Many sourcing and procurement professionals find MRO (Maintenance, Repair, and Operational Expenses) one of the most complex categories of spend to source. The reason for the difficulty in sourcing this category starts with simply defining what the category is. A plant manager will usually define MRO as anything that is not a raw material or labor cost. A finance person of procurement manager would surely take issue with that, segmenting out MRO as something different than administrative expenses or shared services.
Regardless of what you categorize as MRO, the ultimate need you are looking to satisfy remains the same - it includes any of the “stuff” you buy to keep your plant running in a safe, efficient, and effective manner. The easiest way to figure this out is by looking at the catalogs and line cards of the major suppliers in the industry and understanding what they sell. This typically includes electrical supplies and components, bearings and power transmission products, fasteners, lubricants, filters, pipe valve and fittings, motors, safety supplies, machine parts, and even cleaning products. Depending on your industry, you may add or subtract from this list.
Adding to the complexity of the category, MRO products tend to span across multiple business units with spend falling under the purview of many different stakeholders. Some supplies relate to the prevention of safety hazards. Others are associated with providing a comfortable working environment for employees. Another portion relates to making sure there is very little disruption to actual production.
MRO means different things to different people, and the diverse definition of the category is indicative of the substantial size and scope of the industry. Thousands of suppliers exist in the marketplace; some provide a wide range of products and others are more niche or specialty players. At the highest level, the market includes:
Manufacturers - These include the companies that make the motors, bearings, and electrical components, etc. Examples might include WEG (for motors), Gates (for belts) and Philips (for lighting and other electrical supplies). In this industry, the manufacturers control the market, and often dictate pricing on a customer by customer (rather than distributor by distributor) basis.
Specialists - These are distributors with a single focus, such as pipe, valves, and fittings (PVF), electrical supplies or safety supplies. Specialists, such as Columbia Pipe and Fitting or Arbill, market their technical experience and ability to help customers not just by supplying parts, but identifying what parts a customer actually needs to perform a particular function or stay within compliance rules and regulations. Most offer engineering and design support as well.
Generalists - These include distributors that provide a wide array of parts over a wide variety of categories. They may provide electrical supplies, fasteners, general industrial supplies, and safety supplies, all in one catalog. Examples of Generalists include Fastenal, MSC, Grainger, and McMaster-Carr. Generalists focus on providing a “one stop shop”, easy ordering, and value added services such as vendor managed inventory or free next day shipping. Their focus is ensuring that you have the part you need (any part) at the time you need it (any time).
Partnerships - Partnerships can be fairly diverse in nature, but normally include a group of specialists (and sometimes manufacturers) in a particular industry that come together to compete on a regional or national level. In the category of electrical supplies, partnerships such as Vantage Group or Vanguard National Alliance have pooled in some cases hundreds of individual local companies together in a loose affiliation or even through the formation of a new company to compete with national (semi-)specialists such as Wesco Distribution. In the area of bearings and power transmission, national partnerships such as Precision Industries were developed to compete with the likes of Motion Industries, Applied Industrial Technologies, and Kaman.
Integrated Supply - Also known as outsourced storeroom management or consolidators, these companies will take over the entire process of purchasing MRO on your behalf. This includes ordering product, managing inventories, and paying for goods. Integrated suppliers cater to companies that want to focus on their core competencies and outsource the day to day activities of parts procurement to someone else. Companies utilizing integrated suppliers expect to see value in leveraging the overall volume purchased by integrated suppliers to reduce their per unit cost when purchasing parts and benefit from processing one vendor invoice a month rather than hundreds or even thousands. Suppliers focused in this area include supplyFORCE and Storeroom Solutions, although Generalists such as Fastenal or Barnes Group or Specialists such as Motion Industries are also beginning to offer some level of integrated supply services.
Retailers - Purchases from home improvement stores such as Lowes, Home Depot, and Sears Hardware, often fall under the MRO category as well. Retailers offer easy access to thousands of general items, but if you are looking for a part that is somewhat unique, or a specific manufacturer, you probably will not find it here. In addition, most retailers do not offer anything substantial in terms of corporate discount programs, so you are paying premium (retail) rates when buying from one.
The industry is further broken into local, regional, and national players, with some overlap. For example, your local electric distributor could fall into several categories. They may stand on their own and service your local plant, but they could also partner with other local distributors to offer programs nationally through an organization such as Vantage Group to accommodate companies looking for local service but consistent pricing across locations.
Just as diverse as the suppliers in the industry are services available and the sales teams that work day to day at your facilities. Sales representatives at national companies may be able to tout service offerings, technology, and consolidation opportunities, with local companies able to provide engineering support and technical expertise. Some reps can be highly capable, and others fairly unqualified, unknowledgeable, or down right sleazy - all within the same company operating under the same contract and service level agreement.
As you begin to analyze spend data and undertake an MRO sourcing initiative, you should keep this diversity in mind. You may see that multiple suppliers are used for the same type of purchase, or even the same part, either within the same plant or across multiple facilities. This may represent a consolidation opportunity, or there may be valid reasons for using multiple suppliers. Before digging into a project, make sure you understand these distinctions and plan accordingly.
Regardless of what you categorize as MRO, the ultimate need you are looking to satisfy remains the same - it includes any of the “stuff” you buy to keep your plant running in a safe, efficient, and effective manner. The easiest way to figure this out is by looking at the catalogs and line cards of the major suppliers in the industry and understanding what they sell. This typically includes electrical supplies and components, bearings and power transmission products, fasteners, lubricants, filters, pipe valve and fittings, motors, safety supplies, machine parts, and even cleaning products. Depending on your industry, you may add or subtract from this list.
Adding to the complexity of the category, MRO products tend to span across multiple business units with spend falling under the purview of many different stakeholders. Some supplies relate to the prevention of safety hazards. Others are associated with providing a comfortable working environment for employees. Another portion relates to making sure there is very little disruption to actual production.
MRO means different things to different people, and the diverse definition of the category is indicative of the substantial size and scope of the industry. Thousands of suppliers exist in the marketplace; some provide a wide range of products and others are more niche or specialty players. At the highest level, the market includes:
Manufacturers - These include the companies that make the motors, bearings, and electrical components, etc. Examples might include WEG (for motors), Gates (for belts) and Philips (for lighting and other electrical supplies). In this industry, the manufacturers control the market, and often dictate pricing on a customer by customer (rather than distributor by distributor) basis.
Specialists - These are distributors with a single focus, such as pipe, valves, and fittings (PVF), electrical supplies or safety supplies. Specialists, such as Columbia Pipe and Fitting or Arbill, market their technical experience and ability to help customers not just by supplying parts, but identifying what parts a customer actually needs to perform a particular function or stay within compliance rules and regulations. Most offer engineering and design support as well.
Generalists - These include distributors that provide a wide array of parts over a wide variety of categories. They may provide electrical supplies, fasteners, general industrial supplies, and safety supplies, all in one catalog. Examples of Generalists include Fastenal, MSC, Grainger, and McMaster-Carr. Generalists focus on providing a “one stop shop”, easy ordering, and value added services such as vendor managed inventory or free next day shipping. Their focus is ensuring that you have the part you need (any part) at the time you need it (any time).
Partnerships - Partnerships can be fairly diverse in nature, but normally include a group of specialists (and sometimes manufacturers) in a particular industry that come together to compete on a regional or national level. In the category of electrical supplies, partnerships such as Vantage Group or Vanguard National Alliance have pooled in some cases hundreds of individual local companies together in a loose affiliation or even through the formation of a new company to compete with national (semi-)specialists such as Wesco Distribution. In the area of bearings and power transmission, national partnerships such as Precision Industries were developed to compete with the likes of Motion Industries, Applied Industrial Technologies, and Kaman.
Integrated Supply - Also known as outsourced storeroom management or consolidators, these companies will take over the entire process of purchasing MRO on your behalf. This includes ordering product, managing inventories, and paying for goods. Integrated suppliers cater to companies that want to focus on their core competencies and outsource the day to day activities of parts procurement to someone else. Companies utilizing integrated suppliers expect to see value in leveraging the overall volume purchased by integrated suppliers to reduce their per unit cost when purchasing parts and benefit from processing one vendor invoice a month rather than hundreds or even thousands. Suppliers focused in this area include supplyFORCE and Storeroom Solutions, although Generalists such as Fastenal or Barnes Group or Specialists such as Motion Industries are also beginning to offer some level of integrated supply services.
Retailers - Purchases from home improvement stores such as Lowes, Home Depot, and Sears Hardware, often fall under the MRO category as well. Retailers offer easy access to thousands of general items, but if you are looking for a part that is somewhat unique, or a specific manufacturer, you probably will not find it here. In addition, most retailers do not offer anything substantial in terms of corporate discount programs, so you are paying premium (retail) rates when buying from one.
The industry is further broken into local, regional, and national players, with some overlap. For example, your local electric distributor could fall into several categories. They may stand on their own and service your local plant, but they could also partner with other local distributors to offer programs nationally through an organization such as Vantage Group to accommodate companies looking for local service but consistent pricing across locations.
Just as diverse as the suppliers in the industry are services available and the sales teams that work day to day at your facilities. Sales representatives at national companies may be able to tout service offerings, technology, and consolidation opportunities, with local companies able to provide engineering support and technical expertise. Some reps can be highly capable, and others fairly unqualified, unknowledgeable, or down right sleazy - all within the same company operating under the same contract and service level agreement.
As you begin to analyze spend data and undertake an MRO sourcing initiative, you should keep this diversity in mind. You may see that multiple suppliers are used for the same type of purchase, or even the same part, either within the same plant or across multiple facilities. This may represent a consolidation opportunity, or there may be valid reasons for using multiple suppliers. Before digging into a project, make sure you understand these distinctions and plan accordingly.
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