By partnering with MRO suppliers, purchasing can help lower inventory levels, streamline processes—and better manage the company's sales growth.

Such is the case at O'Reilly Auto Parts in Springfield, Mo. The $2 billion auto parts retailer is growing 20% annually, and has done so for the past 20 years. O'Reilly operates more than 1,700 stores nationwide and plans to increase that number by more than 10% before year end.

MRO stands for maintenance, repair and operations, the goods and services that keep a facility up and running. O'Reilly spends more than $15 million annually on MRO, with packaging, IT and maintenance, the company's biggest buys.

"As we continue to add more stores, from about 120 a year to about 190 this year, we have the ability to pull from our MRO suppliers," says Gregory Beck, vice president of purchasing at O'Reilly. "Without that support, we'd have to add not only more workers, but also more warehouse space just to accommodate the inventory needs for those additional stores. Our suppliers help us grow without having to add more resources."

In an effort to better manage costs and streamline operations, O'Reilly has reduced its MRO supplier base from 100 to about 35. One long-time supplier that has benefited from the consolidation is Grainger, an industrial distributor based in Lake Forest, Ill.

O'Reilly's relationship with Grainger is one that Beck and his team consider strategic and continue to work to develop. They especially like the distributor's responsiveness. When the auto parts retailer recently built a new returns facility in Houston, for example, Grainger was there to supply much-needed 12-ft. fans in relatively short notice.

"One strategic way we've been able to work with the supplier is for them to develop pre-packs of MRO products that go to each of our new stores," says Beck. The pre-packs consist of three pallets of items including buckets, brooms, chairs, lights, clocks, mirrors and safety signs. "By using Grainger for our store pre-packs, we are able to free up almost $200,000 in inventory investments as well as space in our distribution centers for our core business, auto parts distribution. With Grainger, we have nearly 100% fill rates on our pre-packs, something we were not able to do ourselves."

Beck: “Our relationships with our MRO suppliers are growing.By working with them, we’re able to focus on our core business of auto parts retailing and less on MRO purchasing.”

Looking to further improve internal efficiency at O'Reilly, Beck is leading an initiative to integrate the company's systems with those of its suppliers. For instance, the team would like the stores to be able to electronically order items directly from Grainger rather than from its own distribution centers.

Another initiative would connect Grainger to O'Reilly's EDI (electronic data interchange) system so it can reduce costs and improve accuracy on receiving purchase orders at its facilities. O'Reilly connects electronically with its suppliers to receive auto parts, and is now looking to expand that system to its MRO purchasing process.

"We consider our relationship with our MRO suppliers as continually growing," says Beck. "By working on the prepacks and going forward with the direct-to-buy-from-the-stores' initiative we're able to focus more on our core business and we don't have to devote as much space and manpower to our non-core business, or MRO purchasing."