Jarn Gill, head of corporate sales at RS Components, discusses how consumption profiling holds the key to cost savings.
The MRO procurement process is becoming an increasingly recognised area of expense.
Where product cost once dominated the decision-making process, strategies to increase efficiencies in this area are now being prioritised.
Evaluating consumption to unveil a true picture of requirements is crucial to the creation of efficiencies.
Only when analysing and optimising data in key areas – product, inventory, supplier & process and pricing solutions – and breaking down these contributory factors can the issues be tackled.
Many organisations are not keeping a close eye on the products they are using regularly, those they are not, or considering alternatives that could save them money in the long term.
For example, holding the right quantities, to free up stock space and streamline inventory can free up cash flow, as well as, reduce cases of obsolescence.
Not focusing on price but instead on quality and longevity, will not only save money in the long term on the product itself, but also save on the procurement of products.
RS undertook research which unveiled the ratio of product procurement to product cost is actually 2:1.
Dealing with multiple suppliers with multiple invoice procedures adds to that cost so streamlining suppliers will not only cut down on process and the cost of this, but also present a better position from which to bargain.
However, it is only through joined-up thinking with all stakeholders that the optimum savings of 35% can be made, and suppliers must show added value over and above product offering to help make a difference.