Published September 29, 2020
Many organizations choose to outsource their MRO operations, and for good reason. Managing a large number of suppliers with relatively small spend can take away time and resources from focusing on major capital and strategic purchasing. At the same time, availability of MRO materials is crucial for avoiding operational downtimes. Choosing a partner that aligns with your organization and goals is extremely important to ensure program success. Here, we outline what you need to know before selecting a partner.
3 Rules When Choosing an MRO Provider
1. Ask questions & disqualify providers based on inadequate answers
Early in the search process, it’s important to ask key questions to ensure each company on your shortlist has the approach to achieve your key goals.
Important Questions to Ask Potential Partners:
- What is your approach to optimize, manage and collect MRO data in order to uncover value? Do you have a data team committed to this process?
- Are your contracts performance-based? Do you track key KPIs with benefits and penalties for both parties?
- How should a CMMS function to support MRO processes?
- What are the requirements necessary for excellence in supply chain management?
- Do you offer guarantees?
2. Agree on clear & mutual KPI’s with benefits and penalties for both parties
KPIs should be agreed upon at the outset of the partnership. Mechanisms for tracking and a monthly or quarterly reporting schedule are essential. KPIs demonstrating operational and financial value include those related to safety, on-time delivery stock item fill rate, cycle count accuracy, and inventory reduction. On-time delivery and stock item fill rate ensure critical items are available, and inventory reduction keeps the cost of maintaining the storeroom down without sacrificing availability.
3. Obtain agreement from all disciplines to support your SOW with positive activities
An integrated supply program involves stakeholders from different disciplines in your organization. Developing a statement of work with the new partner is an opportunity to gain alignment with everyone on expectations, timing, and goals. The SOW should clearly define milestones that will achieve your goals and should include key roles and job descriptions from your company and from your new partner.
Do’s and Don’ts of Choosing a Provider
- Gain alignment from all key stakeholders that change in MRO management is critical to your plant operations
- Set aside the time and resources to effect the necessary change
- Define existing problems and set goals to eliminate them
- Institute an action item-time schedule for implementation with assigned duties and status reporting
- Execute the agreement and implement; measure and report benefits to senior management
- Review an annual plan for cost-out & continual improvement incentives
- Pick your provider based solely on perceived lowest material price– labor and operational savings must also be taken into account
- Limit your search to distributors– explore how working with an integrated supplier brings value to your organization
- Assume that all plant personnel are positive about the change process; beware of the existence of naysayers who will create situations designed to defeat your efforts.
RS Integrated Supply leverages $500 million of buying power to reduce your materials costs and transaction costs. We are also the experts in MRO supply chain and uncover operational value through data management and continuous improvement. Contact us to start a conversation with one of our supply chain experts to identify your current MRO challenges and potential solutions working with an integrated supplier.