Many organisations are dissuaded from attempting to make efficiencies in MRO procurement because of the process’s complexity. Here, we outline three ways to simplify MRO and make cost savings

Anyone who is involved in the procurement process – from procurement professionals to operations to board members – knows that it has a number of complexities. And that complexity is even greater when it comes to MRO procurement – the indirect spend on maintenance, repair and operations of goods and services.
MRO process costs can represent 80% of an organisations total procurement processing costs
MRO process costs can represent as much as 80% of an organisation’s total procurement processing costs, which means that efficiencies made in MRO can have a huge impact on a business’s bottom line.
 
The benefits of tackling MRO are therefore clear, but there are a number of stumbling blocks in the way of efficiencies including the lack of internal data around MRO, the volume of products being ordered and the sheer number of people involved in the process.
 
However, RS has, in partnership with the Manchester Business School, identified three key areas a business can focus on to simplify MRO procurement and start to make cost savings:
 
 
1. Involve stakeholders
Organisations often fail to understand that having a large number of stakeholders involved in MRO procurement has a significant impact on indirect costs. To improve the MRO process you need to know how many stakeholders are involved and ensure they are all aligned to making it more efficient.
 
 
2. Analyse consumption data
Most organisations don’t have access to comprehensive data about their own MRO consumption or any analysis of their consumption behaviour – both are crucial to identifying where and how savings can be achieved. Working with an external partner such as RS can help you to analyse the data and identify short- and long-term cost savings.
 
 
3. Accurately track savings
The inevitable result of a disjointed stakeholder approach to direct and indirect procurement is that sourcing managers and buyers tend to overestimate – by more than twice – the savings being achieved, compared to the actual savings recorded. Creating a system to accurately track savings will allow you to set clear goals, review performance and make continuous improvement.
 
For a more detailed overview of how to reduce MRO complexity, read our white paper: How MRO complexity conceals significant potential cost savings