By: Beroe Inc --
19 September, 2021
To further maximize focus on critical operations, manufacturers are shifting their preference from distributors to integrators when it comes to quality Maintenance, Repair, and Operations (MRO) processes. Meeting production demand with better lead times and significant differences in cost of ownership that comes from choosing MRO integrators have proven to be the ideal approach for manufacturers across multiple segments.
This shift in the procurement approach has also brought about a desire for present distributors to enter a decades-old integrators' market despite the latter's clear dominance in the field. Besides performing as the single point of contact for clients by offering services in the likes of spare parts inventory, distribution, purchase orders, and logistic management, MRO integrators handle the overall end-to-end procurement and sourcing function. This adds great value for clients in terms of management as well as savings.
"MRO supply chain offers various advantages such as managing spare parts inventory at the client’s site facility storeroom, managing other distributors and being a single point of contact for the client, managing multiple purchase orders, and logistics to ensure on-time delivery of spare parts," said Vijith Bhargavan, Senior Domain Analyst at Beroe. "They are basically an extended arm of the client’s MRO procurement and sourcing function and can provide lucrative year-on-year bottom-line savings for clients".
MRO integrators are like distributors with better functionality and services that can handle everything for the client right from the planning stage to procurement, management and optimization of internal stock inventory. Outsourcing of procurement to pay cycle (P2P) management enables in-house teams to focus on capital and production strategies. Integrators allow enhanced plant uptime where clients can focus on elements that have a greater impact on the company's key objective.
The main difference between an MRO distributor and an integrator from the client's perspective would be the overall cost of procurement. Integrators enable more hard and soft savings. This is because, unlike distributors, integrators usually do not have warehouses but do direct drop shipments. Most integrators buy 70 percent of the products directly from the Original Equipment Manufacturer (OEM), and 30 percent from local product distributors, which they drop directly to the customers. Thus, with no additional capital to spend on warehouses and distribution centers, the shared cost charged on the clients becomes less when compared with that of the distributors. Transparency is another added value that comes with integrators' digitized functioning. Most integrators have excellent Information Technology in place, which allows for advanced analytics and databases of every phase in the MRO process.
Integrators in the MRO category for procurement have been around for a few decades now. They are already well established in the European markets, while the trend is still warming up in the Asian market. The shift is expected to be well received as it favors both integrators and manufacturers. Healthcare, food, beverages, tobacco, automotive, aerospace, and packaged goods are some of the industries projected to be highly impacted by this shift in the MRO process.
With more companies preferring integrators, we might as well see distributors shifting their business to integrators. Although the MRO Integrators category is a mature industry, getting into it would be a challenge for distributors. This would be true, especially for distributors who specialize in the industry sector. However, there's a large scope for distributors to integrate with the already existing old-timers who hold a significant business volume across sectors.
"MRO integrators provide better transparency and a smoother management system, the advantage of which reflects in the client's optimized management and maintenance system, enhanced plant uptime, and significant cost savings," said Vijith Bhargavan, Senior Domain Analyst at Beroe. “So, in the coming years, we will see a deepening trend with even less matured Asian region joining the bandwagon to rely on integrators for their MRO category needs. As for distributors, they need to evolve and come in sync with the current market trends”.
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