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Capabilities Overview

March 2015

Capabilities Overview

MRO MATERIALS AND STOREROOM MANAGEMENT

John Kronenwetter

Vice President

Copyright 2015 SDI, Inc. All rights reserved.

Why are firms investigating a more connected, enterprise-wide solution?

Equipment unplanned downtime

Thousands of SKUs

Inaccurate Inventories and too much

Poor on-time delivery

Work order completion delays

Tens of thousands of transactions

Decentralized spend /Highly fragmented vendor base

Lack of visibility, technology enablers & information systems

No central authority -stakeholders cross multiple departments with conflicting agendas

• Accounting – lowest transaction cost

• Finance –minimum inventory

• Maintenance –parts availability

• Operations – labor productivity

Under-resourced, neglected category

Minimal investment due to difficulty in calculating ROI / unknown TCO

Risks and costs (direct & indirect) are not clearly visible or controllable 2

Copyright 2015 SDI, Inc. All rights reserved.

Competing Agendas & Conflicting Interests

Structurally, this approach has been fragmented between MRO stakeholders across

multiple departments – can’t align MRO with other strategic initiatives (OEE, Lean, Six

Sigma, sustainability, operations excellence)

• I.T. – systems compatibility, data integrity, analytics & reporting

• F&A – minimum inventory & PO transaction costs

• Storeroom – fire fighting

• Reliability – Overall Equipment Effectiveness (OEE)

• Maintenance – parts availability

• Operations – production optimization

• Sourcing & procurement – lowest material price & total cost of ownership

This fragmentation makes it all but impossible to align MRO with other organizational

strategies such as overall equipment effectiveness (OEE).

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Copyright 2015 SDI, Inc. All rights reserved.

Silos of PainA typical organization's MRO processes are

usually fragmented into many sub-processes

and tasks that are carried out in departmental

silos. Often, no one is responsible for the overall

performance of the end-to-end supply chain

and the departments have conflicting interests.

These suboptimal practices result in “silos of

pain”. These silos evolve as individual

departments implement localized and isolated

MRO-related management tactics that ripple

through the organization, most often in terms of

added costs and inefficiencies.

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Counterproductive behaviors won’t change until individuals or

departments see and understand the enterprise impact.

Maintenance & Engineering IT

Finance & Accounting

Connected = Efficient and Productive

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The hidden costs can exceed MRO

parts spend by 200%!

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SDI connects every link to reduce MRO TCO

and improve operational uptime

Leading provider with 40+ years experience

delivering services in North America

$300 million in spend management with 6,000+ suppliers

End-to-end service offering includes data management and

analytics, strategic sourcing, procurement to payment,

storeroom management, and engineering services

Serving customers in chemical, food & beverage, heavy

industrials, pharmaceuticals, transportation, medical devices,

and education

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Copyright 2015 SDI, Inc. All rights reserved.

Connecting MRO for leading companies:

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Data management

& analytics

Source-to-pay

procurement process

Receiving &

storeroom operations

Engineering Services

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How to achieve maximum value

from your MRO Supply Chain

Data Management & Analytics. - Reduce Consumption 10-15%

Inventory MRO SKUs and location.

Cleanse data to standardize parts catalog and set

proper data taxonomy.

Analyze SKU data for duplication and identify

critical, existing and obsolete inventory

SDiExchange cloud-based portal provides all

transactional detail, reporting, analytics and

inventory control

Establish inventory forecasting methodology and

set risk tolerances

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Data Management

& Analytics

Source-to-Pay

Process

Receiving &

Storeroom Operations

Engineering Services

Source-to-Pay Process. - Reduce Processing Costs by Over 50%

Six Sigma sourcing process in 40+ categories with

6000+ suppliers to achieve price savings.

Design workflow and approval hierarchy

Select strategic suppliers and establish PunchOut

capabilities with each

Paperless processing eliminates manual intervention

and reduces processing error rates

Shared Services model for greater control

and leverage of our entire portfolio for more efficient,

compliant buying operations.

Significant reduction in AP processing costs,

SDI becomes the single supplier,

billing 2x per month

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Data Management

& Analytics

Source-to-Pay

Process

Receiving &

Storeroom Operations

Engineering Services

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Data Management

& Analytics

Source-to-Pay

Process

Receiving &

Storeroom Operations

Engineering Services

Receiving & Storeroom Operations- Increase Productivity by 30%

- Reduce Inventory 15-25%

Deploy MRO expertise and storeroom SOP’s.

determine best method to secure the storeroom

Implement surrounding technologies to

SDiExchange - bar coding, cycle counting, warranty

and repair tracking, ERP interface, SDiMobile,

vending and point of use.

Deconstruct the SDI Best-in-Class assessment and

develop a 12-month project plan to achieve BIC

status

Align storeroom functionality and the work

order and planning process

Set agreed to metrics to measure

performance and service

Copyright 2015 SDI, Inc. All rights reserved. 12

Data Management

& Analytics

Source-to-Pay

Process

Receiving &

Storeroom Operations

Engineering Services

Engineering Services Drive 8-10% Value Creation to the P&L

Largest team of certified and licensed reliability

engineers focused solely on MRO.

Conduct data analytics, review process

efficiencies, and identify cost improvement

opportunities with your team.

Pinpoint issues with equipment – repeat

failures, unplanned downtime, costly or

inefficient applications, longer life products,

improved maintenance strategies

Standardization, OEM commercialization and

reverse engineering to increase product

availability and/or life as well as reduce cost

Initiate all savings and productivity

improvement projects in SDiPowerSteering

Copyright 2015 SDI, Inc. All rights reserved.

Parametric Google-like search engine

Web-based, access from anywhere

PunchOut to key suppliers

Electronic order approval hierarchy

Catalog and non-catalog requests

Workflow

Easy part-add process

Robust online reporting

Virtual warehouse

Improves spend visibility

SDI Exchange : Custom Catalog, Order Processing & Inventory

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Master Data Management

Inventory Management

Inventory Forecasting

Budget controls

Order Status

Copyright 2015 SDI, Inc. All rights reserved.

SDiExchange – Technology Specifically for MRO

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SDiExchange

eCatalog and eProcurement

SDiTrack

Warranty & Repair Tracking

SDiMS

$-

$100

$200

$300

$400

$500

$600

$700

$800

1 3 5 7 9 11 13 15 17 19 21 23

Thou

sand

s

Projected Inventory On-Hand

Months

Demand Forecasting

SDiConnect

Seamless SAP Interface

SDiMobile

Barcode and Electronic Signature

SDiStoreroom

Smartphone Application

SDiVending

Storeroom Automation and POU

SDiPower Steering

Project Management and Tracking

Copyright 2015 SDI, Inc. All rights reserved.

Vending Solutions

Every SDI vending solution is customized to the requirements

Actual parts and usage

Volume of daily transactions

Level of inventory control requirements

Size and layout of the facility

Number of employees

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Your MRO Connected Enterprise

SDI connects, coordinates, optimizes & aligns

every link in the chain, typically delivering up to

350% ROI to our clients.

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Data Management

& Analytics

Source-to-Pay

Process

Receiving &

Storeroom Operations

Engineering Services

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Copyright 2015 SDI, Inc. All rights reserved.

Savings Opportunities & Productivity Improvements

Master data management and new parts registration

Spend visibility and analytics

Leveraged and consistent pricing

Compliance to contracts and increased incentives

Freight expense reduction

AP processing reduction

Product standardization

OEM conversion and reverse engineering

Inventory management and forecasting

Inventory reduction

Warranty and repair tracking

Labor cost reduction

Maintenance productivity improvements leading to increased OEE rates 17

Achieving Best in Class MRO and Storeroom Management Status

The results:

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Next Steps

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The path forward for MRO success.

The process:

Understand the challenges to be overcome

Size and scale the project

Data share

Identify the team involved and the internal process ahead

Select plant(s) for supply Chain Assessment

Establish a timeline for completion

Tour SDI’s Shared Services Center

Report out of assessment

Agree upon the savings metrics to be reported

SDI presents final solution to the MRO team

Scope implementation and timeline

Copyright 2015 SDI, Inc. All rights reserved.

Next Steps

MRO Data & Spend

Sourcing & Procurement

Systems & Technology

Storeroom & Inventory

Engineering & Maintenance

Production & Operations

Finance & Accounting

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Align stakeholders to move forward with a comprehensive assessment.

SDI diagnostic of your:

The strength of this approach lies in its ability to reveal pain points and

inefficiencies in the process, identify savings opportunities, drive departmental

synergies and ensure sustainable performance improvement connecting the

MRO supply chain to the needs of the business.

Copyright 2015 SDI, Inc. All rights reserved.

MRO Total Cost of Ownership - Example

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CATEGORY COST COMMENTS SDI IMPACTMRO MATERIAL SPEND $5,600,000 MRO & OEM, Stock & non-Stock 5-12%

FREIGHT COST $448,000 Estimated at 8% 50-60%

STOREROOM LABOR COST $156,000 Single shift, 2 FTE's, fully loaded 0-100%

INVENTORY MANAGEMENT $952,000.00 Carrying cost 12%, 5% slippage 10-20%

TECHNOLOGY $35,000 Inventory management system, not tied to CMMS 100%

MRO SOURCING $132,000 OEM / Commercial, 2 FTE's 0-100%

MRO PURCHASING $66,000 OEM / Commercial, 1 FTE 0-100%

AP PROCESSING COSTS $241,758 Average voucher size $275, 20,350 processed, $11.88ea 80-100%

MASTER DATA MANAGEMENT $0 No dedicated resources or formal process to manage N/A

MAINTENANCE PRODUCTIVITY $333,432 Includes wait time, parts search, ordering 20-30%

$7,964,190 11-23%

Nearly 150% of Material Cost