For any organization to do well, it is imperative to keep costs under control. Businesses do well or poorly, depending on how the management manages costs across the supply chain. Many organizations across industries have taken steps to reduce costs by renegotiating with suppliers all the procurements. The question is how to reduce procurement costs.
When businesses struggle with the procurement costs externally, their internal procurement team helps different departments to overcome the following challenges:
- Lack of expert perspective for external markets.
- Limited bandwidth.
- Decreasing value in savings in procurement costs.
MRO procurement support for cost reduction
- Overlooking MRO (Maintenance, Repairs, Operations) spending as a source of cost reduction.
- Focusing and segmenting specialty components can be a significant cost-saving area.
- Gaining visibility of MRO spending across locations can bring insights into reducing costs.
How do procurement strategies help MRO to control costs?
Mro Procurement Outsourcing MROs do not have uniform characteristics, and classifying MRO parts into Non -OEM and OEM categories will help focus on those that impact business functionality.
Specialty parts make up about 25% to 35% of Total MRO spending and are more expensive. They are critical for maintaining operations. Taking the time and focusing on categorizing parts is a significant segmentation exercise. It enables one to understand the MRO complexity and identify ways of controlling costs.
- MRO Parts refurbishments
There is a rise in refurbishment parts as they offer significant MRO cost reduction- usually in the range of 30% to 60% of the new parts cost in some cases. Since MRO parts supply was mainly dependent on China and the Covid crisis has shown the supply chain bottlenecks mean one cannot rely on one source only.
A more viable strategy is refurbishing existing parts to maintain inventory, saving costs on new parts, and avoiding shortages.
- Partnering with MRO manufacturers
MRO parts manufacturers that service multiple sites to an enterprise may not have visibility of the volume of parts and the categories purchased. They may enter into direct tie-ups with enterprises instead of operating through distributor and dealer networks.
For businesses, it is essential to have visibility into the MRO procurements across locations. If Procurement is a decentralized function, it leads to inefficiency as it is possible to procure the same type of parts from different suppliers. Consolidating them under one central procurement authority will help negotiate a better volume price.
Using MRO services
The right combination of process and technology improve automation levels, accuracy, and efficiency in MRO purchasing. MRO Asset management solutions provide MRO Procurement Support Services for MRO items and others.
Examples of Support services
Order Processing & follow up
- Management of Order requests
- Processing of Purchase Orders
- Contract management
- Confirm PO acceptance by vendors
- Ensuring timely delivery of MRO parts and equipment
- Ensuring Proof of Delivery
- Engaging with vendors and suppliers to ensure meeting key milestones
- Invoice exception management
- Reconciliations of payments
- Ledger verification and reconciliation
- Adding new vendors to the system and updating existing ones
- Ensure completion of vendor documentation
With the above procurement support strategies for sourcing MRO, it is crucial to use those which suit a particular business. Segmenting MRO parts into clear categories and data maintenance will provide all-around visibility in MRO management.
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