We need to talk about MRO savings …. once in a generation opportunity

It is currently possible to make significant savings in MRO and add incredible value to your organisations by adopting the latest innovations from suppliers.  Do not delay acting as the window of opportunity will not last. 

MRO is a spend category which should behave like other aggregated, commodity, high-variety, online offerings (often with low unit values) such as stationery.  

The product is stored in sophisticated warehouses, picked and shipped in a short time scale and delivered to a desk or goods inwards.  Unfortunately, the similarities to stationery often end here since MRO has its own peculiarities.  

The end-users are often on the front line of operations and have preferences based upon years of experience and no doubt heartache. Some preferences remain valid, many aren’t and this is often an issue which stalls MRO savings initiatives. 

The MRO market in the UK is currently experiencing a dramatic downturn with low order volumes, high stock holding and replenishment sitting in containers on its way from low cost countries.  There is a surplus, with supply outstripping demand by some margin, for most sub-categories.

This is an opportunity to secure a low cost-base for the future.  Manoeuvring into the best position is not the easiest of tasks so here are some thoughts on how you might do it:

1. Conduct an internal audit to confirm current arrangements and confirm how performance is matching up with contracted commitments.  
2. Assess the inertia to change with both user attitude and perceived ‘lock-in’ established by the incumbent supplier.
3. Identify new value-added support services which the major suppliers are offering.  We recently saw a scanner, which can identify an unlabelled item, to ensure that the replacement is correct thereby saving downtime and frustration.
4. Sell the benefits of improved service and support to users.  Mobilise their enthusiasm.
5. Trial ‘own brand’ products as they are typically significantly cheaper. NB Trial don’t just introduce as this may alienate end-users.
6. Invest in data handling expertise as the volume of data, regarding historic purchases is often monumental.
7. Disrupt the current supply position and establish a climate of uncertainty about retention of business.
8. Compete the business in a meaningful, independent manner.

Your new position should be locked in for the long-term, at least across key spend areas, to maximise opportunities from the various value-added support services that suppliers are able to include into a deal.

For any additional information about securing your MRO supplies with an Enlightened Procurement approach or to discuss how JMCL can help you to make this happen do not hesitate and call Jonny Michael on:

j.michael@jmclconsulting.com

+44 7831 390161