Accenture Spend Trends Report: MRO Category Intelligence – Not One Category, Not One Opportunity (Part 2)

The Thinker

In the first part of our update on MRO (maintenance, repair and operations) sourcing trends, we highlighted a number of our own observations as well as those that Accenture made in its recent Q2 Spend Trends Report. As our analysis continues, we turn our attention, courtesy of Accenture, to the area of supplier innovation and material substitution and how to access it. Accenture suggests there is no substitute for face time when it comes to learning from MRO suppliers. Specifically, attending supplier conferences is an important place to learn.

Accenture notes “Supplier innovation conferences can help brand owners gain access to new ideas and innovation that leverages suppliers’ work across multiple brand owners and customer segments. Improvement ideas can range from ways to utilize new or substitute materials to process efficiencies.” Further, “In areas like packaging, supplier conferences can be a strong source of innovation delivering waste reduction and value enhancement ideas that can drive savings and improve sales performance. However, to be successful, brand owners need to approach conferences as an opportunity to collaborate more closely with strategic suppliers and involve executives and cross-functional teams representing R&D, supply chain, sales, marketing and quality—not just procurement.”

As we observe in the Spend Matters PRO research on the topic (See: MRO Sourcing is Changing Fast: What’s Your Strategy? and MRO Sourcing: Forget Negotiations, Start With Good Visibility and Data), supplier innovations such as substitute materials/products and distribution/metering kiosks can help drive MRO results. Yet fundamentally, the first step to MRO success is building a portfolio sourcing strategy.

As Spend Matters observes in the first research brief linked above:

Just as we can segment overall spend into different categories in the famous Kraljic 2×2, we can create a similar sub-segmentation for MRO. We’ve attempted one below that suggests four distinct approaches within an MRO portfolio: leverage pre-negotiated contracts, pursue a strategic sourcing process, engage in an advanced sourcing approach and supplier partnering based on analytics/data visibility, demand management, inventory (e.g., VMI) and a true exploration of the customer experience (e.g., think big — not Ariba/SAP for buying on a notebook or tablet with an eProcurement tool, but a Grainger self-service kiosk). Note, this segmentation is appropriate for standard MRO SKUs but may not be appropriate in the case of capital investment and facility build-out, which may require different strategies – or a combination of approaches.

And here’s how it looks in practice:

MRO Sourcing Strategy Segmentation

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