By George E. Krauter
About $150 billion in MRO materials is purchased annually in the US. There are thousands of MRO distributors competing for these dollars.
The selection process MRO consumers utilize to procure those materials varies from simplistic to the sublime …. from attempts at structure to “Go Get It Yourself” …. from corporate dictates and audit trails to utilization of “P” cards.
Most companies pay little attention to MRO. A major reason is that knowledge on “How to Improve” or “Why Change” is minimal. A familiar refrain: “Let’s go out on quote and show price saving comparisons that satisfy management. Besides, MRO is only 6% of our spend; let’s concentrate on the other 94%.”
RFPs, RFQs, etc. often state that “Price” is not the major determinant in supplier selection; “Services” et.al. are the most important factors.
The RFQ/RFP (RF) process is extremely costly regardless of the side you sit on, supplier or requestor. Committees are formed, meetings and webinars are scheduled to establish what data should be included; the various disciplines develop and share opinions based upon how it relates to their internal functions. This affects a long, costly and arduous set of requests and responses.
As mentioned above, these meetings exist and are costly and redundant for both requestor and responder. The time required to complete the process often drags out over six months to a year in some cases. The data submitted gets old and stale leading to adjustment requests by the winning supplier after the contract is awarded. These adjustments are permitted because there is no alternative. You cannot go out and request a re-quote that only elongates the time where savings are not realized. The result is that the selected provider may or may not be the best source for your company. The truth is that the existing RF process is flawed and does not necessarily produce the “best deal”.
Why is the process the way it is? “Because,” managers will say, “this is the way we have always done it. There is no other way to satisfy management that we have the best deal and have them accept the results of the process as optimum…We have done our best.”
Well….This is just not so. There are alternatives.
In my next post, I’ll outline the necessary steps in selecting the right third-party MRO service provider.
George Krauter, former founder and president of Industrial Systems Assoc. [I.S.A.] has retired as vice president of Synovos.
Currently, he has initiated, "George Krauter Consulting [GKC]" for effective reliability and cost recovery for consumers of MRO materials. George is a recognized authority on the management of the MRO supply chain and support for maintenance reliability programs. His book, "OUTSOURCING MRO...FINDING A BETTER WAY" is available from Amazon and from Reliability Web.com.
He is published in Uptime, Modern Distribution Management, and Supply and Demand Chain Executive. George has conducted seminars across North America, in Europe, and in the U.A.R. as well as a guest speaker at Temple U., Howard U., Duke, and MIT.
George is a graduate of Temple University; he lives with his wife, Joyce, in Bucks County, PA. All grand kids live within eating distance. He can be reached anytime: email@example.com.
George E. Krauter
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