By Saurabh Bansal📧, V. Daniel R. Guide📧, Sergey Naumov📧, Kusumal Ruamsook📧 and Steve Tracey📧
White paper, July 2023
Maintenance, repair, and operations (MRO) items are critical components of enterprise asset maintenance. While MRO items do not become part of or are central to the finished product, they are necessary to keep plant and facility assets operating safely at optimal levels of performance. Companies spend between 5 and 10 percent of their cost of goods sold on MRO purchases. However, we are not interested in these direct and visible costs of MRO, but rather in something less apparent and potentially more sinister. We are interested in the hidden costs when MRO parts are not available, and assets must be retired—what we call an MRO failure. When an asset can no longer be repaired, then it must be replaced, and these costs are largely hidden since they may not be directly reported. To further an understanding on these issues, an on-line survey was conducted during October–December, 2022. Our objective is to get insights into how firms manage their capital assets lifecycles. Specifically, the survey seeks to provide clarity about the causes of three asset retirement circumstances, namely prior to full depreciation, after depreciation but before the end of its useful life, and after the asset’s useful life. This report presents the findings from the survey study.
View full paper here.
Suggested citation
Bansal, Saurabh, V. Daniel R. Guide, Sergey Naumov, Kusumal Ruamsook, and Steve Tracey. 2023. “The Hidden Cost of MRO Failures: Industry Survey Sheds Light on Reasons for Early Retirement of Capital Asset.” White paper, Center for Supply Chain Research® (CSCR®), The Pennsylvania State University, in collaboration with Ivaldi and SDI.
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