Primary suppliers help standardize parts list
Staff -- Purchasing, 3/6/2003 2:00:00 AM
Schneider Electric North America (SENA) is shifting its MRO purchasing strategy.
Until 2002, the global electrical equipment supplier had been purchasing MRO items in North America through three distributors: Each of the suppliers was responsible for providing MRO items to SENA plants located in a specific geographic region. Facilities in the South purchased MRO items from Cameron & Barkley; plants in the Midwest bought supplies from Graybar and those situated near Cedar Rapids and Lincoln used W.W. Grainger for their maintenance buy. In 2001, SENA spent about $80 million on MRO items in the U.S.
While SENA had narrowed down its supplier base, the strategy didn't allow for product standardization or take full advantage of the company's purchasing leverage.
Recently to improve coverage of the total corporate buy, SENA "beefed up our staff and increased our focus on MRO," says Karen Riegert, MRO and purchasing manager. Based at a SENA plant located in Oxford, Ohio, Riegert reports to David Clay, market director, services. He reports to Vic Venettozzi, vice president, purchasing and real estate, in Nashville (PUR: July 18; 2002; p. 53).
Now SENA's purchasing operation is taking a "commodity basket" approach to the MRO buy. The same three primary suppliers will continue to fill the bulk (75%) of SENA's MRO requirements; each is responsible for providing all of the plants with a grouping of like items. For instance, one now provides SENA with tools (power, hand, cutting and abrasives); another is responsible for safety and security, material handling and janitorial supplies and the third provides lighting and electrical equipment.
Riegert says the purchasing operation decided to continue working with these three suppliers because of their past performance, history and relationship with SENA. SENA has agreements with additional distributors for other groups of MRO items needed by the plants, i.e., power transmission products and fasteners.
To order MRO items, requisitioners at SENA's U.S. plants (Riegert's internal customers) use the company's e-procurement system called eMALL, which is based on the Commerce One platform. Use of eMALL is being expanded to include Mexico and Canada.
Once logged on, a user can search internally managed catalogs (suppliers provide quarterly updates) for items. eMALL provides users with data on product availability. Orders are sent directly to the supplier. A ghosted American Express purchasing card is the payment vehicle for the items ordered. Monthly reports on spending activity are used by the eMALL team to help consolidate items listed in the catalogs. Requisitioners are discouraged from ordering direct from supplier sites. The team is working to integrate existing crib replenishment software and internal electronic kanban systems for additional data flow through eMALL. This integration will have a significant impact on standardization efforts.
Moving toward a more standardized list of MRO items, the purchasing operation is working to better define those listed in the catalog. When a user searches for, say, safety glasses, the catalog may now provide information on 100 different styles. "In the future, we'd like it to come up with a handful that we standardized on," says Riegert. "Now, we're working with users so that they become familiar with the system. Once we get data and better understand the volume of purchases we will narrow down the catalog."
Suppliers are assisting with the effort to standardize. In the next few months, Riegert is planning to join the distributors in trilateral negotiations with their suppliers, the manufacturers, to better leverage SENA's MRO spend. Future supplier agreements will include cost reduction/standardization targets that ensure suppliers are working toward the same goals.
"I've met with the suppliers and talked with them about the manufacturers we want to work with and how we plan to standardize, narrowing down the catalog content and focusing our buying power within eMALL."
In addition to benchmarking each supplier against the others on service and price (based on a list of the top 100 items), Riegert measures performance through results of user surveys which monitor such metrics as delivery, quality, and responsiveness. She also looks at content (catalog) and ease of ordering, two important measures when using an e-procurement system to order MRO items.
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