Fill Rate & Customer Wait Time

Authored by Steve Bray
It Takes Two to Tango in a Maintenance Environment
For any of you who work in a Maintenance Repair and Overhaul (MRO) environment, the following story might just strike a chord:

The supply chain team are celebrating their third straight month of delivering a Fill Rate in excess of 95%. Meanwhile, the Maintenance Manager is being screamed at by the Operations Manager over why four of the ten machines are down for spares, and production output is dropping faster than his super fund!

How can this be?

A 95% spares availability and only a 60% equipment availability?

Surely there is something wrong in the numbers?

The fact is that both numbers are right. The problem however, is that the supply chain team is focussed on one goal – Fill Rate; whilst the maintenance team is focussed on another goal -minimising equipment down-time.

Another way to think about it is: What if the supply chain team could offer two different supply chain promises?

Service Delivery Offer One: deliver a Fill Rate of 95%, but you wait an average of four weeks for the remaining 5% of ‘failed’ demands to be satisfied.

Service Delivery Offer Two: deliver a Fill Rate of 85%, but you wait an average of one week for the remaining 15% of ‘failed’ demands to be delivered.

Which does the customer prefer? Which is the more expensive service offer to provide?

In an MRO environment, equipment availability (or ‘up time’) is maximised when the average wait time (for failed demands) is minimised. Significantly, this average wait time is minimised when the total backorders for the equipment are minimised. The good news is that there are some powerful tools/maths available to calculate stock levels that minimise total backorders and thus, minimise wait time. Note that wait time is often referred to as Customer Wait Time (CWT).

Anyway, enough of the theory, what is important in an MRO environment is to appreciate that it is the combination of both Fill Rate and CWT that delivers the full MRO supply chain experience.

So if you’re not currently focussed on CWT, here are some steps to help get you started:

1. Measure CWT. Define, develop and implement a simple metric that measures how long a ‘failed’ customer demand remains unsatisfied. In doing so, suggest you establish a trend view.

2. Set CWT Targets. Discuss with the maintenance staff (ie the supply chain customer) what would be a target level of acceptable wait time.

3. Diagnose CWT Underperformance. When reviewing any empirical evidence of unacceptable CWT, investigate underlying causes. Is it due to poor demand planning, poor stocking policy, poor sourcing, poor supplier performance etc. Develop, implement and monitor improvement initiatives.

4. Investigate Advanced Inventory Optimisation tools. If your current CWT performance is not where you need it to be, consider inventory optimisation tools (to integrate with your ERP system) that have inherent algorithms that allow management to establish either Fill Rate or CWT targets.

For non-MRO supply chains, Delivered In-Full, On-Time (DIFOT) performs very well in capturing the supply chain experience. However, in the MRO environment, CWT is equally as important as DIFOT and requires supply chain managers to understand the nuance that separates Fill Rate from CWT.

If you are unconvinced of the importance of CWT, try this simple experiment:

• Take a day off work to perform maintenance on your partner’s car

• Complete the necessary level of vehicle disassembly to allow you to identify the spares needed to repair the vehicle

• Slide out from under the vehicle, and make your way to your auto spares shop to secure the spares

• Depart the spares shop with nine of the ten items you need to complete the task – now knowing that the tenth part is on backorder and will be delivered in two weeks

My bet is that you will spend the trip home considering how you are going to explain to your partner why their car is up on blocks and that they will need to catch the train each day to work for the next two weeks! If only the CWT was two days not two weeks.


Notes:

Steve Bray is a Partner at GRA Supply Chain Consultants.

This article was first published in May 2013 on the MRO Australia website.

Reproduction of GRA whitepapers and articles

GRA permit the reproduction of GRA authored whitepapers and articles so long as all the following conditions are understood and met:

  • Entire credit details must be included:
    • Author's name(s)
    • GRA name and contact details
    • GRA URL link to the original article
  • All hyperlinks within the article must also be retained
  • Articles must not be resold
  • GRA retain full copyright.

If you have any queries about reproducing a GRA article or whitepaper, please contact GRA Marketing