Joel Roth wants to talk about MRO.

Looking to open up discussion between purchasing and distribution, the president of Fulton Supply Co. in Atlanta, has written a book based on his experience in the industrial distribution business called The 20% Solution: A Practical Guide to Dramatic Cost Reduction in MROP Procurement. (MROP stands for maintenance, repair, operations and production.)

And to really spur the conversation, Roth is making the book available free for download at www.the20percentsolution.com.

“MRO is one of the best and biggest untapped areas I know to achieve significant cost reduction,” he says. “But many companies never glimpse its true potential.”

That's because MRO typically makes up 20% of a company's annual buy and conventional thinking is that the dollars are “peanuts” compared to spending on raw materials and purchased components. But these areas tend to be ones that are mined over and over for savings and are probably tapped out. And companies today may be looking for new areas for savings in this uncertain economic climate.

How to reduce cost. In the book, Roth offers common-sense advice for managing MRO costs. The first step is relatively simple, but often neglected by purchasing, and that's to develop a set of objectives. “Saying you want to reduce costs by 10% isn't good enough,” he says. “Neither is saying you want to improve quality, delivery or service. You need substance behind those statements.”

In his role at Fulton Supply, Roth often meets with MRO buyers. Most, he says, don't really have a good idea of what they expect to accomplish with MRO, nor do they have a clear picture of what makes up the spend. “If you don't know what you spend, if you don't have good information to work with, you are at a handicap,” he says. That's the substance.

Roth suggests MRO buyers approach their suppliers for help with mining information on spending. He says suppliers can provide data fast, professionally and accurately. “But purchasing has to be willing to work with suppliers, and not treat them like the enemy. There are good partnerships between purchasing and distribution, but mostly it's still us against them [with suppliers]. It's not logical. The success of any good supplier is tied up with the success of its customers.”

For example, Roth says the purchasing operation at one company put its MRO requirements out to bid and received responses back from 15 suppliers, including Fulton Supply. Not hearing back, Roth contacted the buyer who was trying to make sense of it all. “We found out there was a lot of derisiveness across the company,” he says. “Corporate and the plants couldn't agree. We talked with them and helped crystallize and focus their thinking.”

Once purchasing decides upon its objectives, Roth suggests buyers select a small number of pre-qualified suppliers. “Bring in those you know are competent and whose core competencies fit with what you want to achieve,” he says. “Provide them your objectives and data. But boil it down to meaningful figures. Don't clutter it up with one-time buys or obsolete items. That only makes it more difficult to get to the kernel of truth.”

He advises buyers not to put limits on suppliers. “You take away a lot of potential ideas and knowledge that can help you,” he says. “Let suppliers come back with what they propose in terms of approaches and programs, and see what they have. It doesn't cost a penny.”

At this point, purchasing should be able to see which suppliers understand its needs. Then comes time for real negotiation to begin. But there's no need for purchasing to make any change instantaneously, says Roth suggesting that purchasing create a task force of employees, interns or suppliers to research the ideas.

“Although the process sounds time-consuming and laborious, it's not because purchasing really is letting suppliers do all the work,” he says. “Purchasing still controls the process. Just poke your head in once in a while to ensure the company is getting what it wants and is on the right track.”