This post is based on material from the Spend Matters research brief, Everything You Wanted to Know About MRO Sourcing But Were Afraid to Ask (registration required – temporary free access to the content is underwritten by BravoSolution until December 2013). This brief contains excerpts from the Spend Matters PRO pieces MRO Sourcing is Changing Fast: What’s Your Strategy? and MRO Sourcing: Forget Negotiations, Start With Good Visibility and Data.
The effective sourcing of the most strategic and largest MRO areas requires that procurement organizations invest the time to segment their spend effectively by fully exploring different supplier options and understanding internal preference. They should also quantify the cost of that preference, letting stakeholders decide whether their personal preferences and preferred constraints justify an award decision that adds cost.
Beyond fully considering this internal and internal/external dynamic, Spend Matters recommends that companies tackling the MRO category give full consideration to the following strategies:
- Giving weight to the sometimes criticized GPO model (this approach has a place for certain MRO areas) – and using it potentially to fund additional investment. Contracts from GPOs, such as Corporate United, may have a place even in companies that are more advanced in their MRO sourcing activities.
- Prioritizing technology investment in analytics and sourcing solutions. We can’t overstate the importance of investing in the right portfolio of sourcing technologies, including but not limited to spend analysis, supplier management, category management/market intelligence, and basic and advanced e-sourcing tools.
- Putting off eProcurement decisions around MRO until organizations have full visibility into MRO spend and a segmented sourcing strategy . Ariba, Coupa, SAP, Oracle, SciQuest, and others, from a P2P perspective, are all but irrelevant when it comes to identifying the right savings opportunities to pursue and actual efforts involved in taking out cost (there, however, analytics and sourcing tools may be quite useful!)
- Taking advice from unbiased parties only. For example, the case for “integrated supply” approaches may sound attractive when presented by an MRO distributor with value-added capabilities, but always consider the source.
Read the full Spend Matters Research brief: Everything You Wanted to Know About MRO Sourcing But Were Afraid to Ask (free, registration required). Temporary access to this material is underwritten by BravoSolution until December 2013.