PRINCIPAL KEYWORDS: maintenance, repair, and operations
Managing procurement for maintenance, repair, and operations, (MRO) is challenging for the reason that the functions relating to it are spread across a host of departments like finance, engineering, etc. Which have competing and at times conflicting interests. This is because even though these departments, work towards achieving a common goal to sustain the business profitably, yet in reality, since the individual goals, which they have to manage are tied to their own performance, they get caught in cross-currents that make managing the processes of MRO procurement a challenging one. Besides, MRO procurement is considered an indirect purchase resulting in the managements following a decentralized approach, which is erroneous because in such an approach with each site processing their own purchases, there is no consolidated data on inventory or expenditure is available. This leads to inefficient management that goes detrimental to the successful running of the business.
In this light, we have presented 5 key strategies that would help in smoothening MRO procurement.
Rationalization of Suppliers
An inherent feature of indirect purchases is it involves handling a large number of suppliers. Which if not streamlined can negatively impact your profits. You can structure supply chain management by adopting the following measures:
- Grouping of both the orders and deliveries
- Separating non-strategic products and bringing them under a single source of procurement
- Reducing the quantum of low-value tasks by minimizing low-volume orders, the processing of their invoicing and deliveries
The application of this strategy would result in saving of time, increase in productivity, and optimization of costs, and enhancement of revenues.
Vendor Management Inventory programs (VMI)
In this strategy, which is one of the strategies gaining popularity, it is an external entity that assumes total responsibility for procurement management. The biggest advantage of this strategy is, it literally frees the procurement teams from low value-added tasks; the other benefits it brings improve visibility of stocks, product availability, and increased productivity. On top of them, VIM has the ability to combat counterfeiting of the products. This substantially reduces the risk of your flood with faulty parts that could cause extensive damages to your plant and even personnel by causing them injuries. All in all, by choosing a VMI that can be trusted, you can be assured of improvements in expenditure management that bring about consequential increases in revenues, profits, etc.
Segment MRO Parts
The importance of this strategy emanates from the fact that MRO requires a diversified stream of products ranging from specialty to commodity to ordinary. Therefore, it is necessary to categorize parts and segment them. By classifying them into OEM and non-OEM categories and distinguishing the category of suppliers. When a distinction is done, it can throw open opportunities for rationalization. Which otherwise may not be visible in ordinary circumstances Specialty parts involve major spends, in addition, to being critical to maintaining operations. Commodity products by nature cannot substitute by similar products from other distributors. This stresses the point that all suppliers cannot treat alike. Some products like screws, nuts, etc may be ordinary, yet they are indispensable. Segmentation as a strategy addresses these problems and works in your favor.
Pay attention to the lifetime cost of capital purchases
The acquisitions would be not only strategically plan but also time to address factors that influence lifetime cost. The ripe time to negotiate discounts on replacement of parts and training is when the initial acquisition of the machinery takes place. You have to consider locking in the OEMs into multi-year contracts that would take care of purchase price, installation costs, initial spares, consumables, replacement parts, user and maintenance training, as well as services, etc. Leveraging lifetime costs will strengthen your spending of fixed as well as recurring costs.
In an era where technology has been fast catching up, going for digital solutions is a strategy that has to be on your radar. Digitalization of transactions facilitates the automation of several processes including low-value-added ones. It also enables you to punch out catalogs. They can directly link your e-procurement system to that of the suppliers. This facilitates their offers to update automatically and be available in real-time for you to make timely decisions. It would give you better control on expenditure and ordering for and receiving of products in time
The foregoing discussions emphasize the fact MRO operations for being successful. And making money involves sourcing and procurement strategies thought out. Even though the MRO requirements of the organization may vary from one to another. Yet there are some core strategies, which have been discussed in this article. You can choose the best and customize it to benefit the most.
Keywords: STRATEGY, PROCUREMENT, PRODUCT, COST, MANAGEMENT, SUPPLIER, PURCHASE, MRO Procurement, OPERATION, MANAGE