MRO & MORE
MRO & MORE focuses on maintenance, repair and operations sourcing strategies and looks at ways purchasing operations can better control costs surrounding the buy. George Krauter has more than 40 years’ experience in the fields of industrial distribution and MRO purchasing.
If they don’t go out the door…
Attempts to study the effects of labor on a total cost of ownership (TCO) analysis of MRO costs are inhibited by the inability to associate parts of people’s time to that cost. A company recognizes that there are potential cost recovery opportunities for MRO parts by hiring a third party that has a total focus on indirect materials storeroom management. The company’s focus is manufac ...... Read More
Comments (0)The definition of insanity…or the emperor has no clothes
Albert Einstein is attributed with saying that the definition of insanity is, “doing the same thing over and over and expecting different results.” If you shoot pool with a garden hose and you can’t put a ball in a pocket, do you continue with the hose or find another cue stick? Do you continue to look in the mail box for your mail during your lunch time when the mail comes at ...... Read More
Comments (11)Time and the savings dilemma; where is purchasing?
As VP of operations, “Jim” is responsible for production output as well as P&L (profit and loss) goals. Production is running near capacity and, with it, the inherent problems of people and asset performance. In addition, senior management has asked Jim to take out a substantial amount of dollars from his operating budget.As Jim looked for ways to trim his operating budget, he as ...... Read More
Comments (1)Bad descriptions. Bad decisions. High costs.
The world of MRO is replete with holes, errors and uncontrolled costs (not just price). One example is the condition of product descriptions. It is rare that a company’s SKU (stock keeping unit) listing has complete descriptions; most are missing one or more important attributes. In an effort to reduce cost, the purchasing group will put together a Request for Quote (RFQ) for commodities. W ...... Read More
Comments (4)Let's run our own cafeteria
We want to run our own cafeteria. Okay, we need to hire cooks, busboys and buyers. We need to buy equipment and contract with food service suppliers. We could even issue a market basket and have food service companies give us their prices on lettuce, hamburgers, pizza, etc.Well, maybe not. Let’s hire an expert who knows how to run a cafeteria. We can check on quality and consumption but we ...... Read More
Comments (2)Barriers to realizing value from TCO for indirect-MRO
There is a change taking place in the world of MRO in that total cost of ownership (TCO) considerations are becoming the focus of supplier selections. Although factors other than price are stated to have value in supplier selection, low price was, and still is, the determinant because it is perceived as measurable. Since market basket processes compare less than 4% of the buy and prices change fro ...... Read More
Comments (1)Fear of the unknown…a barrier to progress
In this down economy, change is crucial to survival for companies as well as individuals. To resist consideration for change is to court disaster. I recently came to know a situation where it was evident that considerable benefit for plant operations could occur if a change in process was implemented. The proposed change would involve various plant disciplines who would be affected but had differe ...... Read More
Comments (0)There is no such thing as a dumb question…or is there?
Corporate purchasing at a major company has been charged by management with cutting MRO costs. Through a series of evaluations of cost-cutting opportunities, corporate purchasing determined that the total cost of MRO represented “low hanging fruit” and assigned a cost recovery project to the indirect materials manager. The manager visited each plant to evaluate opportunitie ...... Read More
Comments (1)In a down economy…Stay pat?
With the current economic downturn, companies are looking for any and all ways to save money, reduce costs and, most of all, conserve cash. An automotive company removed all cell phones from its employees; another laid off its janitorial staff; most have restricted travel and have discontinued non-core events. Is it time to change, or draw in and stay pat? If a company is in the decision proces ...... Read More
Comments (0)It’s 2009: Does anyone know where their MRO is?
It continues to amaze me that companies big and small, well-known and obscure, cannot give an accurate figure of what they spend and/or of the value of their MRO inventory. When asked what a company’s MRO spend is, there are estimates that can vary 100%, 200%, 300%. About $1.5 million. No, it’s more like $2.5 million, if we count the pallets and shrink. Wait, the spot buys are ...... Read More
Comments (11)Year after year price reduction programs: A fantasy world
Senior management asks purchasing executives for year after year savings. In the indirect world, this means that, if you spend $20,000,000 in 2008 and the selected program provides a 10% reduction in 2009, the price is now $18,000,000. If the contract term is three years, the “year after year” concept would require a price reduction of $5,420,000…not including any pr ...... Read More
Comments (5)