MRO Supplier Management – Price is Key... Only After the Product is Actually Delivered

A fair amount has been said recently about reversing the trend in keeping suppliers at arm’s length. Many companies are finding that bringing their suppliers into their internal conversations can lead to sustainable supply chains and considerable overall long-term cost savings. But in the world of MRO, where one company can literally have hundreds or even thousands of suppliers, how do you begin to create an effective supplier management program?

With all of the sourcing options including OEMs, integrated suppliers and general distributors, it’s difficult to put together a comprehensive indirect procurement program that can satisfy both corporate objectives and plant needs. Many procurement teams find themselves caught in a cycle of sacrificing price for service, or worse, service for price. It takes a clearly-defined centralised strategy and strong leadership to create a successful procurement program, something not always given priority in the MRO world.

So where does a good supplier management program start?

An initial supplier qualification process is integral in setting the baseline for both pricing and service levels. This can be a challenging process right from the start if your organisation has operations in different geographical areas or usage differs greatly among plants. De-centralised indirect procurement is not uncommon because of the belief that plants can buy best in their area and that centralised buying would be too large of an undertaking. Although this may be an effective strategy if indirect spend is limited, significant opportunity exists in evaluating the entire indirect spend of the organisation to realize the benefits of aggregation of pricing and processes. Many suppliers appreciate the value of aggregation as well and will work to put together a program that works for your entire organisation; which is why Evolution’s sourcing model has had such great success!

Evolution takes supplier management to a whole new level by fully vetting all suppliers on behalf of its clients. Because Evolution acts as an extension of its clients’ buying teams, it measures and tracks KPIs like pricing, response times, shipping times and more throughout the year to ensure proper compliance. All this information is available on demand in the Evo Gateway and is reviewed quarterly with clients. Having this information on hand also allows Evolution to remain supplier agnostic and build a process around buying in a way that is best for the organisation as a whole.

Evolution’s strategic suppliers appreciate this process as well since it ensures their ability to obtain more business through our client relationships as long as they can meet the documented expectations. Through this partnership, Evolution is able to consistently achieve 12-17% initial cost savings for its clients. To learn more about how your organisation can benefit from Evolution’s trusted network of suppliers or include your current suppliers in Evolution’s source-to-pay process, visit our Downloads page or contact us directly.