Few spend categories are as consistently time-consuming and headache-inducing as MRO (Maintenance, Repair, & Operations). Managing costs within the category means keeping an eye on literally thousands of subcategories. Understandably, this can quickly become unmanageable.
Organizations are certainly aware that their MRO spend is critical. Source One's Senior Consultant and MRO expert Michael Croasdale remarks, "Ask any plant worker how important their MRO suppliers are, and they will tell you a story about how much it will cost if a machine goes down." Understanding that something needs to be addressed and understanding how to address it, however, are two very different things. "The diversity of products that fall under the category, the lack of spend visibility at the SKU level, and the diversity of suppliers across regions," Croasdale adds, "make proper sourcing and supplier management difficult."
Spread across numerous sites, companies typically take a decentralized approach to tackling their MRO spend. They purchase goods on a site-by-site basis and make little effort to standardize their data. This approach tends to promote poor communication, a lack of transparency, and general inefficiency throughout the category. Missed opportunities for cost reduction quickly pile up.
When these missed opportunities eventually come to light, organizations tend to seek out a quick-win solution. Oftentimes, this means replacing one ineffective approach with another similarly ineffective one. Driven by mandates from the executive-level, they'll consolidate their supply base to a few catch-all providers without doing their due diligence. They soon find that maintaining a fully centralized approach to MRO spend is not much better than a fully decentralized one. In many cases, it proves even worse.
In these instances, new contracts with MRO suppliers typically feature unrealistic growth incentives and volume commitments. As friction emerges and savings suffer, the organization will experience tension between site-level managers and the executives who suggested centralization in the first place.
There's no one-size-fits-all strategy for optimizing MRO spend and supplier relationships. Source One's Procurement and Strategic Sourcing experts know this. They specialize in developing customized strategies informed by their clients' unique MRO needs and objectives.
Beginning with a thorough spend analysis, Source One takes a collaborative approach to developing MRO sourcing strategies and streamlined value-generating initiatives. Once they've identified the right mix of MRO suppliers, they'll even assist in developing contracts, managing the implementation lifecycle, and developing metrics for tracking savings and compliance.
Want to learn more about Source One's approach to managing MRO spend? Check out their new video outlining their informed and flexible methods.