South African managing director Brian Andrew shares tips on how to build profitable companies with MRO procurement Updated for 2021

82,095FansLike
2,966FollowersFollow
2,700SubscribersSubscribe
82,095FansLike
3,122FollowersFollow
2,700SubscribersSubscribe

Updated: March 5, 2021

By Brian Andrew, Managing Director South and Sub-Saharan Africa at RS Components

It does not matter if times are good or bad – waste is never welcome at any proactive business. Business is primarily driven by profit and efficiency, and waste is an attack on both. But many businesses, particularly among manufacturers, overlook a major cost hidden among their operations: that of MRO (maintenance, repair and operations) procurement.

[read_more id="2" more="Read full article" less="Read less"]

MRO or indirect procurement concerns those many small parts needed to keep equipment running. It’s fundamentally a supply chain/procurement discipline, but not often considered as a cost centre. Individual MRO items – small parts in big machines such as light bulbs, safety switches, connectors, push buttons, power supplies etc. – tend to be inexpensive and not attract much attention. Yet as a pool, MRO procurement can represent a significant purchase base for companies.

The days of MRO being overlooked are numbered. According to a survey conducted by RS Components and UK-based CIPS (the Chartered Institute of Procurement and Supply), the focus is on to reduce MRO spend. Over half cited pressure on operation budgets or reducing inventory costs, followed by asset performance (42%) and continuous improvement (38%) as motivations.

This message is less apparent in the South African market, but given the current tough economic conditions, it’s well worth discussing. What can local businesses do to curb their MRO spend?

Taming MRO

Many businesses underestimate the amount they spend on MRO products over the course of a year. They also rarely understand the significant hidden costs associated with MRO procurement. In reality, the overall process of procuring a part can be double that of the actual part. Our research shows that an organisation spends £2 on the MRO procurement process for every £1 spent on the MRO product itself. Bigger footprints such as multiple locations amplify this effect. South African patterns are unlikely to buck the trend.

What causes such a poor ratio? It may be because too much time is being spent on finding the cheapest product, or using the wrong strategies for example category management and contracts negotiated on price alone to manage unplanned indirect spend. This may negate any actual savings made as extra processes and delays accrue costs.

Another reason is that MRO purchases often happen under the radar and tend to ignore official procurement channels. It may seem faster for an engineer on the floor to quickly acquire a spare part and get operations running again, using a convenient supplier. But amplify this over many instances and the purchases can compound into astounding inefficiencies.

Every company can meet this challenge with a good MRO strategy. It requires a new way of thinking and saving: a successful MRO strategy relies on all stakeholders involved in indirect procurement to collaborate. It must focus on improving the whole process of buying parts, involving stakeholders such as engineering, operations and finance functions, with buy-in at the c-suite level.

The strategy itself should aim for several objectives, which may include:
Reducing ‘maverick’ spend, where the user selects vendors outside the agreed supplier framework.

Consolidating suppliers so procurers can make quick decisions without having to consider the bigger MRO picture.

Procurement teams must communicate with users to understand what they need – this ensures suppliers with appropriate catalogues are chosen.

Deploying an integrated eProcurement system to streamline ordering processes, which in turn will help users change their own procurement habits.

Reducing items held in storage by only keeping critical spares and the items that will be used on a regular basis and then using suppliers that deliver on demand. This frees up working capital and space in your premises.

Without MRO, production can grind to a halt. A small part can stop everything for practical, health & safety, compliance or many other reasons. But sometimes the can-do attitude to keep lines going can result in inefficient MRO procurement choices.

Don’t disturb that spirit on the work floor that keeps your business moving. Instead, establish an MRO strategy that compliments proactive workforce attitudes while establishing a framework which pursues efficiency and significant cost savings. Partner with a supplier who can develop these solutions with you and support you on the journey of taming your MRO procurement.

[/read_more]

Today News Africa
Today News Africahttps://todaynewsafrica.com
Today News Africa is a US-based international news organization focused on US-Africa policy and breaking news. Our goal is to provide truthful and exclusive stories to a diverse audience across North America and the African Continent. Subscribe to our news page at https://todaynewsafrica.com/ and Follow us on Twitter @todaynewsafrica

LEAVE A REPLY

Please enter your comment!
Please enter your name here

Trending Now

TRENDING

Confidential U.S. government report concludes Ethiopia Prime Minister Abiy Ahmed leading ethnic cleansing in Tigray region

A confidential U.S. government report has concluded that the government of Prime Minister Abiy Ahmed in Ethiopia along with allied militia fighters are leading a systematic campaign of ethnic cleansing in Tigray."Whole villages were severely damaged or completely erased," the report, first obtained by The New York Times, says.It adds that fighters from the neighboring Amhara region of Ethiopia who moved to Tigray...

Stay connected

[/read_more]

[read_more id="2" more="Read full article" less="Read less"]

error: Alert: Content is protected !!
Share
Tweet
Reddit
Pocket
Share
More