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MRO: Saving Opportunities with Integrator

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by Harnek Singh , Senior Research Analyst
31 March 2014

As more and more fortune 500 companies focus on cutting down indirect spend, MRO has been given special importance because of its channel complexity and strategy execution. Hidden margins in the supply chain make it more critical for the customers to evaluate their suppliers/partners before entering big contracts. This paper discusses various factors that would enable the buyer of MRO products to make key decision of partner selection by better understanding the services offered by them, outsourcing scope and expected savings level for different parameters. It would focus on how integrators have evolved their capabilities to better serve their customers and bring down other costs apart from material costs. The findings of this paper are based on various case studies and expert?s view of how major MNC?s are focusing on their core capabilities by outsourcing MRO procurement related activities and bringing down their spend levels across geographies. MRO purchasing accounts for 60-80% of procurement executive?s work in a manufacturing company but the dollar value doesn?t justify the efforts. However the MRO products are critical for day-to-day operations, and hence the primary focus of procurement managers is to spend as little time without shortfall of supplies. To achieve their client goals, distributors offer various additional services to ensure supply, but that still leaves the client with managing those supplies while dealing with so many product categories. In such a scenario, Integrators have been successful in filling this void. In mature regions, Integrators have evolved as a single stop shop and their claims of 5-15% spend reduction/year has also got attention from clients. This value is only a monetary estimate of activities that can be quantified. There are other benefits such as uptime, service levels, spend controls which the integrators deliver as a part of their engagement.

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