Move to strategic MRO sourcing puts new focus on relationships
MRO buyers say they are moving from tactical buying to strategic sourcing.
By Susan Avery -- Purchasing, 11/13/2008 2:00:00 AM
An uncertain economic environment presents new opportunity for MRO purchasing professionals to differentiate themselves and their companies by taking the function to a new level. MRO stands for maintenance, repair, operations.
The MRO buyers attending the 11th Annual Institute for Supply Management's Indirect-MRO Group conference in Denver recently are making a transition from tactical buying to strategic sourcing and, in so doing, are working to align themselves with both internal customers and suppliers.
Nancy Q. Smith, director of strategic partnering at Exemplary Performance in Annapolis, Md., provided attendees with ammunition they need to go back to their companies to collaborate with internal customers. She calls them clients.
"Expectations of purchasing professionals are expanding, and you are in a unique position to drive excellence like no other function," she said. "Purchasing needs to build trust, and it all starts with gaining an understanding of the mindset of internal clients." To do this, she suggested purchasing gain a strong knowledge of the internal client's function, the company's business and to ask lots of questions to internal clients.
Terry Wahlgren, director of global indirect materials and services at Eaton Corp. in Cleveland, Ohio, backed this up in his case study presentation. At Eaton, which received Purchasing's Medal of Professional Excellence in 2007, the objective of the sourcing strategy for MRO and indirect is to satisfy plant sites' material and service requirements by aligning with leveraged core competent suppliers which ultimately minimizes total cost.
Wahlgren told attendees that his team works closely with internal clients to understand business requirements for materials, technical support (personnel) and technology and then selects the sourcing model that best fills them.
"We try to help our internal stakeholders and customers conduct business better," he said.
In another case study, Steve DeFord, commodity manager for indirect operations at Rockwell Collins in Cedar Rapids, Iowa, talked about obstacles facing purchasers responsible for MRO and indirect. Two he mentioned are the perception that MRO is not a strategic spend area and buying from too many suppliers.
Centralizing MRO and indirect sourcing helped Rockwell Collins realize some efficiencies, he said, but the move comes with its own set of challenges. Among these are implementation. "It all comes down to putting good tools in place, using them with great suppliers and continually improving processes to benefit internal customers," he said. Rockwell Collins received the Medal of Excellence in 2005. DeFord is a member of Purchasing's All-Star MRO Buy team for 2007.
Drew Schramm, senior vice president, global supply and logistics at Herman Miller in Zeeland, Mich., opened the conference with a keynote on balancing green with getting the green. While he spoke mostly on the topic as it relates to purchasing direct materials and design for the environment, he did offer up advice that applies to MRO and indirect sourcing.
As an office furniture manufacturer, the RFPs (requests for proposal) and RFQs (request for quotations) Herman Miller receives are asking for information on sustainability. As such, Schramm reminded attendees to be careful for what they ask and to ensure first that the supplier is financially stable. "Commitment is expensive," he said. "There is opportunity cost."
Managing Costs. These themes carried over to the second day of the conference, with Tim Underhill, president of Strategic Business Solutions in College Station, Texas, telling attendees that the economy drives actions of MRO buyers and "since the future looks uncertain, companies in all probability are refocusing efforts on reducing costs."
To that end, he suggested MRO buyers collaborate with suppliers because "suppliers have knowledge that can make your company more profitable." Through the value-added services they offer they can either help increase revenues or decrease costs. The first step toward collaboration, he said, is for purchasing professionals "to understand your internal customers before you involve suppliers. And, it's your responsibility to lead the team and get people involved. You have to find value for everyone on the team."
Two MRO purchasing professionals who have built trust in relationships with both internal clients and suppliers presented a session on outsourcing the MRO buy called "Indirect MRO Empowerment."
Alisha Vaughn, purchasing manager—capital and MRO for MAPEI Corp. in Deerfield Beach, Fla., was an attendee at last year's conference and new to her current position. Tasked with the responsibility of creating an MRO and capital purchasing operation for 12 plants in North America, she decided to outsource the MRO side to Storeroom Solutions of Radnor, Pa., also attending last year's conference. In a year, working with the supplier, she now has a handle on MRO and is concentrating her efforts on the capital side.
The relationship, she said, "put me in the driving seat. I have full control. Looking ahead, the sky's the limit to what we can do in purchasing."
Tim Larson, vice president and chief purchasing officer at Michael Foods in Minneapolis, also spoke on how he gained control over the food processing company's MRO spend by working with Storeroom Solutions. Michael Foods has 100 plants nationwide.
"Communication, cooperation and trust are keys to success in our relationship with the supplier," Larson said, adding that now he also has metrics on the MRO buy that he never had before.
More than 120 purchasing professionals with responsibility for the MRO and indirect buy as well as distributor executives attended the conference.
At the start of the conference, Michael Smith, chairman of the ISM Indirect MRO Group and a professor with Western Carolina University, said, "These are very interesting times. Purchasing professionals are facing challenges. Improving your skills is important to your organization. This is a great time to differentiate yourself."
Douglas Henninger, purchasing agent with the Denver Water Dept. and a past president of the National Association of Purchasing Management—Denver, welcomed attendees to his hometown.
An exhibit of MRO suppliers was open during breaks in the conference. On hand were: Fastenal, IHS Dolphin, Inventory Management Analysis, Precision Industries, Storeroom Solutions, Vinimaya and Cribmaster.
Networking opportunities included popular small group discussion sessions which hit on such topics as centralization vs. decentralization, global sourcing and hiring and retaining talent.
The 11th annual ISM Indirect MRO Group conference was preceded by a workshop on negotiating with single and sole source suppliers by Joe Rice of Benedict Negotiating Seminars in Valrico, Fla. There was also a post conference workshop by Underhill on measuring total cost and a post-conference seminar that delved into trends in indirect supply management by Smith and Lee Buddress, a professor with Portland State University.
Joel Thomas is conference chair. For information on the ISM Indirect-MRO group, see: www.indirectmro.com.
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