In the world of procurement, finding, negotiating, and managing deals for big-ticket direct procurement purchases gets a lot of attention, consumes and provides a lot of resources, and represents massive opportunities for growth, innovation, and long-term strategic cost savings for the company. Traditionally, direct procurement has been treated as a much more reliable source of value development than the cost-savings focus of indirect procurement, also called MRO (maintenance, repair, and operations) purchasing.
As technology continues to mature, however, and the endless battle for competitive advantage in a crowded marketplace roars on, indirect spend has become a potential source of both cost reduction and lasting value. Realizing these potential savings, however, relies on fine-tuning of procurement processes, strategic sourcing in the MRO supply chain, and overcoming the possibility of resistance to change in a corporate culture long accustomed to treating MRO as a necessary chore rather than a vector for value creation.
What Is MRO Purchasing?
MRO purchasing is indirect spend related to maintenance, repair, and operations (MRO). These purchases ensure a company can keep working but are not directly related to the products and services provided by the company. MRO items would include consumables like office and cleaning supplies, computers, items directly related to maintaining tools used for production of goods or providing services.
The MRO Purchasing Challenge
The goods and services that keep your company running, from office supplies to essential repairs to maintenance services, all fall under indirect spend—that is, expenditures that do not contribute directly to production of finished goods for sale, but instead support for that production—and therefore, MRO.
MRO procurement often deals with myriad small, bread-and-butter buys that seem individually insignificant but work in concert to create a vast and powerful MRO supply chain that keeps the lights on, the production line in good repair, and your staff equipped with the tools and services they need to do their jobs. MRO supplies critical parts, not just spare parts, and if its supply chain fails, your company could find itself in serious trouble much more quickly than expected.
MRO spend is not without its challenges, mind you. Without rigorous internal procurement processes in place or the aid of continuous improvement supported by automation, MRO can be a source of “invisible spend” that can cripple effective spend analysis. It can also increase risk exposure and supply chain management headaches.
It’s perhaps not that surprising, then, that MRO procurement—often treated as an afterthought— has been overlooked for so long as a genuine source of value. For purchasing managers and MRO buyers who want to take advantage of the value and reduced total cost of ownership (TCO) hidden within MRO while increasing spend visibility, there’s plenty of opportunity for positive transformative change.
There’s real value to be found and optimized in the MRO supply chain, and formalizing your practices, identifying the key performance indicators (KPIs) that provide the most useful data, and incorporating the right tech tools (including a procurement software package) will help make (corporate cultural) change a reality.
Making the Most of MRO Management
Want to maximize the value and cost savings generated by MRO items? The first and most important step is to prioritize and support MRO procurement and MRO inventory management in the same way you do direct procurement. You’ll immediately gain substantial and sustainable savings through:
- A shift away from tactical cost reductions and toward strategic reductions to TCO through incentives, economies of scale, and partnerships with trusted vendors.
- Elimination of needless workflow complexity to reduce staff hours and process inefficiencies. Paired with automation, roadblocks and human error are reduced significantly.
- Enhanced data management and collaboration to boost productivity and engagement by all stakeholders.
- Simplified spend analysis and more accurate financial forecasting and strategic planning through elimination of rogue spend.
To support this shift, establish and follow Best Practices for MRO purchasing. Fundamentally altering your corporate culture to allow for the concept of building value through supply chain management to take hold can be a hard row to hoe. There’s real value to be found and optimized in the MRO supply chain, however, and formalizing your practices, identifying the key performance indicators (KPIs) that provide the most useful data, and incorporating the right tech tools (including a procurement software package) will help make this change a reality.
MRO Can Be a Direct Source of Savings and Value
Whether it’s a truckload of new office supplies for headquarters or replacement parts for your bustling production line, MRO items have strategic and financial value for your business. Unlock the potential of your MRO supply chain through process improvement, automation, and cultural education, and discover the very direct impact MRO can have on your bottom line.