Feb 10, 2021

MRO Procurement; GEP Gives 3 Strategies For Cost Improvement

MRO
spendmanagement
efficiencies
costsavings
Laura V. Garcia
2 min
MRO
An often-overlooked category, MRO is a good source of cost reduction opportunities. GEP gives three proven strategies for cost improvement...

Maintenance, Repair and Operations (MRO) procurement often lacks in attention, pushed to the side for bigger or more direct spend categories. However, MRO items are critical to production, can stagnate cost-optimisation initiatives and have a high degree of complexity.

With the right tactics and improved management, MRO can bring significant cost savings.

GEP offers three proven strategies for cost improvement:

Segmentation of Parts

Not all MRO items are created equal, some have more impact on your business than others. 

25-35% of total MRO spend can consist of speciality parts. Not only do they represent a significant portion of spend, but they are vital to operations and maintaining efficiencies and safeguarding operational continuity.

Commodity parts, however, are often easily substitutable with offerings from ulterior suppliers.

Classifying MRO parts allows you to distinguish speciality parts from commodity parts and is the first step in understanding the complexity of your MRO items and finding ways to better manage purchases and control costs.

Refurbished Components

According to GEP, refurbished parts have the potential to bring significant opportunities to lower costs on MRO items. In some cases, using refurbished parts can bring a savings of 30-60% vs new parts. Hence, it is on the rise.

The global pandemic has highlighted the risk of depending too highly on China, the leader in production for MRO items. Refurbishing existing components is a viable option for avoiding shortages and saving on costs compared to replenishing stock with brand-new components.

Leverage Scale

If you’re purchasing through distributors, you’re likely missing out on leveraging your volumes. However, as the purchasing of MRO items is often decentralized, left to each site to procure their own requirements. Increasing visibility allows you to find synergies, and work towards purchasing directly from manufacturers and lower costs.

Although there is no magic pill or one size-size-fits-all approach, each category may require it’s own unique strategy. However, clearly segmenting MRO parts into distinct categories, gathering data and increasing visibility is the first step more intelligent spend and strategic procurement that saves money and mitigates risks.

For more on cost management in the MRO category, check out their white paper: Unlocking Cost-Reduction Opportunities in MRO: How to Tame Seemingly Unaddressable Spend. 

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