It’s Time to Rein in MRO Spending: Here’s How
Maintenance, repair and operations (MRO) is the Cinderella of manufacturing procurement – overlooked, underappreciated, and invisible. It’s time MRO was the focus of an optimization program. It’s time MRO went to the ball.
In a new Conduent white paper, Four Strategies for Streamlining MRO Spend, we explore the ways in which organizations can rethink MRO purchases to avoid unnecessary costs. According to our estimates, manufacturing firms with total indirect annual spend of $1B USD could look to realize potential cost savings of over $10M USD per year and cost avoidance savings of over $25M USD per year.
The paper starts by outlining three challenges specific to MRO:
- There is a mismatch between the initial cost of MRO products and materials, and the associated expense of procurement and processes. The latter significantly outweighs the former. As a result, many organizations underestimate the overall impact MRO has on potential costs and income.
- There is a tendency towards ad hoc local purchasing as a workaround to more bureaucratic and centralized buying directives. The result: loss of control, overstocking and, ultimately, greater expenditure.
- MRO roles and responsibilities are poorly defined which in turn is a likely contributor to the first two problems.
Next the paper puts forth four key strategies to overcome these challenges:
- Strategy #1: Move from spot buys to contracts
Deploy volume-based triggers to counter ill-governed purchases.
- Strategy #2: Automate matching of shopping carts to contracts and historical POs
Track daily shopping cart activity and map it to existing contracts or recent purchase orders.
- Strategy #3: Introduce periodic pruning of the tail
Regularly review the supplier base by analysing the annual purchase value (APV) of all commodities.
- Strategy #4: Tap into MRO sourcing expertise
Add much needed rigour, focus, market knowledge, and expertise by looking beyond in-house personnel.
Download the white paper now. Then, contact us if you’d like to learn more.