An overview of what MRO or ‘indirect procurement’ is, why most companies underestimate it’s importance and how a good MRO strategy can improve your bottom line
MRO stands for maintenance, repair and operations. In procurement terms it refers to the products and tools purchased that keep an organisation running. It’s also referred to as ‘indirect procurement’ because these products enable your business activity but are not directly incorporated into any final product you create.
RS is a supplier of MRO products to a huge variety of industries, from utility firms and the aerospace industry to manufacturers and the public sector. Our range of over 500,000 products includes electronic components, electrical, automation and control, and test and measurement equipment, and engineering tools and consumables.
While many of the products supplied by RS are relatively inexpensive, they are often critical to keeping an organisation running. Without them operations could grind to a halt, which would have a huge impact on productivity and profits.
This is one of the key reasons why it it’s so vital to have an effective MRO strategy, but it’s also important because many businesses underestimate the amount they spend on MRO products over the course of a year and often don’t understand the significant hidden costs associated with MRO procurement. Getting MRO right makes it possible to achieve long-term, sustainable efficiency savings that will help your bottom line.
While individual MRO purchases are often for low-value items the overall process of making those purchases costs, on average, twice as much as the actual product. Our research shows that an organisation spends £2 on the MRO procurement process for every £1 spent on the product itself. This may be because too much time is being spent on researching the cheapest product, which negates any actual savings made, for example, or an inefficient procurement process that has too many stages in the purchase-to-pay process could also create additional costs.
While procurement departments are usually essential in driving change, our research shows that enacting a successful MRO strategy relies on all stakeholders involved in indirect procurement working together which includes engineering, operations and finance functions.’
On Connected Thinking we have provided a wealth of expert information, thought leadership and case studies examining the different areas of MRO procurement, offering advice on how to create or improve your MRO strategy and benefit from the savings this can create.