A leading building products manufacturer with $2.5B in annual revenue made the decision to bring their maintenance, repair, and operations (MRO) spend under management once and for all. Their distributed North American facilities regularly purchased electrical supplies, safety supplies, lubricants, mills supplies, and more – a category of spend representing $25M a year.
People say, "Production is King", so addressing MRO spend is often fraught with conflict as any threat to production is a threat o the entire business.
**Learn more about MRO on our webinar **
Listen in while Tenzing expert, Francois Gau and Grant Shirk, VP of Marketing at Scout RFP explain that by approaching MRO proactively companies can save 10 to 15% in year-over-year costs.
Click here for the recorded webinar.
Ensuring the Structural Integrity of Highly Distributed MRO
All 45 sites were managing their MRO spend independently. There was little to no useable line item data, which served as a wall between the company and opportunities for improvement. Lack of governance had allowed the MRO supply base to swell to over 1,600 suppliers, with no standards for performance or inventory management. Historical spend was only available internally at the aggregate level, and while it was “directionally accurate,” item level detail had to be collected from suppliers and then combined and cleansed before sourcing could begin. The company established the following objectives for the effort – in priority order:
- Achieve consensus across the sites, no matter how hard that might be
- Reduce spend while increasing long-term value to the business
- Rationalize the supply base and put consistent supplier performance standards in place
Tenzing accepted the challenge of creating critical but elusive company-wide consensus while also building a useable data set and rationalizing the supply base.
Tenzing Created a "MRO Initiative Team", Elevating Key Players From Multiple Facilities to Drive All Communication, Feedback, and Strategic Decision Making
The team developed consistent, company-wide supplier performance criteria focused on measuring service levels, quality, pricing, terms, and shipping requirements. Because the goal was long-term value rather than just savings, particular emphasis was placed on leveling the playing field for all sites and all circumstances. This allowed national and regional players to be considered side-by-side and inefficient “just-in-case” inventory management practices to be redirected. Significant effort was invested in implementation planning to build company-wide confidence in the new MRO strategy. Priorities were set by sub-category and deployment was scheduled plant by plant. Savings were realized quickly without jeopardizing the newly formed consensus.
Overcoming MRO Complexities with Strategic Analysis and Time in the Field
The company realized exceptional savings and value-based improvements across the entire MRO category:
- 18-22% savings on existing parts and approved substitutes
- 60% supply base reduction, consolidating the bulk of the spend and line items to a single primary supplier across 5 major MRO categories
- Redundant specifications were drastically reduced, emphasizing useful life and optimal performance. For example, safety supplies were reduced from 1,000 to 100 SKUs.
- The procurement process was streamlined to ensure control, guarantee pricing stability, and provide ongoing data visibility to help further reduce inventory levels.
Tenzing optimized the MRO supply chain and created greater business value by capitalizing on internal customer input and investing in a fact-based strategy.
Mining field sites for quantitative information that would serve as the basis for strategic decision making in the absence of an actionable centralized data set.
Working collaboratively to build consensus around new supplier performance criteria, reining in the haphazard and inconsistent frameworks in place.
Establishing repeatable processes that recognize the priorities of each category and plant, and equipping local management with pricing and inventory management tools.