How a change in strategy can lead to significant savings when it comes to setting KPIs for MRO procurement
“It’s important to take a broad approach when it comes to KPIs for MRO procurement”
By definition, ‘total cost savings’ is the total amount of money saved, including savings on transaction costs or costs per order. This KPI helps buyers keep costs in check, while you maintain process efficiency, product quality and on-time delivery.
It’s essential to gauge whether MRO goods being bought meet your company’s standards and the needs of front-line engineers (who have their own KPIs to meet). Working with engineers and suppliers, procurement teams should be able to identify alternative products with the same function and standards at a lower cost.
While the costs are often less obvious, the true impact of an essential part not being available, and the resulting downtime and loss of production, is likely be greater than the value of the part itself.
Keeping close tabs on whether inventory is in the right place at the right time – and in the proper form – saves costs by avoiding the need to rush orders to fill gaps and outages, or overstocking.
Contract KPIs allow buyers to capture baseline information around service-level agreements, negotiated prices and other key measures. Armed with this data the procurement team can assess current contracts, seek out new sourcing options and negotiate better terms and conditions.