In the procurement industry, managing deals, finding, and negotiating for large purchases garners a significant amount of interest, uses up and produces a large amount of resources, and provides a great opportunity for business growth, cost saving, and innovation for any company. Typically it is the case that the act of direct procurement is treated as a very reliable and super strong source for developing value rather than a source of cost saving that in direct procurement brings. This is known as Maintenance, Repair, and Operations purchasing, or MRO for short.
With technology continually developing and with businesses always looking to have and keep a competitive advantage over others within a marketplace that is already crowded, making indirect spend is a way that these companies can not only reduce costs but also add long lasting value. Being able to make the most of these savings can only be done however where the procurement process is fine tuned, strategic mro sourcing is in place, and where resistance to change has been overcome in those corporate settings where MRO has been treated as somewhat of a chore, rather than something that can add or even create value.
This is the spend that is made indirectly in relation to Maintenance, Repair, and Operations (MRO). By making these types of purchases it helps to keep a business operational despite the fact that they are not directly responsible for the production /. manufacture of items. MRO products include things such as computers, cleaning and office supplies (consumables), and items that are directly related to keeping tools and equipment used in the production process in good working order.
Things Needed For MRO Purchasing
Having a department or team within a business to handle all aspects of MRO purchasing and being willing to invest in the necessary technology is important for any company to make the process a success. However, where these things are not so, it can be beneficial for a business to bring in a third party, as they possess a greater level of knowledge and expertise, which is necessary for MRO purchasing. For those companies doing it themselves, there are a number of things that they can do in order to streamline the process and make it more efficient.
Challenge of MRO Purchasing
Indirect spend is conducted on those services and goods that all work to keep a business running and includes the likes of essential repairs and office supplies. These constitute spending that in no direct way contributes towards the production process but instead help the process, and so MRO.
MRO typically involves the smaller, bread and butter type purchases that are insignificant but all work together to produce a powerful and large MRO supply chain which keeps the business’s lights on and running. In addition to this, it also ensures that the production line is kept in working condition and all employees equipped with the necessary services and tools to be able to do their jobs to the best of their ability. MRO is responsible for supplying those parts that are business critical, spare parts, and where the supply chain has a point of failure, the business will be in major trouble at a very quick rate.
There are certain challenges where MRO spend is concerned. Where there are no strong internal processes for procurement in place or where automation is used in order to aid improvement, then MRO can and does quickly become a source of spend that has a crippling impact on being able to perform spend analysis. In most cases, it also increases the risk of exposure to various supply change management issues.
It comes as no surprise then that this (MRO procurement) is often only considered as an after thought and has been, for many years, overlooked as a real source of creating value. The opportunity for transformative change, in a positive way, for MRO buyers and purchasing managers to really take advantage of the propensity to both create value and reduce costs within MRO.
Maximizing MRO Management
The first step and the most important one in maximizing savings and value through MRO is the prioritizing and supporting of the MRO inventory management and MRO procurement process in the exact same way as direct procurement. When this is done, there are big and long term and big savings to be had via:
- A move away from tactical based savings to strategically generating reductions to total cost of ownership (TCO) via partnerships with trustworthy vendors, economies of scale, and incentives.
- The removal of complex workflows that are simply not needed in order to reduce the number of staff hours and to process any inefficiencies that there may be. Couple this with full automation and things like human errors and roadblocks are significantly reduced.
- The enhancement of collaboration and data management in order to give a boot to engagement and productivity by all present stakeholders.
- The simplification of spend analysis and development of financial forecasting for the process of strategic planning via the elimination of rogue spending.
In order to be able to support this shift in emphasis, it is important for businesses to follow best practice techniques when it comes to MRO purchasing. However, this is not a straight forward process, as changing a corporate culture does not happen over night. The greatest amount of value is found in and optimized by MRO supply chain processes. By highlighting Key Performance Indicators (KPIs), incorporating the correct technology tools, and formalizing practices, this change will swiftly become a reality.
MRO As A Source of Value & Savings
No matter if it is a number of spare / replacement parts for a busy working production line or a container full of office supplies, MRO products possess both financial and strategic value for any business. The full potential of an MRO supply chain system can be unlocked via performing certain improvements to processes, a course of cultural education, automation of processes. Doing so will show just what impact MRO can have on the bottom line of any business.
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