The Sewing was Sent to San Salvador

By Guest Editor

June 02, 2017 at 3:20 PM

There WAS a company in southeast USA who manufactured private label sports clothing; they HAD five plants within a 10-mile radius of each other. The company CEO initiated a call to all plant disciplines asking for all cost reduction ideas to be implemented because of the threat of foreign competition.

The director of maintenance had been a long-time critic of the duplicated and unnecessary costs the company assumed from the internal MRO supply chain. All five plants had separate processes for ordering, receiving, and storing MRO parts; all requisitions went through “central purchasing” which rewrote the request on a purchase order and placed the order to a supply base of over 150 MRO suppliers. The maintenance director answered the CEO’s request stating that a considerable amount of savings could be made by consolidating the MRO buy and eliminating duplicated functions. This MRO project was assigned to the purchasing director who was directed to investigate the opportunity.

Purchasing put out a RFI to 50 of their MRO suppliers; most did not respond because they have little knowledge of companies internal cost let alone how to reduce it. Some of the suppliers offered ideas that had to do with price concessions, but only one understood the real financial and non-financial costs the company assumed when they consumed MRO…not when they purchased it.

This one supplier was an implementer and sustainer of the new MRO integration, not a distributor, and, as a result, maintained a process that defined the company’s total cost of ownership [TCO] and offered a program that would deliver what the CEO desperately needed. The program included utilizing master data leadership to define all parts consistently, a program to insure asset reliability, consolidation of the multiple stock locations into one storeroom staffed by the integrator and a CMMS system that would coordinate and control all necessary maintenance activities. The answer to optimum MRO inefficiencies.

But wait….here comes the rub. The program proposed also included cost reductions from the elimination of the standard purchase order process. All P.O.’s could be eliminated [not necessary to maintain the audit trail] and invoices reduced to two per month (a yearly reduction from over 15,000 to 24). This meant that it would be necessary to find other work for four purchasing clerks because there would be no more P.O.’s to place (another unnecessary duplication). When the purchasing director realized that he would lose four people from his staff, he felt that his position in the company would be lessened; he would not be as important. Therefore, he did not support the new change ideas that the company needed and reported that the present MRO processes were at optimum; in other words, he did nothing except report a five percent price reduction goal instead of a 25-30% guaranteed TCO reduction offered by the new integrator. In similar situations, when purchase orders are eliminated, staff personal can shift duties to accommodate increased plant activity; they rarely lose jobs.

Eventually, the company did not get the cost recovery needed and had to outsource the sewing function to San Salvadore; they closed the American plants. The purchasing director lost his job as did the people on his staff. So, the short sightedness of one director contributed to the unnecessary loss of American jobs including his own.

Would the MRO savings have made the difference? No one will really know, but it surely could have. The opportunity certainly should not have been denied simply to protect the short-sightedness of a single director. 

Tags: MRO MRO savings mro suppliers purchase order process central purchasing
Category: News Article

Guest Editor


Please add a comment

You must be logged in to leave a reply. Login »

Related Content

Data Quality and Accuracy Are Key Enablers of MRO Efficiency Gains

Dennis Bouley

Management of corporate maintenance, repair and operations (MRO) requires the tracking of thousands of SKUs and the generation of many transactions that are of low dollar value in nature. In most organizations, MRO spending amounts to less than Read More

Software Audits are Inevitable and Everyone is Responsible

Abinaya Govindarajan

No company is immune to software audits. Poor leverage with top software vendors, suppliers’ focus on audit income as a source of additional revenue, complex software contracts and licensing models, Read More


Marisa Brown

Millennials have an unwarranted reputation in the workforce as short-term employees always looking for a better opportunity, including in the supply chain management (SCM) work force. Read More

Supplier Profiles


Staples Advantage is the one supplier that offers all the business solutions you need, all with the expertise of a specialty vendor. Read More


It started in 1972 with an idea, a new concept in distribution. Today, Digi-Key Corporation is one of the fastest-growing electronic component distributors in the World. The stimulus for this growth is Digi-Key's customer-centered business philosophy… Read More

Lunney Advisory Group

Lunney Advisory Group was founded in 2007. Our firm is not your typical consulting company. Some members of our firm are highly qualified and experienced industry executives/practitioners while others are full time or adjunct university professors.… Read More


What CEOs Expect Of Purchasing

Guest Contributor

Procurement and supply management leaders have a seat at the table, and management’s expectations are high. But what do CEOs really want, and is purchasing delivering on these expectations? This webcast looks at how procurement and supply management … Read More

Growing Purchasing Influence On Indirect Spending

Guest Contributor

At world-class companies, purchasing’s influence touches just about every area of spending. But, how exactly do procurement teams get to the point where other departments approach them for help with sourcing such indirect categories as human resource… Read More

Procurement-Finance Collaboration

Guest Contributor

Procurement & finance are two business functions which are often at loggerheads with each other. One reason for this is the lack of perception alignment on an important metric of procurement and finance performance - 'savings'. Read More