Maintenance, Repair, and Operation (MRO) supplies can constitute a substantial part of the purchases by an organisation. Thus, a concerted effort is needed to reduce the non-valued cost, and improve the profitability of an organisation. This article explores seven strategies to reduce the cost of MRO supplies in an organisation.
Strategy 1: Analysing The Spend
A thorough analysis of an organisation spend will allow it to determine what it buys, how much it is paying and who is getting most of the dollars. Performing this analysis is challenging and will take the efforts of not only the procurement team but also stakeholders from each business group it serves.
Data collection is the most time-consuming element of the task and can be frustrating. But it is critical to the success of the initiative. Stakeholders cannot easily make decisions, eliminate inefficiencies or improve performance without knowing what, where and how MRO categories are purchased.
In order to compile an 80 percent representation of the category spend in one consolidated format, the following data must be included: manufacturer name, manufacturer part number, estimated annual usage and package quantity.
In addition, most buyers are managing multiple sites that are buying MRO items and should provide delivery locations, acceptable substitutes and historic unit pricing. An incomplete data set is likely to force suppliers to provide substitute products and hedge on pricing due to lack of detail.
Strategy 2: Choosing the Right MRO Supply Model
MRO model selection has probably one of the biggest impacts on future spend, and hence it is a critical lever to consider. There are primarily three supply market models for MRO: the Specialist model, the Integrator model, and the Hybrid model.