MRO procurement: the main component

Posted on 3 Mar 2016 by The Manufacturer

Jarn Gill, head of corporate sales at RS Components, advises how to avoid inefficiencies in MRO procurement strategies.

Generating cost savings with the implementation of an MRO procurement strategy based on insights drawn from consumption data is essential to develop strategies to optimise product and processes.

Jarn Gill, head of corporate sales at RS Components.
Jarn Gill, head of corporate sales, RS Components.

However, understanding how to gain those insights is largely down to working with suppliers and distributors.

There are vast inefficiencies in the MRO procurement strategies of many organisations, most of them generated by a recession-fuelled focus on product price as a way to drive down costs.

The complexity of data around MRO – with multiple sites, systems and manual processes generating obscure and misaligned data – means tackling the problem has been challenging.

Decisions have increasingly become based on assumption rather than fact, leading to inefficiencies and non-sustainable short-term tactics rather than long-term strategies.

Big data

Big data, when analysed, can inform decision-making, improving productivity and profitability.

According to an Economist Intelligence Unit survey, companies using data insights as part of the decision-making process saw an average 26% performance improvement in the past three years, something that is expected to increase to 41% in the next three years.

Having data insight allows for better planning of your MRO procurement in terms of timing and volume orders.

It helps highlight potential delays in the process and optimises use of warehouse space, distribution and delivery. It also minimises loss of revenue due to downtime.

Many organisations would be surprised to learn that a 1% decrease in operating costs will achieve 20% earnings per share– making it even more critical to understand consumption behaviour.

A clear plan focusing on the right savings potential and understanding the service levels of suppliers will help realise and control contract leakage across various sites, installing compliance.