitioner
Back-up Issuer/Attendant
Customs Administration

MRO Buyer
Quotes and Sourcing
Create POs and place Orders
Follow-up and expediting
Monitor Vendor Performance
A/P Exceptions (pricing)

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/KPIs
On-going training needs

Storeroom Attendant

Responsible for all inventory transactions: issues, receipts, returns, cycle

counting
Barcode labeling and putaways
Maintenance Kitting
Housekeeping

Hershey status..
Insourced
MRO Buyer

Quotes and Sourcing

Create POs and place Orders
Follow-up and expediting
Monitor Vendor Performance
A/P Exceptions - GR/IR

Hershey status..
Outsourced
3rd Party Buying

Quotes and Sourcing

Processes POs 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

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 3rd Party partner for industry expertise

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

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

Based on Hershey experience How would you

improve
Process owner defined for work processes
Well defined, documented work processes with clear
responsibilities
Hershey & 3rd 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!

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

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

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 3rd party partner
Auto PO is active for ALL materials that are sourced by 3rd party
partner
At 1 PM all open requisitions are passed via EDI to 3rd party partner,
thus converting them to a purchase order in our ECC system
Follow on updates from 3rd party are done via EDI back to Hersheys
system
Corporate MRO sourcing group is system owner

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

How to improve and get to World Class

Manage the Storeroom as a Business

Vision
Mission
Strategy
Objectives/Goals/KPIs
Organization & Staffing
Roles & Responsibility
Training

Defined work processes

Owners
Audited
Continuous improvement

Key Point #1
Get the Storeroom properly Organized/Layout
Clean
Neat

Consolidated
Secure
Develop a Master plan

Page: 51

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

Key Point #3
Define and put in place Storeroom KPIs
Define KPIs
They can change over time as the organization matures

Measure KPIs
Review KPIs
Set priorities for improvement based on KPIs
Track results and adjust, as needed

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

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

Communicate

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

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, KPIs 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

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