WHAT IS MRO OR INDIRECT PROCUREMENT?

Published June 27, 2022

What is MRO or ‘indirect procurement, why do most companies underestimate its importance, and how can a strong MRO strategy improve your bottom line?

MRO stands for maintenance, repair, and operations. In procurement terms it refers to the products and tools purchased that keep an organization running. It’s also referenced within the context of ‘indirect procurement,’ meaning products that enable business activity but are not directly incorporated into any final product you create.

RS Group, of which Synovos is part, is a supplier of MRO products and services to a huge variety of industries, from utility firms and the aerospace industry to manufacturers and the public sector. The product range of over 650,000 includes electronic components, electrical, automation and control, and test and measurement equipment, and engineering tools and consumables. Services include MRO supply chain management, which includes inventory management and optimization, strategic sourcing and procurement, data management and more.

While many of these products are relatively inexpensive, they are often critical to keeping an organization running. Without them, operations could grind to a halt, which would have a huge impact on productivity and profits.

MRO strategy

This is one of the key reasons why it it’s so vital to have an effective MRO strategy, but it’s also important because many businesses underestimate the amount spent on MRO products over the course of a year and often don’t understand the significant hidden costs associated with MRO procurement. Getting MRO right makes it possible to achieve long-term, sustainable efficiency savings that help your bottom line.

While individual MRO purchases are often for low-value items the overall process of making those purchases costs, on average, twice as much as the actual product. Our research shows that an organization spends $2 on the MRO procurement process for every $1 spent on the product itself. This may be because too much time is spent researching the cheapest product, negating any actual savings, for example, or an inefficient procurement process that has too many stages in the purchase-to-pay process could also create additional costs.

Joined-up approach

While procurement departments are usually essential in driving change, our research shows that enacting a successful MRO strategy relies on all stakeholders involved in indirect procurement working together, which includes engineering, operations, and finance functions.

On the RS Group’s Connected Thinking website there is a wealth of expert information, thought leadership and case studies examining the different areas of MRO procurement, offering advice on how to create or improve your MRO strategy and benefit from the savings this can create.

 

Note: This article originally appeared on Connected Thinking and has been updated.