Published February 8, 2012
In a recent presentation to an APICS Group on MRO storeroom outsourcing, a member of the audience raised her hand to voice a complaint.
She said that as a Purchasing Manager, she was involved in the process of outsourcing the MRO purchasing function to a dot.com MRO purchasing company. The decision to hire the company was based upon that company’s claims of cost reductions in the areas of price savings and the recovery of the cost of processing purchase orders. The company claimed that the cost of installing the company’s system would have payback from price and processing cost savings. The lament from the Purchasing Manager was that the claims of savings did not take into account the additional burden her company assumed to support the new process.
She averred that, “Yes, prices were reduced on those parts where compliance existed. Where the process was circumvented, there was no price benefit. The claim of a percent reduction on the total MRO spend did not occur.”
Most important, in the area of transition recovery, purchase orders, per se, were reduced; however, the audit trail required another set of administrative costs that were not recognized in the company’s claims of ROI (Return on Investment) benefits.
In other words, the benefits touted by the MRO purchasing company looked great; however, the additional burden assumed by the using company was not considered in the value claims.
The Purchasing Manager stated that MRO outsourcing does not work and would not even consider another value presentation. “Outsourcing” has become a bad word with her.
Claims that do not address all related costs are false and result in companies being denied the real benefits of a properly operated 3PMRO process.