Maintenance Repair & Operations (MRO)
Market, Supplier, Risk and
Competitive Intelligence

Industry Outlook & Drivers

• The global MRO market was valued at $608 billion in 2019
• The global market is forecasted to grow at a CAGR of 2.8 percent and reach $660 billion by the end of 2022
• Mature Markets: North America, Western Europe
• Fast Maturing Markets: APAC, LATAM, and Australia
• APAC accounts for approx. 37 percent of the global MRO market, and it is expected to remain in the similar range (34 percent-38 percent) until 2020

MRO in Mining Industry: Global Outlook

Mining companies are expected to spend more on MRO activities to improve the operational efficiency of the equipment by reducing the downtime and lower the spend on new capital equipment.

• The global mineral output was at 11.37 billion metric tons in 2014 and  expected to grow at a CAGR of 1.8 percent and reach 12.01 billion tons billion by the end of 2017. The slow growth of mineral output is due to low commodity prices and low demand from China, and this trend is expected to continue until 2017
• Coal accounts for ~74 percent of the total mineral output and is expected to remain in the similar range (73 – 75 percent) until 2017 
• The APAC contributes to two third of the mineral output and is expected to grow lesser than the global average, due to the slow economic growth of China. Although Latin  America and Africa contribute to around 14 percent of the mineral output currently, it is expected to witness maximum growth compared to other regions, owing to the participation of global players and changing local regulations 
• Global exploration spend declined by about 31 percent to $20 billion in 2014, as major miners cut short their exploration spend, due to the falling commodity prices 

The Key Market Trends 

• Due to slowdown in the mining industry and the falling commodity prices, mining companies have been compelled to refrain from high capital expenditures and resort to  technologically intensive investments, such as mine technology products, which enable them to enhance the production level by improving the equipment performance and reducing the downtime

Global MRO Industry Trends

• Increasing levels of MRO outsourcing and adoption of Integrator model for MRO sourcing in developed regions like North America and Western Europe signal increasing buyer maturity and willingness to partner with suppliers 
• Global suppliers are entering new geographies in developed regions through mergers and acquisitions, thus offering multi-location solutions to global buyers
• Customers expect MRO integrated suppliers to provide highly tailored solution, with real-time access to information and just-in-time delivery for products and services 
• Additionally, due to increased information access, the demand for transparency is consequently increasing
• The fragmented MRO market in APAC and the MEA has produced a big opportunity for global distributors and integrators to tap this market
• These regions are considered to be developing regions, in terms of MRO Sourcing maturity, with OEM and Distributors being the preferred souring channels E-procurement is gaining popularity in Asian regions, like India and China. Increased purchase of low-value, high-volume spend is driving the B2B platform in these regions
• MRO consolidation is steadily being implemented by mature Indian buyers. Companies, such as, TATA Steel, BASF, Shell, PepsiCo, etc., engage in consolidation activities through established MRO distributors, like Rexel India

Global MRO Industry Drivers and Constraints

• MRO sourcing not being a core competency of most buyers, mature markets are increasingly seeing adoption of MRO outsourcing and integrated supply solutions and are reaping the benefits in terms of hard cash savings and manpower reduction. The awareness of the same is low in maturing/less mature markets, such as APAC, the MEA and LATAM 
• Large scope for MRO market lies in the shale gas processing equipment market, by component type, which includes compressors and pumps, internal combustion engine, heat exchangers, electrical machinery, and measuring and controlling devices

Market Overview

The MRO industry is propelled by industrial production. While the global industrial output is gradually increasing, so is the MRO market. The cost of products is primarily driven by fluctuations in raw material and oil prices. The cost drivers for manufactures are labor cost, raw material, oil price fluctuation, proprietary vs. non-proprietary and complexity of design.

The major cost components include:
Raw Material (Costs associated with the various materials used for manufacturing the parts), Labor (Prevalent market wage rates for labor), Administrative costs & overheads (Costs associated with the office supplies, sales office cost, accounting fees, MRO marketing, insurance, interest, legal fees, rent, repairs, supplies, taxes, etc.) 

MRO buyers relish the online experience of e-procurement, mainly from tier-1 MRO B2B suppliers. Moreover, e-commerce enables them to focus more on tail spend and ensures that c-part sourcing is streamlined into Spend Under Management (SUM). This eventually helps them to save cost.

Summary

What is MRO? MRO stands for maintenance, repair, and operations and it refers to the supplies consumed such as industrial equipment, consumables, furniture, and plant supplies required for upkeep. The MRO market was valued at over $600 billion in 2018 and by the end of 2020, it will grow to more than $660 billion. The high maturity markets include the UK, US, France, Belgium. The Netherlands, and Germany. The medium maturity markets include Canada, India, Japan, China, Africa, Brazil, and some parts of Western Europe. The major end-use industries include food and beverages, CPG, mining, automotive, technology, pharmaceutical, and oil and gas.

According to the MRO industry trends, a trade war is predicted which can cause inflation of up to 12 percent in MRO spare parts. The categories that make use of raw material will be affected as a result. If measures are taken to avoid this then they can lower the impact by a high level. Experts have recommended that those products which are OEM driven or critical ones should focus on long-term contracts. This can help provide big discounts and can save from tariff effects to a certain level. One of the expert recommendations is to focus on locally sourced spare parts.

The global MRO trends include global suppliers focusing on developed regions and making an impact there with the help of mergers and acquisitions. This has given an opportunity for global buyers. Buyers are more aware and so they require high transparency from MRO suppliers. Buyers are expecting customized solutions and they require information access and timely delivery of products and services. Due to the fragmented market, integrators and distributors have lots of opportunities. The MRO spend analysis shows that some KPIs include lead-time for product delivery, innovation for potential, inventory turnover ratio, and service level improvements. The MRO stock is important to understand too.

Experts state that industrial production is leading to an expansion of the MRO market. In Asia, one of the trends is e-procurement. India and China are particularly focused on this. Some companies in India such as PepsiCo and TATA Steel are engaged in MRO consolidation with the help of MRO distributors. The benefit of e-procurement is enjoyed by B2B suppliers who are in the Tier-1 category. E-commerce has many benefits and one of them is that it enables buyers to focus on tail spend. This helps in streamlining the C-part sourcing into the Spend Under Management also known as the SUM. This can help cut down on costs.

 MRO Market analysis shows that there are various drivers and constraints. MRO outsourcing is on the rise whereby high-cost savings and lower need for labor are some of the benefits. At present medium and low maturity markets such as LATAM, APAC, and the MEA are not aware of this and so haven’t used this opportunity. There is potential in the shale gas processing equipment market for MRO. There are many cost drivers for products including oil prices and raw materials. The main cost drivers for manufacturers include design, labor cost, oil price fluctuation, and raw materials.