Risk Assessment and Management of MRO Inventory

1. Risk Assessment and Managementof MRO Inventory Shane McLellan Project Leader – Business Performance & Planning SaskPower

2. Discussion topics: • SaskPower • Vision, location, business, structure, and history • Materials Work/Process Management Overview • The MRO Inventory risk assessment process • Materials tie to PM activities • Assessment process development • Leveraging SAP Doclink to retain knowledge • Summary of Current and future initiatives

3. Vision: • People and innovation. . . powering Saskatchewan to a bright future. is a fully integrated electric utility located in Saskatchewan supplying power to the entire province.

6. Relatively Speaking…..

7. generating facilities are strategically located: Hydroelectric – 854MW Natural Gas – 538 MW Wind – 172 MWCoal – 1653 MW _______________________________ Subtotal – 3217 MW Independent – 454 MW _______________________________ Total – 3671 MW

8. Plant maintenance and major capital projects are required to enhance aging equipment, implement new technical processes and develop new generation solutions. These activities have a significant impact on inventory holdings.

9. Materials Overview @ PPBU SaskPower • Significant $ provision for obsolete inventory • > 150,000 MMRs (>95,000 with stock) • Adding ~ 6,000 per year • > 120 material groups • De-centralized structure for managing materials and most inventory purchasing functions

10. MRO Inventory Required For… • Maintenance • Planned maintenance activities • Preventive maintenance • Weekly, monthly, quarterly, annual, etc. • Repair • Unplanned break-fix maintenance activities • As occur • Operations • Consumables • Used along side Maintenance and Repair or alone • May or may not be on BOMs

11. Inventory Decision?... Balancing Risks • Do not Stock…potential for unit outage • Public / employee safety • Forced brown-outs, essential services, extreme weather • Reliability • Revenue: potential loss of generation capacity • $70/MWh X MWh capacity of unit(s) • Stock…potential for wasted resources • Lost capital • Limited capital resources

12. Why do Inventory Assessments? • Legal requirements (accounting rules) • Accurately value assets • item cost $5000.00 ten years ago; • no longer required; and • no market value; • valued at scrap value minus disposal costs • Business benefits (increase productivity) • Reduce non-value-added costs: • initial purchase price • carrying charges • physical storage • administrative

13. PPBU $ Provision for Obsolete Inventory

14. …more on Business Benefits • Identify obsolete materials • Recognize true inventory asset value • Utilize freed up space and resources for value added activities including: • Procuring and maintaining required inventory; • Regularly assessing dead stock items; • Updating and managing SAP master data. • Identify opportunities to reduce min/max stock levels (slow moving & costly items) • Identify items that may be under stocked

15. % Dead Stock / Active Stock • Is obsolete inventory identified and removed regularly? • Presently, “No”; responses heard: • Too difficult! • Not enough resources! Or worse… • May need it some day. • Might be able to scavenge something from it. Careful!! • Its a slippery slope!

16. % Dead Stock / Active Stock • A slippery upward slope!

17. Process Optimization • So how can we optimize the management (including assessment) of MRO inventory?

18. Specify Source Buy Inventory Use The Materials (MM) Process

19. Initiate Plan Schedule Execute Complete The Maintenance (PM) Process

20. Specify Source Buy Inventory Use Initiate Plan Schedule Execute Complete Integration ofMM and PM Processes

21. Plan : Specify & Source

22. Decision; Schedule : Buy

23. Plan, Execute, Complete : Use

24. SAP Functionality to Manage Inventory • The Material Master Record (MMR) • Material Resource Planning (MRP) • MRP Type • ABC • Bill of Material (BOM) • Document Linking • Classification • Serialization

25. MRP Type – Material Resource Planning • V1: min / max maintained • Slow or fast moving critical items • Fast moving non-critical items • PD: required items ordered at WO release • No stock maintained • Typically not a critical item • ND: maintain record for information purposes • Not currently used but may be used in the future • May have been used in the past (contains history)

26. ABC – Analysis of MRO Inventory • Separating essential from non-essential • A: Essential stock items that: • Are directly critical to generation of MW • May be fast or slow moving (usually slow) • Are typically high value (not always) • B: Non-essential stock items that: • Can be ordered at WO release • Typically have shorter lead times • C: Essential Stock items that: • Are not directly critical to generation of MW • Would significantly impact business if stock-out occurs • Are fast or slow moving (usually fast) • Are typically low value (not always)

27. ABC Indicator & MRP Type • Classifying essential and non-essential • A: items critical to generation of MW • MRP of V1 (min/max maintained) with Lot Size HB • Slow or fast moving (usually slow) • Typically high value (not always) • B: items can be ordered at WO release • MRP of PD (no stock maintained) with Lot Size EX • MRP of ND (no stock maintained) with no Lot Size • C: items not directly critical to generation of MW • MRP of V1 (min/max maintained) with Lot Size HB • Non-critical items used frequently (high quantity) • Typically low value (not always)

28. BOMs tie Materials to Plant Maintenance BOMS

29. Document Linking in SAP

30. Document Linking in SAP

31. A Picture is Worth a Thousand Words…

32. Other Tools • Spares Optimization System (SOS) • Proprietary software • Used 2000 – present to varying degrees • Comprehensive • Resource intensive • No workflow • SaskPower’s Material Assessment Database (MAD) • Built in-house • Used 2006 to present • Less comprehensive than SOS • Resource friendly and fast • Newest version contains workflow • Other ….

33. SaskPower’sMaterial Assessment Database • Key Requirements of Assessment Tool • Workflow • Move documents through assessment process • Integration • Maintain key information including photos • Transparency • Provide for easy tracking of process At SaskPower we built an assessment tool based on previous knowledge and the above identified requirements.

35. Views – Plant Contact View • Choose assessments to assign

36. One click to access the tasks in “Your Responsibility” View Views – My Responsibility View

37. Views – Other Views that are Available • By Plant & Role • By Plant & Owner • Supervisor View • Sortable View • By Plant & Status

38. Material Overview

39. BOM information…

40. Used on past work orders…

41. History of material movements….

42. Link to Functional Location Structure

46. Recommendation only

48. Link Assessment to MMR in SAP

49. MAD is One of Many Current Initiatives • Process Development / Improvement • SAP MM/PM (ABC, M Status, S.Proc., offset) • Sub-processes (receipts, issues, salvage…) • Block Maintenance • Training • Material Risk Assessments • Controlling function / operations management • Standard Supply Agreements • Measures & Dashboard • Lotus Notes

50. Future MAD Plans • New MMR / Change MMR • Risk calculator • Factor in cost of replacement energy, MWs impacted and lead time to replace • Move process to SAP Portal • BI / BOb reporting