By George E. Krauter
In my first installment in this series, I pointed out how those within organizations opposed to outsourcing of the MRO function erect obstacles to success. These individuals or groups of individuals I identified as “obstructionists”, and I pointed out some of the methods they utilize to undermine those who are attempting to cut MRO costs through an outsourcing approach.
Listed below are several more tactics to be aware of in order to avoid a situation where your outsourcing plans are either delayed or set up for failure:
Be aware, the obstructionist will call your supplier’s source (claiming to be your supplier) and obtain your supplier’s price which is devoid of the markup to which you have agreed. The obstructionist will now say that the part in question can be acquired for less than the agreed contract price, ergo: “THEIR PRICES ARE HIGH; THEY ARE COSTING US MONEY!!
For example: “I was paying $10.00 for SKU # 1234, and now my budget was charged $10.80 when I withdrew the part; this will crush my budget…These high prices are not worth it; this program does not work for me”
In this case, note that there is no mention that the SKU at $10.00 was purchased two years earlier and that, if purchased from the previous traditional supply base, would have been much higher than $10.80. The savings were there; facts are distorted.
For example: Flan Part #34: Quantity 1 each price: $25.
Flan Part #34: Quantity 25 each price: $15.
With no allusion to the quantity difference, the obstructionist’s conclusion (voiced to management): “This new supply program is costing us money. Look at this; they are 40% high in price for this Flan part!!”
The consultant’s proposal was proven unacceptable and rejected. Management required that the consultant retract their claims; they did so in a small paragraph on a back page of the company report. Quality performance vs. low price must be considered.
A lesson learned regarding all of these tactics is that, on any given day, a price on any MRO SKU can be beaten. Your supplier has presented a price comparison guaranteeing a specific price reduction as a percentage of the aggregate. Specific SKU’s of significance can be reduced in price to add to the overall price benefits, but should not be used as false generalizations to defeat the total benefits inherent in properly applied third party MRO outsourcing endeavors.
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.
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