July 27, 2023

MRO Management Strategies for Manufacturers to Drive Cost Savings

MRO Management Strategies for Manufacturers to Drive Cost Savings

With the majority of procurement initiatives targeted at streamlining direct costs, maintenance, repair, and operation (MRO) costs are often overlooked. 59% of procurement leaders have reported feeling pressured to reduce operational budgets, with another 40% stating the need to improve asset performance.1 

This makes reducing unplanned downtime by ensuring all the right parts and equipment are readily available at any given time an absolute necessity. Adopting MRO management strategies can ensure manufacturers proactively deal with procurement risks instead of following reactive maintenance policies.

Top 3 Strategies to Optimize MRO Supply Chain

As manufacturers grapple with several procurement risks, including fragmented supplier base, low spare parts standardization, excessive inventory holding, low catalog usage, and high lead times, reducing indirect costs can feel daunting. Below, we outline the top three MRO procurement strategies that induce cost savings and improve operational efficiency. 

Implement Spending Analytics

The global distribution of manufacturing plants paired with a large decentralized user and supplier base entails incurring millions of transactions, which hold massive scope for cost savings. Manufacturers can identify operational inefficiencies within their MRO procurement processes by thoroughly analyzing spending patterns. 

Businesses must deploy techniques like ABC analysis to categorize MRO items based on their impact on production and cost to prioritize critical item purchases while reducing costs on lower-value items. To put this into perspective, procurement leaders spend almost 30%2 of their time making manual purchases. 

Leveraging data-driven software tools, such as Moglix Solutions, can enable manufacturers to track their spending in real time, acquire actionable insights, and gain alternate product recommendations at better pricing, leading to substantial cost savings.

Introduce Process Transparency

Manufacturing’s MRO supply chain involves several procurement and inventory processes to ensure regular maintenance and replacement of assembly line machines, conveyor belts, and industrial motors. However, such multiple processes also imply multiple error possibilities. For instance, poor visibility into quality and compliance processes can raise procurement costs by 10%.3

Manufacturers must encourage cross-functional collaboration among operations, maintenance, and vendor teams by establishing clear communication channels and documenting detailed procedures for the proper management of MRO procurement processes. By ensuring thorough accessibility and transparency of procedures for all stakeholders, manufacturers can identify and remediate inefficiencies and quality slippage, promote accountability, and enable efficient decision-making, thus contributing to cost savings.

Establish Strong Supplier Relationships

Typically, manufacturers contract with hundreds of vendors to cater to unplanned and unanticipated stockouts and MRO purchases, which forces them to forgo the benefits of high-volume purchases. Hence, strategically consolidating your supplier base and collaborating with them can yield cost benefits. To illustrate, Moglix’s MRO procurement solutions help reduce the supplier base by 80%.4

Manufacturers must establish key performance metrics (KPIs), such as price competitiveness, quality standards, and delivery reliability, to evaluate supplier performance and prune their supplier tail end accordingly. Entering into long-term agreements facilitates better price negotiation and builds trust, which is necessary for cost optimization.

Augment Your MRO Management with Moglix’s Solutions

With Industry 4.0, powered by predictive data analytics, artificial intelligence, and the internet of things, becoming the new normal, harnessing data-driven insights has become intrinsic to streamlining MRO procurement processes. Using a centralized platform, like Moglix’s solutions, can empower manufacturing companies to better detect process deficiencies and maintenance needs, optimize workflows and resource allocation, enhance operational excellence, and gain complete visibility of their MRO supply chain.

To put this into perspective, Moglix helped cut operational costs by 5% for a major EPC company focused on civil and environmental infrastructural development. Faced with the numerous challenges of a fragmented vendor base, exponential inventory holding costs, and poor spending control, it sought to improve process efficiencies by aggregating its remote sites through Moglix’s solutions. Download the case study or get in touch to learn more.