A uniquely diverse spend category, MRO is usually
classified as a tactical spend area - though some aspects can be considered
leveraged or critical. With so many products and services falling under the MRO
header, companies can use multiple strategies in order to drive savings. Having
clear goals and objectives when sourcing MRO will provide a smooth guide in
guiding your companies market assessment, sourcing strategies, and its approach
to supplier engagement. Below are six meaningful goals your company should keep
in when going to market for MRO.
Cost
Reduction and Supplier Rationalization
Many goals in an MRO-centric initiative can change
as a project moves forward. However, it is important to remember that bottom-line
impact should always command attention. A simple cost reduction can be achieved
simply by transitioning from brand name items to more generic substitutes.
The chances of achieving savings on MRO products is
usually high based on the sheer number of suppliers in the marketplace. This is
especially true in organizations where Procurement has typically made purchases
and built relationships at the site-level. A quick audit in the form of a spend
analysis should point out opportunities to eliminate redundancies and establish
an optimal collection of preferred suppliers.
Ordering
Process Efficiencies
A substantial
amount of MRO products are considered tactical purchases. This often means that
costs associated with acquiring an MRO product are greater than the cost of the
product itself. Thus, a streamlined, simple ordering process will generate
efficiencies for your buying team. The ordering process should make invoice
reconciliation easy. This will save time and money and enable to Procurement to
devote more attention to high-value, strategic initiatives.
Part
Number and Specification Standardization
After performing a spend analysis, buyers may find
that their company’s internal ordering system does not deliver reliable
information. For example, let’s say several locations order the same product. While
the product may be the same, the descriptions are likely to vary, thus data
entry errors may exist. Cleaning up and standardizing data helps give buyers
and management a clearer picture of what they are spending and where saving
opportunities are.
Inventory
Level and Lead Time
By its very nature, the MRO requires Procurement to
keep a multitude of stock-keeping units (SKUs) on-hand. After all, the cost of
an individual part is not nearly as expensive as the cost that comes with
having a production line go down. However, the cost of managing and fulfilling
MRO stockrooms at multiple locations can result in cash being tied up in
on-hand inventory. One option that can help mitigate this is outsourcing your company’s
stockroom altogether. Reviewing current inventory and identifying unnecessary
parts can ultimately open up warehouse space.
Maximizing
Equipment Uptime
Just like managing
inventory levels and lead time, maximizing equipment uptime is a key goal when
sourcing MRO. While most business realize that maximizing equipment uptime
means having parts ready for when machines go down, few also realize that buying
the right parts in the first place is equally important. Sourcing from a
sub-par supplier could lead to poor quality parts, retro-fitted equipment,
incorrect deliveries, and incorrect orders. Having the right supplier group or
group of suppliers can assist in troubleshooting and resolving these issues
(or, better yet, avoiding them altogether).
Long-Term
Supplier Relation Development
Most, if not all suppliers in the MRO industry are
familiar with periodic customer turnover. This is why it is worthwhile for your
company to evaluate a supplier’s overall service offering. Take care to
identify those who are willing to go above and beyond, build partnerships, and
provide additional value adds that their competitors might not.
In closing, the goals and objectives for the
category help outline the framework for the initiative. As suppliers are
engaged, make them aware of each goal and collaborate with them to achieve it.
As your company dives into data collection and spend analysis, you will realize
how much effort is needed to accomplish the goal of improving your MRO
sourcing. Why not commit to doing it right the first time?
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