7 Key insights
every CPO should know
These 7 MRO Insights cover fundamental strategies to help your company navigate the complexities of this category. The MRO market is estimated at $1.7 trillion annually - $200 billion of which is in the industrial segment – make sure you’re optimizing MRO for your company now and for years to come.
THE 7 INSIGHTS
EVERY CPO SHOULD KNOW
Insight 3: The Artistry of Data Interpretation
MRO spend is already highly fragmented due to low price point items and distributed buying, and the associated data sets are usually no help. MRO data tends to be extremely large and is often plagued by nonstandard descriptions that hold no meaning to anyone other than the individual who entered them. Descriptions are created based on how each item is used by that production team rather than an overarching recognition of their function.
The “Gobbledygook” of MRO Data
Gobbledygook – information that is meaningless or made unintelligible by excessive use of obtuse technical terms or nonsense.
Anyone who has been exposed to MRO data knows that it is a collection of random SKUs, terms and descriptions. Each production facility has its own unique jargon to describe a specific part, often without a SKU associated with it. The MRO item may be described in technical terms, or with long, descriptive definitions based on use or location. There is no consistency from plant to plant.
After scanning the data gobbledygook, many often throw their hands in the air in frustration and push MRO until next year. Some companies take the easy route and go to market with simplified market baskets.
An expert with working knowledge of production floors and employees knows how to navigate through the data morass. They can systematically organize and categorize the data so that opportunities – both short-term and long-term – can be identified and implemented.
Item descriptions are inconsistent from person to person, plant to plant, and company to company. The lack of a gatekeeper or generally accepted set of industry standards has prevented the creation of an MRO dictionary and standardized product descriptions. This inconsistency functions as a tether, holding companies to their current supplier because the thought of transitioning and potentially losing their legacy knowledge is too painful.
It’s All About Efficiency
To effectively manage MRO spend, item descriptions and demand/purchase volume need to be sorted and grouped both horizontally (across facilities or business units) and vertically (by MRO sub-category).
A category breakthrough is unlikely to happen until detailed MRO data is matrixed and standardized across all locations.
Clean-Up of Enterprise Master Data
The first step towards this point is a clean-up of master data across all enterprise systems, allowing users to be self-sufficient and improving the quality of future purchase decisions. Too many companies view the time spent optimizing MRO spend (facilitating standardization and supplier/item rationalization) as pure overhead. And yet eliminating duplicates can often stand alone as an initiative to save money on MRO.
Insight 4: PPV is Not the Issue
Frequently Asked Questions
Can we source MRO without perfect line item data?
Yes, absolutely. There is no such thing as perfect data. Start with as much data exists for part numbers, long descriptions and purchase history. Each facility will have different descriptions, SKUs or part numbers which will need to be cleansed, standardized, categorized and optimized. In many cases MRO data will need to be validated by “walking the floor” to get a sense of critical spare parts. The project will move forward at a good pace with the help of seasoned MRO experts who know how to look for data and “translate” shop-floor descriptions.