Managing MRO Procurement With a Modern Purchasing Platform
Running a manufacturing business is a two-sided coin: While finance manages cash allocation and spend control, the facilities and maintenance teams must ensure the physical location functions at maximum capacity. Overseeing both operational efficiency and upkeep of a large manufacturing facility requires project management, cost control, and production optimization.
Those who keep the production lines running shoulder more than just maintenance schedules—they play a critical role in companies' long-term success and profitability. To achieve this, maintenance, repair, and operations (MRO) management teams rely on strategic planning and effective purchasing strategies, making MRO procurement a key area for digital transformation. By adopting the right software, businesses can streamline their MRO processes while ensuring the organization's hardware stays efficient and reliable.
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What is MRO procurement?
MRO procurement is the process of purchasing goods and services necessary for optimized manufacturing. MRO procurement focuses on purchasing items across several facilities and operations categories, including:
- Safety equipment
- Industrial supplies
- Machinery parts
- Office supplies
- Equipment maintenance
- Repair supplies and services
MRO procurement is critical to supply chain management, as it helps ensure teams have the tools and components necessary to avoid equipment downtime or production delays. According to a recent sourcing report by Keelvar, nearly three-fourths of procurement professionals struggle with unpredictability in sourcing and purchasing goods. Streamlining indirect procurement helps businesses avoid unexpected delays or disruptions, boosting operational efficiency and enhancing profitability.
What are the major categories of MRO management?
Most purchasing and service scheduling for manufacturing plants falls into four main categories. These areas of focus each contribute to uninterrupted production and cost-efficient operations.
Tooling and consumables
The tooling category handles the implements used in manufacturing, like drills, molds, and specialized manufacturing components. Consumables are the materials and supplies that help complete manufacturing activities, such as lubricants, adhesives, and personal protective equipment (PPE).
Infrastructure repair and maintenance
Maintaining the facilities and production environments in a manufacturing facility is the first step in ensuring efficiency and productivity on the job. Infrastructure maintenance covers everything from grounds management and building repairs to facilities services and routine upkeep.
Material handling equipment maintenance
A production line helps ensure manufacturing efficiency by moving materials and components from place to place. For instance, a manufacturing line may use conveyor belts, transport containers, or even advanced options like robotic process automation (RPA) tools to keep physical production activities on target.
Production equipment repair and maintenance
Equipment maintenance is mission-critical to upholding manufacturing cadence and quotas. Facilities achieve this through scheduled and contracted maintenance programs that prevent potential issues.
Operational Efficiency: The Complete Handbook
Learn 4 ways a centralized procure-to-pay process increases operational efficiency and expedites business growth.
Top challenges in MRO inventory management
Although MRO management is a vital strategy for sustaining production and ensuring operational efficiency, its wide-scale demands make it susceptible to certain pitfalls. Procurement can play a pivotal role in navigating these obstacles by optimizing supply chains, helping teams negotiate better terms with suppliers, and aiding in implementing strategic sourcing techniques that mitigate risks associated with equipment downtime and inflated costs.
Here are the top obstacles common to most manufacturing management scenarios:
Inaccurate records: Difficulty in maintaining accurate and up-to-date records of inventory levels can lead to either excess stock or shortages.
Lack of standardization: Discrepancies in categorizing and labeling parts makes it hard to track and reorder items efficiently.
Poor forecasting methods: Challenges in accurately predicting the future demand for MRO items can result in overstocking or understocking issues.
Vendor management issues: Managing multiple suppliers causes complications, such as varying lead times, quality issues, and lack of volume discounts.
Inefficient use of technology: Underutilization of modern inventory management systems means missing out on automated ordering processes and real-time data analytics.
High carrying costs: Storing excess inventory creates unnecessary financial burdens associated with storage costs, insurance, and depreciation.
Component obsolescence: Holding on to spare parts for too long leads to obsolescence, especially as equipment gets upgraded or replaced.
Limited cross-location visibility: Operating across multiple locations makes achieving visibility into each site's MRO needs and inventory levels challenging.
Compliance and regulatory challenges: Ensuring stored MRO supplies meet industry standards and regulations can be complex and time-consuming.s clear to see how Alec has made a substantial impact on the end-to-end payment experience.
What are the impacts of poor MRO management?
It can be tempting to try to save on short-term costs by reducing MRO management, but companies should consider the long-term consequences of such a decision. Poor MRO management can lead to significant disruptions in production and decreased productivity or product quality. Associated equipment downtime, higher maintenance expenses due to emergency repairs, and lost revenue quickly diminish any short-term benefit.
Before reducing spending in MRO to realize cost savings, consider these potential impacts:
- Production delays: Lack of adherence to maintenance schedules can lead to increased downtime and significant production delays due to equipment failures.
- Higher maintenance costs: Poor management creates elevated operational costs resulting from emergency supply orders.
- Poor resource utilization: Reduced productivity means workers must wait for equipment repairs or replacements.
- Increased risk: Safety risks due to using outdated or malfunctioning equipment can lead to accidents and liability issues.
- Missed opportunities: Poor MRO creates lower overall profitability resulting from increased costs and reduced output.
The better course of action is to manage MRO spending and maintenance schedules more effectively. This approach retains cost savings without compromising production or company reputation.
5 Ways to simplify MRO procurement
Managing maintenance, repair, and operations spending and schedules effectively is crucial for the longevity and efficiency of any business. Implementing a strategic approach to MRO management and financial operations not only safeguards against increased risks but also ensures opportunities for growth and profitability.
Here are five low-investment ways to streamline your MRO procurement processes for better outcomes:
1. Define your procurement policy
Poorly defined MRO and procurement policies make it harder to manage maintenance and inventory. Creating clear procurement guidelines for these activities can help finance and operations teams control costs and reduce issues.
Key elements of a well-crafted procurement policy for MRO management include:
- Outlining stakeholder roles and responsibilities
- Defining acceptable procurement procedures
- Specifying criteria for supplier and product selection
- Creating an approval workflow for purchases
- Highlighting relevant compliance requirements
- Developing a workflow for requisition, fulfillment, and payment
A strong procurement policy also helps teams set up other systems, like KPI monitoring, vendor performance management, risk management, and compliance. Building a solid foundation for MRO and procurement practices ensures everyone understands their role in maintaining operational standards and adhering to budgets.
2. Centralize the purchasing process
Centralizing the purchasing process helps teams gain better control over spending, streamlines procurement workflows, improves visibility, and enhances negotiation power with suppliers due to increased volume commitments. This approach also simplifies administrative tasks and enables more effective tracking of expenditures and inventory levels. Centralization improves cost efficiency and creates a more cohesive procurement strategy for organizations.
3. Automate accounts payable (AP) processing
Automating AP makes life easier for your accounting team and improves data quality within the procurement function. With automation, AP can process invoices more quickly to ensure timely payments. Automation within a procurement platform also provides real-time visibility into spending for better budgeting and cash flow management.
4. Streamline the vendor pool
Consolidating your vendor list is a strategic move that can significantly improve procurement management. By streamlining and optimizing supplier relationships, organizations can negotiate better terms and discounts, ensure access to high-quality products or services, and save time. Concentrating on vendors that comply with the company's standards and regulations also enhances risk management.
5. Use procurement technology
A procurement platform improves purchasing and payment management by automating routine tasks, including ordering, invoicing, and making payments. A platform like Order.co offers advanced features like real-time analytics, spend management tools, and payment processing.
Operational Efficiency: The Complete Handbook
Learn 4 ways a centralized procure-to-pay process increases operational efficiency and expedites business growth.
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Alternatives to MRO inventory management
Cloud-based procurement management tools streamline manual processes, offering an efficient alternative to manual MRO inventory management. These cutting-edge solutions facilitate real-time tracking, automated reordering, and advanced analytics, thereby minimizing human error and optimizing stock levels.
A software solution like Order. co integrates strategies like predictive maintenance schedules and more accurate procurement management to help businesses manage MRO inventory while reducing costs and improving operational efficiency.
Fast reordering: Order.co features a quick, customizable order catalog so stakeholders can automatically reorder MRO items based on their needs and preferences. The centralized platform ensures manufacturing operations teams avoid stockouts for mission-critical items, and guided purchasing features help teams stay within budget while addressing plant maintenance and equipment needs.
Real-time order tracking: Procurement software offers visibility into current supplier stock levels, shipping data, and pending orders, allowing for more accurate plant management and project planning. Stakeholders can see their purchase order progress in real time and assist in the approval process for new requisitions.
Supplier management: A centralized procurement solution brings all vendor data into one place, making managing supplier performance much easier. The platform helps teams consolidate orders, spend information, and supplier performance metrics for future data analysis and reporting.
Spend analysis: Using a software system with analytics tools helps provide detailed insights into MRO spending patterns, identifying opportunities for cost savings through bulk purchasing and enhanced supplier negotiations.
Customizable reporting: Software can help accounting teams generate customized reports on inventory levels, procurement cycles, and maintenance schedules to support strategic decision-making.
Integration capabilities: A procurement tool seamlessly integrates with other systems, such as enterprise resource planning (ERP) and supply chain management (SCM), creating a unified operational framework.
Capital access: Order.co Financial Offerings can unlock up to $500k in capital, facilitating equipment and maintenance purchases to boost operational efficiency without the financial strain of expensive loans or net terms agreements.
Simplify MRO procurement with Order.co
As one of the most flexible procurement platforms on the market, Order.co offers MRO teams a powerful way to procure and oversee supplies for maintenance, repairs, and operational management. The platform’s vendor-agnostic approach and customizable guided purchasing features ensure that MRO professionals get exactly what they need at the right price. Reporting and spend analysis tools make it easier for maintenance teams to forecast spending, plan purchasing, and ensure consistent access to mission-critical materials and components.
Want to learn more about using Order.co to power procurement for MRO activities? Sched