Articles by "MRO"
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Many organizations in the manufacturing and industrial field often find themselves working tirelessly to ensure employee safety is practiced through the utilization and procurement of a wide variety of PPE equipment.  The immediate threat of COVID-19 to the workforce has also created greater visibility within the safety category to ensure employees are properly protected.  The purpose of this blog is to help establish a roadmap related to the processes and procedures that will help your organization improve its safety program while also establishing significant cost savings. 

Well before the process of aligning on safety SKUs should be made, the first critical step is understanding and agreeing on the key decision makers within your organization regarding anything safety related.  If an Environmental Health & Safety (EH&S) department is not established within your organization, now is the time to do so.  A reporting hierarchy within your EH&S department should also be clearly established.  For instance, an EH&S Director should be the final decision maker for safety compliance and SKU standardization at all facilities across the organization, while an EH&S Coordinator should be responsible for compliance and enforcement at the local level.  This reporting structure is a critical piece of your overall safety strategy not only to ensure compliance across the organization but to also guarantee significant cost savings.  

Once your EH&S team hierarchy is built and properly aligned, the next step is to understand the “need to have” vs “nice to have” safety SKUs for your organization.  Any “need to have” SKUs should be rather clear – these would include OSHA (Occupational Safety and Health Administration) required equipment related to your specific field or any gear that is paramount for employee safety that should be identified and clearly defined (hardhats, fire retardant coveralls, COVID facemasks, etc.).  Working to solve for the “nice to have” category is often times a very difficult to define gray area between comfort and cost.  For instance, if your team works outdoors often, consider investing in the “nice to have” option of weatherproofing materials to ensure rapid moisture evaporation and rain proofing to help drive efficiency.  When addressing the “nice to have” category, there are usually significant cost ramifications that need to be properly evaluated before making any significant decisions.

Once the need vs nice to have discussion has been aligned on, the next step is to begin understanding and developing a SKU consolidation strategy.  This critical step is what often separates a good safety program from a great safety program.  The goal here is to fully understand what PPE categories need to be utilized by your employees, and to establish EH&S approved only SKUs within each specific category.  This process will lead to a custom internal catalog between your employees and awarded safety supplier to ensure ease of purchasing and compliance.  In addition, this custom catalog will protect your organization from “off-catalog” non-compliant PPE gear that would create additional costs while also putting your employees at risk for potential injury.

When identifying the SKUs that will qualify for purchase in your custom safety purchasing catalog, it is important to do your due diligence and full evaluation of each SKU in the running.  For instance, when aligning on an item such as safety gloves, performing on-site testing and a comparison of cut-sheets for each product under consideration will help provide tangible data to help influence your decision.  The EH&S team can oversee this process by distributing the PPE gear under evaluation with accompanying surveys to select employees in the field, while also internally reviewing the safety standards and specs identified in each cut-sheet.  This process will establish both a qualitative and quantitative analysis of each pending SKU, which will prove to be tremendously helpful in guiding the EH&S team towards a final decision in establishing cost savings within an improved safety program. 





Last October, I had the pleasure of presenting at the 2019 IMPACT Manufacturing/Research & Development Summit in Schaumburg, IL. My presentation was titled Surviving the Next Recession with Help from Procurement. After I completed my presentation, there was the normal question and answer portion.  During that portion, there was one comment in particular that stood out to me. A gentleman stated: “I have been with my company 4 years now, and we have never discussed a recession”. This startled me a bit, largely because it wasn’t in fact a question, but also because several other audience members were nodding their heads in agreement.

While I cannot speak for that gentleman today, I would imagine his company is having that conversation now. We are still in the midst of a trade war, and now our world has been shaken by the Coronavirus global pandemic. With this next recession looming, I aim to outline 6 things procurements can do, to best position their organizations to withstand it.

Before diving into that, let’s take a look back at the most recent recession. This took place roughly between late 2007 and mid-2009. This recession, as I know most remember, hurt a lot of people and a lot of companies. However, that was not this country’s worst recession. Judging by change in GDP and Peak level of Unemployment, the Great Depression was far worse. In fact, it is in line with the recessions America has seen almost every decade since the Great Depression.




I am not suggesting that we are about to witness another Great Depression. However, I do believe that companies should prepare for a recession that is as bad, or worse, then the one we lived through in the late 2000s. With that being said, there are some lessons that can be learned from past recessions, for procurement professionals to better prepare themselves and their companies for the next one.

1.     Understand True Demand 1

90% of organizations saw a decrease in demand last time around. Because forecasting demand is the first step in developing any strategy, it’s essential to see past speculation and recognize true demand. Even a slight over or under-reaction could prove harmful. Establish a process for monitoring the probability of order cancellations. Increase direct communication with customers, identify new channels, and insist upon an ongoing exchange of information. Prepare multiple demand scenarios, and plan your actions accordingly for a series of potential scenarios.

2.     Monitor the Supply Chain

Obviously you’re not the only company that’ll feel the effects of the incoming recession. You run the risk of losing suppliers, even entire supply chains, to bankruptcy. Identify your critical suppliers. Monitor their health and lead times, and understand what alternatives are available.

3.     Focus on Flexibility

Proactively address demand uncertainty and create supply chains that are flexible to a wide range of demand. Understand the effects of demand fluctuations and identify what actions should be taken for each demand scenario. Push for smart contracts that account for potential fluctuations in demand.

4.     Manage Inventories to Free Up Cash

Reducing inventories while meeting service-level requirements is a challenge in the best of times. During a recession it’s even harder. However, you should aim to avoid surplus inventory wherever possible. Review all orders against demand scenarios, and understand cancellation opportunities within contracts. Align your inventory policies, changes in demand necessitate that you review and rethink your inventory policies.  For example, you might consider reducing your typical order size to align with the new demand reality. 

5.     Drive Down Costs Strategically

Review your most recent spend analysis, or run a new one if none exists. If there are any quick wins, take advantage of them. Understand where your major cost buckets are, and strategize how to cut down on them without impacting the business. Prematurely cutting off a supplier to meet a corporate mandate on cost reductions, could mean paying more in the long run. Consider where moving spend through a Group Purchasing Organization (GPO) makes sense. GPOs leverage the combined purchasing power of their members to obtain the most advantageous pricing. You can click here to learn more about Corcentric’s GPO offerings.

6.     Prepare for the Better Days

Don’t wallow. Planning for a sunny day could mean seizing on opportunities that other organizations don’t recognize. Develop and retain talent. Lay-offs were an unfortunate fact of the last recession, but organizations that could afford to, should focus on optimizing the talent they’ve got. You should also keep an eye out for potential hires that your competitors have let go. Prepare long-term initiatives. In boom years, it’s often challenging to think big picture. During a recession, you could enjoy opportunity to focus on planning long-term initiatives. A little planning could go a long way when things get better.


In summary, modern procurement teams empower a company to see the sourcing process from end-to-end, and gain new insights into the supply chain. They’ve got flexible category and business unit expertise, and can provide the insights companies need to make their entire organization more adaptable. So while things could go from bad to worse any day now, today’s best in class procurement teams can help their companies make it through to the other side.



1 Lessons For Supply Chains from the Financial Crisis - Supply Chain 24/7; Kai Hoberg and Knut Alicke

With the global economy facing a seemingly imminent recession, companies will have to make difficult decisions to minimize the impact of the downturn and return to profitability as quickly as possible. The Coronavirus pandemic has become a stark example of the importance of supply chain management, and how quickly an underdeveloped strategy can affect a company’s operations.  This is especially apparent in the medical supply chain, where we’ve all gotten a crash course in the importance (and limitations) of the supply of masks and ventilators. But supply disruptions are an inevitable fact of doing business; whether changing trade policies, hurricanes, or a global pandemic, companies need to consider how they’re preparing for changes in their supply chains. GPOs can offer solutions to mitigate the impacts of disruptions while maintaining a focus on cost reductions.

The pricing benefits of GPOs are well documented. These programs leverage the spend of the entire member base to negotiate improved pricing and contract terms, which continually improve as additional members are added to the program and the scale of its buying power increases. It also outsources much of the non-value add work associated with sourcing non-core and tail spend items, which allow internal organizations to stay lean and make dynamic decisions in a rapidly changing market. But often underappreciated – and especially important at this moment – are the supply chain and inventory benefits associated with these programs. The same scaling model that allows GPOs to negotiate improved pricing on its members’ behalf applies to supply security.

This applies in a multitude of scenarios. For suppliers in industries where demand has surged (e.g. medical supplies and groceries), many are struggling to keep up with orders, causing bidding wars and customer allocations. Those are battles where many small and middle size buyers don’t have the leverage to ensure costs are controlled and orders are fulfilled. By leveraging their combined purchasing power, a GPO can protect its members that would otherwise be eschewed for larger companies and ensure the continuous supply of key materials.

Conversely, many suppliers in non-essential businesses are seeing major slowdowns and are facing an uncertain future. Depending on the length of the economic disruption, the financial health and viability of these suppliers becomes a very real risk. GPOs have the expertise to make informed decisions and ensure spend is aligned with financially stable sources. By driving additional spend to key suppliers, GPOs are in the unique position to help ensure those suppliers’ sustainability while ensuring contract terms remain competitively negotiated.

2020 is shaping up to be a challenging year but by aligning their spend in GPO programs, companies can ensure their purchases are strategically managed and competitively negotiated, all while ensuring supply security. And perhaps most importantly, it allows them to focus their time where it matters most - on making the decisions necessary to navigate the next few months.



When undertaking a holistic spend review in order to identify opportunities for cost reduction it is important to deploy all the tools in your toolbox in the right way. If you don’t deploy the correct tools or strategies you may be selling yourself short or investing too much time and effort into an area that is not warranted. Everything should always be looked at from a time to value perspective. Today I’d like to discuss when it makes sense to conduct Request for Proposals (RFPs), Request for Quotes (RFQs), Direct Negotiations and Group Purchasing Organization (GPO) implementation. Or in a nutshell building a strategic roadmap.

Generally speaking, RFPs should be utilized for categories that are more strategic to the organization and are more than just price focused. You want to identify additional elements and value adds that may be available in the market plus validate that the supplier meets your minimum criteria. There needs to be a wide enough supply base to ensure an element of competition and perceived threat.

But when do you decide that the category should be strategically sourced vs. working to implement a GPO solution? Do you have enough spend to leverage within the category? Often times, you may feel like you have a lot of spend in a given category, but how much does it actually mean to the supplier? The advantage of a GPO is that they are leveraging all of their members spend to drive lower pricing. Also how much time are you going to invest in the sourcing process and how much additional value do you think you may achieve if you are to conduct a full scale sourcing process? These are things that should be considered prior to blindly just applying a strategic sourcing strategy since strategic sourcing requires the highest level of engagement and utilizes the highest level of resource time.

RFQs are a modified version of a RFP where you are still soliciting responses from the market. However, RFQs are 100% price focused and are generally applied to more tactical categories where the suppliers are providing very similar to exact same products or services across the market. There isn’t much to it as far as service levels and value adds go and you are purely interested in reducing cost. But again you need to consider that although not as labor intensive as a RFP, RFQs still have very similar touchpoints. You also need to ask yourself, are you confident that you have enough spend to leverage to beat what you could have gotten going through a GPO program?

Unlike traditional RFP and RFQ categories, direct negotiation type strategies are typically applied in the following situations; there is an extremely limited supply base, the business has no incentive to move from the incumbent supplier and they highly value the relationship, you have a high level of market intelligence and do not need to solicit the market. Negotiating is a skill but having market intelligence is extremely helpful although not necessary.

So when should you assess a GPO and what are the benefits? The most obvious benefit is that the GPO program leverages all the spend across the entirety of their member base to ensure they are providing continuous cost savings and value for all their members. The GPO also manages the supplier relationship and overarching contract for you. But what does that really mean? It means that on an ongoing basis they are ensuring the supplier is meeting performance objectives, hitting KPIs, maintaining SLAs and of course modifying their pricing according the changing environment of purchases made by their member base. That being said if it is very important to you that you are managing the contract and maintaining the entirety of the end to end supply relationship management, utilizing a GPO is most likely not for you for the given category. However, if it’s a category that in the grand scheme of things is a lower to mid-level spend category and you are looking for low touch, immediate savings, it 100% make sense to look towards a GPO solution.

Corcentric applies a multifaceted approach, making the appropriate recommendations for the given category situation. We recognize there is no one size fits all approach. Thing should be looked at strategically and holistically in order to ensure that the right approach is being applied to a given category. In today’s environment not only is finding cost savings paramount but the speed to realizing savings is just as important.






If your organization is concerned about the uncertainty of the economy ahead, an excellent way to protect your bottom line can be through the utilization of GPO programs or consortiums.  This article will help explain the savings benefits of a GPO program and whether or not this solution is a viable option for your organization.

A GPO is an acronym within the strategic sourcing community that stands for “Group Purchasing Organization.”  GPOs carry many benefits associated with them, and this article will help you identify if participating in a GPO program is suitable for your organization.


Is a GPO Right for Your Organization?

GPOs are built upon one simple core philosophy – businesses that buy similar products are able to combine their purchasing power to help establish improved savings via category discounts and unit cost reductions.  For instance, six small market businesses purchasing industrial supplies can establish immediate savings through the utilization of a GPO program connected with a national supplier such a Grainger.

If you are an organization that lacks centralized supplier purchasing within similar categories, has uncontrolled rogue spend across business units, or if you’re an organization that simply wants to understand and consolidate purchasing habits while establishing strong savings then a GPO program could be for you.


Lack of Negotiating Power

As noted above, many businesses that have low or unknown annual sales volumes over the course of a year simply don’t have the leverage to negotiate a strong contract that can provide competitive pricing and discounts.  When coming to the negotiating table with national suppliers your greatest strength is power in numbers, or in this instance annual sales volume.  In fact, many suppliers will provide very minimal unit price reductions and/or category discounts due to low spend volumes, which is where a GPO program can enter the picture and immediately eliminate this hurdle.  Corcentric’s established GPO program has the purchasing power of numerous organization rolled up within it, including strong negotiated category discounts reflective of a much higher annual spend.


Establish a Quick Win for Immediate Savings

The category discounts and unit cost reductions noted previously also help establish immediate savings for participants within a GPO program.  If your organization is concerned with the current economic uncertainties ahead, the utilization of Corcentric’s GPO program will help establish immediate savings and quick wins across multiple categories.  These savings will continue to rise as internal communication and education spreads throughout your organization which will continue to drive compliance.


Establish Greater Discounts through Data Collection & Establish CSP

As noted above, when compliance begins within your organization it will lead to the consolidation of rogue spend spread across numerous suppliers.  This consolidation will in turn give your organization the ability to review data identifying top spend items.  Once these top spend items are identified, Corcentric can help lead negotiations for unit cost reduction of these items which can lead to additional savings opportunities.

The examples in this article are just a few instances of how Corcentric’s GPO program can help your organization today.  The sky is truly the limit when it comes to utilizing a GPO for savings opportunities.    Don’t hesitate to reach out to Corcentric today to establish a quick save during tough times.



For many organizations, Indirect spend is a challenge to understand, as much as manage. The spend is often substantial and easier left alone. On top of that, you may not have the resources to dive in and get the many categories under control. If you are beginning to dig into into your Indirect categories, or you have been with dismal results, here a 5 issues that may be beneficial to correct first.

1. Your Procurement Managers do not KNOW the categories they manage.


It is important to at least have a working knowledge of the categories you are working within. If you do not know the ins and outs, that is fine, but being able to speak the language is necessary. Not understanding a category opens you up to tougher negotiations, worse contract terms, unnecessary spending, and a negative view of Procurement from stakeholders. It is important for Procurement to be involved in any negotiation early, however, coworkers and suppliers will not demand your involvement if you slow them down.

If you are thrown into a category, be upfront and honest with stakeholders who can show you the ropes internally. This way you are taught with the bias of your company in mind. If the supplier is your source of information, you may be taught dishonestly in some, but rare, cases. For example, if once monthly HVAC maintenance is acceptable, a supplier could instruct you that twice monthly service is necessary to get double the business. With stronger category knowledge, you could avoid doubling the required maintenance expense. The same situation could apply to contract negotiations. If a supplier is aware of your lack of knowledge, you could end up with terms that do not benefit your company’s goals. Most importantly, the respect from suppliers and stakeholders to require you be present in negotiations is paramount. As the Procurement representative, you may not be a category expert, but you more than likely are a negotiating and contracting process expert. This is where you will shine, so garnering the respect to be present is extremely important.

Source One Corcentric Gears and Belts MRO Indirect Spend2. Your data tells the wrong story.


How much trust can you put in your internal reporting? How well do you know what this data represents?

Procurement Managers often believe the exact story that their reports are telling them. They choose a category, run a report, and take the total of the spend column as the exact amount of spend in that category for a time frame. However, this is often not the case. Understanding the data allows you to understand the category much better. If your company has a large amount of spend without corresponding purchase orders, be sure to understand whether you are seeing this data or not. Know whether you are looking at spend that has been received against a purchase order or matched and paid against a purchase order. If you do not know exactly what the data you are seeing is telling you, your ability to find cost saving opportunities is greatly diminished. You also risk working within a category that has little addressable spend.

3. You have too many old contracts with too many suppliers.


Contracts are one of the most relevant pieces of information for the Procurement department’s success. Many companies rely on contracts to lock in pricing, payment terms, and other legally binding agreements between the company and supplier. However, contract management is often forgot about as business goes on as usual. The clear line of communication between the supplier and company is lost as the contract renews over and over for years. The benefits the company was getting when the contract was signed are now outdated. Procurement could potentially negotiate a much stronger contract, but no longer knows the contract exists.

This is common among conglomerates and large companies with decentralized purchasing, especially when standards for contract management are not a documented company procedure. Once Procurement begins to analyze the category, it is extremely difficult to get a hold of all the contracts with all the suppliers. The easiest way to avoid this is to consolidate contracts and suppliers. This can be a great opportunity for cost savings, as well! The consolidated spend will make your contract negotiation much stronger as you drive spend to less suppliers. Finally, be careful about evergreen clauses that automatically renew contracts. Once communication breaks down between Procurement and the suppliers, the contracts become a nuisance that will not go away. If necessary, use short term evergreen clauses that renew for a year or two at the most.

4. You are concentrating on the wrong categories that are too difficult, or have too little addressable spend.


For multiple reasons, Procurement managers can have their focus on the completely wrong categories to drive cost savings. If you solely consider spend, it can mean focusing on a category with a small amount of addressable spend. Be sure the large numbers are in fact addressable. For example, freight is a high spend category for certain companies. However, the cost is often high no matter what carrier you use. A better situation could potentially be negotiated, but there is a ceiling to the savings.

Procurement should also be considering when the last time the category was taken to market. If your resources are limited, addressing a category that has not been analyzed for years may be the better decision. Finally, reflecting on whether you are addressing a category because it is one you know well may be another opportunity for improvement. I have seen this multiple times. A Procurement manager is comfortable with stakeholders in one category of spend and continues to look for savings to work with the same department. This often leads to unproductive analysis from the manager that is continued down the chain to the analyst level.

5. You are overdoing due-diligence and not “getting in and getting out”.


Perhaps the most unproductive way to handle Procurement is to overdo due diligence without making any decisions. What I mean by this is looking into spend, analyzing, meeting with suppliers, running RFP’s (Request For Proposal) or RFQ’s (Request For Quote), negotiating contracts, and then doing it over and over without making any changes. At some point, a change will need to be made to actually render savings. If you are not making any decisions, you are not affecting the organization in a positive way. Be careful not to sit in the supplier sourcing function of Procurement for too long. This can cause Procurement managers to be viewed as wasting stakeholders’ and suppliers’ time. Not everything needs multiple meetings, and everyone on the organizations’ and suppliers’ end does not have to be present to have a quick conversation.

Finally, remember what the function of Procurement is. We are here for sourcing, contract management and negotiation, and supplier management. Good Procurement is simply getting as much of your organization’s spend under control. We are not Finance, we are not Accounts Payable, and we are not IT. This is what I mean by get in and get out. Too many times, Procurement gets stuck with processes that handcuff the department from doing what it is there to do. To be effective, take on as few non-Procurement functions as possible. Since we are so hands-on in the beginning stages of a supplier relationship, we often are the ones used as a fall back for tasks other departments do not want to handle. So, when possible, get in and get out, and find the next category to get under control!

It is often eye opening when companies begin to analyze spend in a new Indirect category.

Increased visibility can uncover unexpected issues and wasteful practices that cost millions in unnecessary expenses. The task of correcting the poor habits can be too daunting for leadership to invest time in, and the mess gets swept back under the rug. However, with a little analysis, many of the problems begin to stick out like a sore thumb. Once the big-ticket issues are known, concentration on those issues alone can mean a rewarding return on investment for time put in.

Source One Procurement Services Handshake With Suppliers

Perhaps one of the largest of these obvious and easily addressable issues are supplier relationships that have become too subjective in nature. Of course, the supplier should be viewed as a partner working towards a mutual benefit. As a Procurement manager, a strong relationship is desirable for ease of communication and simple contract negotiations, as well. 


However, the relationship can digress into a friendship instead of a professional relationship.

The use of digress is intentional, and not meant to sound wholly negative. A professional friendship is acceptable but should still require the supplier to remain competitive in the current marketplace. This relationship can sidestep negotiations and move right to awarding the supplier business when quantitative and qualitative benefits are few and far between. This happens all the way up and down the chain of command, especially in Indirect categories and large organizations. A buyer in one region may “like a guy” with a company, so the supplier gets all the business. Meanwhile, the possibility for a national contract, or online ordering system, that could save a large amount of time and money is present with another supplier.

Luckily, the fix is simple in theory and still relatively simple in practice. 

The goal should be to judge all suppliers objectively, first. Your organizations requirements need to be defined and agreed upon prior to awarding business to any supplier. This could show your current suppliers are the best choice for your organization. Although, I have seen the opposite in most situations concerning a new, never-before addressed Indirect category. Based on the new objective requirements, reasons should be found of why NOT to go to market. If the friendly incumbent supplier does not stack up against your new pre-defined objective standards, go to market and take advantage of the new eager suppliers waiting to do business.

To decide what objective standards you should expect from your suppliers, asses the current market. Ask what alternative products, services, or processes are available in comparison. Is it a good time to go to market with the current market conditions? If the market is weak or the natural cyclical nature of some categories is not on your side, speaking to your incumbent suppliers is always an option. Discuss your new objective standards for your business. Often, that is itself enough to get immediate benefits and savings.

Managing a warehouse is never easy, but it doesn't have to be quite so challenging. Check out our tips for establishing and sustaining a world-class warehouse. You'll enjoy the benefits of optimal workflows, manageable inventories, and transparent communication - and that's just the start.



The Strategic Sourceror has served as a resource for supply chain professionals since 2008 and covers anything from procurement transformation to packaging specifics. You can access any of our categories from our header, but we wanted to put a little something extra together for you. In this series, we're giving you a list of our top blogs of all time and we're going to give them to you per area of expertise. This is a perfect opportunity for those getting an introduction to Procurement and Supply Chain Management to familiarize themselves with the hottest topics in the space.

In this edition, we'll focus on is MRO.

1. MRO – An Industry Overview
3/30/2018
The MRO (Maintenance, Repair, and Operations) category covers a wide variety of products and services that are often challenging to manage. It’s important to maintain a high level of visibility into all corners of the category and to take a strategic, center-led approach. This infographic outlines some of the terms and concepts you need to know for effective MRO spend management.

2. The Most Stupidest Contract Clauses
4/28/2009
A poorly thought out contract could put you in an undesirable spot with the other party. Even the slightest error in wording could send your project in the wrong direction. Additionally, not paying attention to detail could result in an unhealthy, unbalanced supplier relationship. Joe Payne recalls some of the most senseless contracts and clauses he’s come across during sourcing projects and explains why they won’t work for you.

3. Predictive Analytics and The Future of Spend Management
1/30/2013
You probably already know the importance of strong market intelligence, but the true power of data comes from what use it to achieve. Predictive analytics are highly valued data that can help companies skip a step and act proactively. Joe Payne highlights the potential of predictive analytics and how industries are utilizing the method today.

4. The Importance of the Market Basket in an MRO Sourcing Engagement
12/18/2016
In many spend catefoeies, sourcing managers will put the top 80% of overall spend in a market basket in an attempt to source the bulk of materials together. Procurement can't afford to leave that other 20% out of sight. This blog offers insights for bringing all relevant spend under management through market baskets.

5. Can Amazon Business Really Compete With MRO, IT, And Office Products Suppliers?
7/11/2017
In 2015, Amazon inserted itself into the manufacturing sector by offering Amazon Business, a service designed to provide industrial products and office supplies to other businesses. Will Amazon be able to compete with suppliers who have decades of experience and industry-specific knowledge? This infographic compares Amazon Business against its new competitors.

6. Will Amazon Impact Top Industrial Supplies Distributors?
9/21/2017
Source One takes another look at the ways Amazon Business has affected the industrial distribution space. How has the eCommerce transitioned into this new market? How are competitors responding?

7. Amazon Business Vs. MRO Distributors
7/19/2018
In this podcast episode, Source One Associate Director takes yet another look at Amazon Business and its competition with traditional MRO and Industrial Supplies distributors. Amazon, he suggests, has its work cut out for it.

8. IBM Watson and the Future of MRO Procurement
7/13/2017
IBM has aired a series of commercials highlighting how predictive analytics can change the world. Mike Croasdale suggests it could prove especially useful for Procurement professionals in the MRO space. Professionals might predict, for a example, that a machine will malfunction and take action before it affects their business.

9. MRO Sourcing & Contracting Tips
12/18/2017
While the MRO sourcing best practices haven’t changed much, the category's contracting and price models have. MRO Sourcing managers must evolve to continue sourcing the category strategically. Ken Ballard provides some best practices for sourcing and managing MRO spend. 

10. Strategic Sourcing Pro Tips: That Dreaded MRO Category
4/12/2018
Don’t make the huge mistake of overlooking your MRO spend. Though it's often complicated, MRO can provide generous savings opportunities and a solid approach to MRO sourcing can help your team reach its full potential. Here are some key tips your procurement team should remember when managing MRO spend.

Check out some of our other "Greatest Hits" lists:

Maintenance, Repair, and Operations (MRO) is a unique (and uniquely challenging) spend category. Including thousands of subcategories, it's often a headache for even the most seasoned Procurement professionals. Approached strategically, however, the category is often a source of considerable value. Here are six benefits you could realize by carrying out a strategic sourcing project in the category. 


Unfortunately, successful sourcing initiatives don't always lead to years of more effective spend management. It's all to easy for organizations to forget the "management" side of the equation. Many find themselves boosting visibility and driving savings only to slide back into bad habits. This "set it and forget it" approach is especially dangerous for MRO. Generating value within the category means taking a proactive approach and never settling for "good enough"

MRO is definitely a complicated category, but it's not unmanageable. Check out some of Source One's tips for ensuring you cut out maverick spending, maintain visibility, and drive value in the long term.


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?  

When custom-built materials become necessary, they naturally introduce a slew of complications. Procurement teams have to work harder to identify suppliers, assess their capabilities, and monitor their performance in the long-term. Securing a great price, however, doesn't have to be so challenging. Check out our guide to driving savings from your custom-built material purchases.









As trade talks have crumbled, the tariffs on Chinese imports will rise form 10% to 25% on a third of everything the US current imports. China has responded by increasing tariffs on US imports. This has escalated the tariff standoff even further and the US has threatened to apply a 25% tariff on the remaining two-thirds. This effectively would mean that there is a 25% tax on almost all Chinese based products. Tariff increases aren’t just with China as talk of imposing increased tariffs on Mexican imports has progressed. With additional tariffs looming many MRO suppliers are forced to pass the increased cost on to their customers. In almost all instances it’s the consumers that have to bite the bullet. But what if there was some way around it?

With so many different manufacturers in the MRO world there just might be. This is when procurement needs to get more creative with their approach to purchasing. Broad stroke price increases such as this should trigger are review and deeper dive. Procurement shouldn’t be in the business of just accepting a 25% increase and shrugging their shoulders. What they should be doing is working with their suppliers to qualify comparable alternate items from Manufacturers not effected as drastically by the tariffs. Sure not all tariff impact can be avoided especially if it’s effecting key raw materials that are being imported but some of the price risk can be mitigated.

Procurement should work with suppliers to identify comparable alternates that are the same form, fit function and match the current product from a specification standpoint. Procurement then should review product cost compared to the current item as well as work with the supplier to assess the risk of tariff increases based on manufacturer location and where the product is being imported from (if it’s being imported). From their procurement should down select alternate items to be tested. This is when engineering or safety/quality assurance may need to be involved dependent on the item. If it’s a key item related to production engineering may need to assess to ensure the item doesn’t damage the end product or production line. If it’s an item such as gloves that is used for personal protection almost always safety or quality should be involved to ensure a safe workspace. Qualified alternate items must have the same of better durability and life cycle to ensure comparable total cost of ownership.

Long story short, with the large increases to unit cost that are being passed through from manufacturers and suppliers alike, it’s time to do your due diligence and explore other options. Whether that be finding alternative items to reduce cost, identifying a new supplier that did a better job mitigating tariff risk or formulating some type of out of the box solution. Procurement can either look at the upcoming tariffs from a glass half full or glass half empty perspective. They can either be crushed by looming increased costs or elevate themselves within the organization as the department that was able to save the company from taking on increased costs.

Inventory is an unavoidable component within most businesses. And no matter the size of the business, establishing an inventory management system is going to make operations much more fluent. Common elements of inventory management include not only the inventory itself, but also the data surrounding inventory such as historical usage or cost data. Additionally, forecasting or inventory projections are going to come into play with managing the inventory levels, and will grow into a larger piece of the process as several business units or facilities are involved. Dependent on the industry in which the business operates, it is also important to identify safety stock or a buffer inventory. In some cases, establishing a reorder point or inventory par level is going to be necessary.

You might be wondering why businesses should put emphasis, or even more emphasis on this area. With regards to Procurement and more specifically, Procurement Transformation, there are key segments in which businesses focus on as far as making improvements is concerned: People and Organization, Process, Tools and Technology, and Metrics. However, inventory management tends to be an area that is often overlooked or underestimated. Though the other segments of a traditional Procurement Transformation are highly evaluated to identify opportunities for spend optimization and process efficiencies, these opportunities can more easily be identified and acted upon within inventory management. Therefore, there should be an added emphasis on this component within a business’ current Procurement function, as well as in a warranted Procurement Transformation. Having a well-established flow of inventory, whether that be raw materials, work in process, or finished goods, that keeps up with the company’s demand will empower them to maintain consistent production and fulfill customer orders in a timely and effective manner.

A business is not much of a business without inventory circulating through its operations. As the business grows, and even for small businesses, it is mandatory that the inventory is managed properly. Some businesses manage inventory manually, and many businesses leverage dedicated software to automate the process. As a business is putting more focus on this portion of their Procurement function, they will be better equipped to understand their demand flow and will be able to better gauge future demand, and do so proactively. While appropriately managing stock levels and circulating inventory, businesses can gain more control over how much they are spending on inventory, and make adjustments to improve the costs of having too much inventory or not enough.

As part of enhancing the business, the Procurement function may assess the cost benefits associated with closely managing inventory across operations. Whether this be by performing periodic inventory counts and manually monitoring stock, or by implementing a specialized inventory management system that actively monitors inbound and outbound product, identifying opportunities to enhance the various inventory levels and effectively manage this portion of the business can lead to significant, and almost immediate cost savings. In the context of direct materials, companies can drastically benefit from understanding their inventory rotation and either using or eliminating the parts that are subject to go obsolete. Keeping a lean inventory inclusive of a buffer will help the company accurately forecast demand and maintain a tight rein on the costs associated with this portion of operations. Ultimately, when companies are identifying options for better managing or reducing costs, it is worth looking into the obvious areas first, such as inventory.

Many OEMs (Original Equipment Manufacturers) in the market today have run into this obstacle throughout the course of doing business. In essence, a custom designed part built by one specific manufacturer has become an integral part of your daily operation.


How can an OEM even begin to find cost saving opportunities when you’re handcuffed to one supplier? Believe it or not, the opportunity to go to market to find better pricing does exist, and these steps can help guide you along the way:

Step 1 - Create an NDA (non-disclosure agreement)

Protecting your intellectual property, data and drawings is crucial! Prior to going to market it’s important to build an NDA that keeps your proprietary information confidential. Before engaging in discussions with any potential manufacturers or suppliers it’s important that this document is executed by both parties.


Step 2 – Communicate with internal engineers and employees in the field

This is an important step that procurement groups miss periodically. Internal engineers more often than not need to be involved whenever custom built materials are being sourced. Involving engineers early will also help expedite the internal approval process with any potential new supplier designs. In addition, this is also the perfect time to communicate directly with the field to see if any improvements to the incumbent design should be considered.

Step 3 – Do your research

This is an incredibly important step that requires due diligence. Take your time when it comes to finding the right suppliers and manufacturers, and ensure they have the proper certifications and quality standards required by your organization. Once NDAs are locked in with potential candidates, use this time to interview potential new manufacturers.

Step 4 – Interview suppliers and learn about their capabilities

When interviewing suppliers about their design offerings, don’t be afraid to learn how they may be able to service other categories within your organization. Even if this supplier doesn’t end up panning out for this unique sourcing initiative, additional opportunities may arise and understanding their value for future needs may benefit your organization down the line.

Step 5 – Submit RFP (Request for Proposal) to approved suppliers

This is where your research and hard work come to fruition. By this point you should be well versed when it comes to your incumbent and potential new supplier capabilities. Now is the time to craft an RFP with an in-depth questionnaire that will help drive decision making. While many of these questions will be built according to the unique design and needs of the custom part being requested, other general points such as lead-time, warranty and in-field service offerings should also be considered in the RFP.

Step 6 – Decision Time

Scorecard each supplier’s response to your RFP by applying a set value to each quantitative and qualitative response given. Make sure this evaluation is performed by multiple people within your organization to help drive proper vetting and analysis. Once complete, see which supplier scores the best and begin the process of internal approval and contract execution.

Step 7 – Ensure compliance

No matter what decision you make from a supplier standpoint, it’s important to educate and train the field when it comes to implementation and execution. If this step is overlooked, any potential savings may be lost if the field fails to participate.

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Keep in mind, much like any other sourcing initiative there are many variables and potential risks that could have a negative impact on this process. For example, stakeholders may be wary of changing suppliers of specialty engineered materials even when presented with lower cost savings.

If this ends up being the case don’t feel defeated, you can still utilize this newly discovered data from other manufacturers as leverage in negotiations with your incumbent supplier. In addition, this sourcing initiative also helped unlock a wealth of knowledge about other suppliers that may benefit your organization down the road.



Spend Management is rarely simple, but it's often particularly complicated in the Maintenance, Repair, and Operations (MRO) category.

Encompassing everything from Material Handling services to nuts and bolts, MRO spend includes many of the products and services that literally keep businesses running. Understandably, it presents Procurement professionals with a number of challenges:

  • Whereas some categories include a small selection of SKUs, the MRO category includes thousands and thousands (and thousands).
  • One-off purchases are regularly made at the site-level with little mind to long-term cost effectiveness and sustainability. 
  • When sites are spread across a wide geographic region, communication is often less-than-transparent. 
All these challenges make for a spend category where maverick purchasing and process inefficiencies can quickly get out of hand. Eliminating either requires a strategic and methodical approach to correcting Procurement's shortcomings. 

Source One's Procurement specialists offer a step-by-step guide to tackling the category in their latest whitepaper series. Published in four parts, MRO Demystified presents actionable tips for organizations looking to repair their approach to MRO spend and realize greater strategic value moving forward. 

Haven't had a chance to download it yet? Check out some key takeaways below before diving in. 

Part 1 - Repairing the Traditional Approaches to MRO Spend Management 
  • Outlines the complications associated with MRO spend. 
  • Examines the flaws in taking either a decentralized or centralized approach to the category. 
  • Advocates for a customized, hybridized approach to optimizing MRO purchases. 
Part 2 - The Value of a Spend Analysis 
  • Maps the process for conducting an effective spend analysis
  • Provides guidance for Procurement teams looking to select the right spend taxonomy. 
  • Offers tips for turning raw data into action by identifying savings and consolidation opportunities.
Part 3 - The Role of Strategic Sourcing in Spend Management
  • Details the typical Strategic Sourcing process and applies it to the MRO category. 
  • Describes the outputs and inputs relevant to a world-class sourcing process. 
  • Presents best practices for market basket development and other components of the sourcing cycle. 
Part 4 - Long-Term Spend Management 
  • Explores best practices for managing MRO spend in the long-term including Punch Out catalogs, Vendor Managed Inventory programs, and more. 
  • Breaks down a ten-step process for strategically approaching tail spend. 
  • Cautions Procurement teams against becoming too comfortable with any one strategy. 

Don't let a complicated category overwhelm your Procurement team. Download all four installments today to take the first step in developing a world-class approach to managing MRO spend. 
A lot of the articles I write are about optimizing the tools in our Procurement toolbox and then using them effectively. These are certainly important practices, but what happens when we rely too heavily on this procurement toolbox? I’m going to use a phrase that I’m pretty hesitant about bringing up: “Think outside the box.” 

Wait – don’t stop reading. Seriously.

Don’t get me wrong, I realize why you’d want to. This bit of business speak has been overused to the point of becoming meaningless. It’s a challenge every management team has placed on every team performing every function in an organization for years. And, you know what? That’s a shame – because there are opportunities to think outside the box to achieve amazing results.

Think outside the cylinder
Let's talk about a relatively common category of spend – air & gases. If we worked for a brewery, for example, we’d be spending a good bit of money to buy the gases needed to carbonate our beer. These gases aren’t cheap – anything a brewery can do to reduce this cost will help the bottom line. So let's go to work.

Projects in this space follow a pretty typical process. In other words, we’re going to break out a pretty reliable and pretty heavily used set of tools from our toolbox. We may seek to go to market with an RFQ or RFP, intending to use supplier consolidation to drive cost savings through a common enough carrot/stick combination (“Win more of our business with a competitive bid… or do poorly and lose it all”). If we do well, we might save, say, 10% of our annual spend on gasses using these strategies. Not bad.

But let’s think outside the box. What if we could reduce the need to purchase these gases in the first place? Cutting the need for half of our yearly volume or more could dramatically reduce our production costs.

Carbon reclamation technologies aren’t necessarily new, but they may not be utilized by breweries. They may have a home in larger operations, but smaller breweries may not have any such systems in place. However, there are firms that are helping smaller breweries implement these systems - So, what if our hypothetical brewery bucked the inside-the-box sourcing strategy and elected to research a reclamation system? Not only are you eliminating a large portion of purchase needs, you’re also able to capture and reuse a high-quality, contaminant-free CO2 product.

What Makes this “Outside-The-Box” Thinking?
A lot of companies that purchase industrial gases view the transaction as a highly commoditized one. When going to market for commoditized products, we’re all conditions to view the event as one focused heavily on price.  The more mission critical the product is (such as gases used in beer production), the higher the degree of product specification. However, checking those boxes off puts us back in the realm of pricing.

Because of this, it can be easy to fall into the same old routine – get a few bids, make a buy. This is what makes thinking outside the box challenging – we have to force ourselves to reconsider that tried and true path. What other trails could we take instead?

It isn’t always easy to blaze a new trail. Attempting to do so won’t always be a success. Yet bringing about real, impactful change will often require this type of thinking. After all, you can’t get somewhere new by following the same old path.



In a perfect world, each successful sourcing initiative would result in years of effective, hands-on spend management. In reality, however, a single event is little more than a good start. While identifying new suppliers or retooling existing relationships might provide savings and efficiency in the short-term, it's all too easy for organizations to forget the 'management' side of spend management. Many find themselves boosting visibility and regaining control only to slide back into the same old bad habits.

'Set it and forget it' is no way to approach MRO spend - or spend in any category. Generating value and maintaining control in the long-term means taking proactive, decisive action. It means never settling for 'good enough' and never relying on old methods 'just because.'

While MRO is most definitely a complex category, it's far from unmanageable. There's no reason any organization should find the joy of a successful event supplanted by the pain of maverick spend, poor communication, or a lack of visibility. Luckily for Procurement, they've got a lot of options for approaching the category more strategically.

1. Punch Outs

Punch Out catalogs connect a buyer's personal eProcurement system directly to their supplier's website. Buyers 'punch out' of their internal systems and gain access to their supplier's online catalog. Without such a system in place, Procurement creates far more work for itself than necessary. Whether it's loading individual items into a cart or verifying pricing against a pre-loaded master catalog, the function is wasting valuable time and resources.

A punch out's real-time, dynamic catalog provides Procurement with live updates on thousands of line items. This ensures that purchasers only select products that adhere to contract terms. In addition to expediting the purchasing process, punch outs make it possible for Procurement to devote its time to more high-value, strategic activities.

2. Vendor Managed Inventory Programs

The MRO spend area includes parts and components that keep an organization and its facilities running. As such, emergency, one-off purchases are an unfortunate (and unavoidable) reality in the category. The sort of incidents that might inspire an emergency purchase are far more common when organizations don't maintain open lines of communication with their supply base. Waiting on a delivery - or a response - could even mean contending with stalled production for an extended period.

Vendor Managed Inventory programs promote communication and optimal supply levels by making inventory the supplier's responsibility. Like punch out catalogs, they cut out a considerable piece of Procurement's tactical workload. Certain VMI programs will see a vendor set up operations on the site level. With direct access and insights into your company's resources, they can set optimal purchasing levels and automate the reorder process.

It's worth remembering, however, that VMI programs run on trust and close oversight. It's not enough to select a supplier and trust they'll make a positive change. Some vendors will make mistakes. Others will behave unscrupulously and look for opportunities to serve their own interests. That's why it's so important to vet vendors thoroughly and establish a management framework that will guarantee reliable service.

3. Supplier Consolidation

One of MRO's most prevailing challenges is the category's breadth. Whereas certain spend categories include just a handful of products and services, MRO compels even small organizations to manage hundreds of SKUs. Things are doubly complicated when these diverse products come from an equally diverse set of suppliers. That's why supply base consolidation is so often the answer for organizations looking to get a handle on their MRO spend.

Carrying out a strategic sourcing event can help a Procurement team uncover hidden opportunities to cut down the size of their supply base. Once they've done so, they can work to build relationships that offer more competitive pricing and better serve their unique needs. Instead of a few dozen 'good enough' suppliers spread far and wide, they'll begin to develop a bench of best-in-class providers who'll serve them on the local level.

Be careful. Organizations should not indiscriminately cut ties with their suppliers. Like any sourcing initiative, a consolidation effort requires effective planning, a wealth of information, and an apparatus for long-term monitoring.

Source One's MRO specialists discuss these best practices and more in the fourth and final installment of MRO Demystified. Download the whitepaper today to develop the hands-on, strategic methods that MRO spend demands.