Don't Bury MRO Supplier Innovation

By George Krauter

January 23, 2012 at 9:49 AM

Provider “A” presents a new and highly effective spending control and TCO (Total Cost of Ownership) reduction to an industrial facility in the Southeast. The facility can realize a 20-25% spend recovery in a major spend area.

Corporate headquarters hears of the proposal and directs the Purchasing department to go out on a quote for the process.

First, the process is unique in its application and cannot be duplicated by traditional processes. Second, the company is over 65 years old and did not conceive of a change nor did any of their suppliers offer a change. Now, these other suppliers will scramble and do a “me, too” and offer their versions.

The effects: A delay in the benefits by 4-6 months (the time to create and process the RFQ, Request for Quotation) and the selection of an existing supplier (“B”) that did not conceive of the idea and is forced into the process with little knowledge or experience … a design for failure.

Provider “A” has lost incentive to continue to provide pro-active ideas to save money for clients. Provider “B” failed, which caused the corporation to reject the concept and fail to realize cost recovery dollars. Eventually, the company sent significant operations overseas in an effort to cut costs. This loss of American jobs could have been avoided if Provider “A” had been given the opportunity to provide the TCO benefits necessary to sustain the corporation.

These situations contribute to inaction so that innovative ideas are buried and America continues to lose advantages to foreign competition. What to do about them?

George Krauter

As the originator of the concept that became known as integrated supply, George Krauter currently serves as Vice President for Storeroom Solutions, Inc. Frequently spotted at industry events and various industry functions, Mr. Krauter brings a wealth of insight and hands-on experience to indirect materials cost recovery methods.

Mr. Krauter’s career began in Philadelphia and carried him through management capacities in all disciplines of the indirect materials supply chain. Following his tenure as Vice President, Sales for a large industrial supply distributor, Mr. Krauter co-founded the first integrated supply company in the US: Industrial Systems Associates (ISA). As an internationally recognized authority on innovative methods that define and eliminate duplications in the traditional supply chain for non-capital expense materials, Mr. Krauter’s concepts led to industry distribution procedures known as Integrated Supply, JIT II and other cost outsourcing techniques within the MRO supply chain. Following the sale of his then multi-million dollar company, Mr. Krauter joined Storeroom Solutions first as sales consultant, then as Vice President working in sales and marketing.

An authority on innovative methods in distribution and MRO outsourcing, he has been published in several publications including Modern Distribution Management and Purchasing magazine as well as a featured blogger, most recently at www.mypurchasingcenter.com. In 2011, he was selected as one of Supply and Demand Chain Executive magazine’s Provider Pros to Know. George participates as an industry practitioner teaching classes at Temple University in Philadelphia, PA and Howard University in Washington, D.C. He has held seminars on distribution cost recovery at MIT and Duke, presented internationally in Oslo, Puerto Rico, Mexico and Dubai and has served on the President’s panel for the Conference Board in New York City. He is also a frequent speaker at industry association events including ISM and APICS.

George has a BA in business administration from Temple University and an MBAA (MBA almost) in sales & marketing.