|
Trends in MRO procurement
Report predicts steep rise in distributor
cost-savings documentation, integrated supply
by Paul V.
Arnold
Thirty-four percent of
end-users say their company utilizes cost-
savings documentation as a way to evaluate the performance of their MRO
distributors, but 60 percent say they will use the metric by 2003. These were
among the findings of a recent report sponsored
by the Industrial Distribution Association and the Industrial Supply
Manufacturers Association.
The report, “2001 Trends in
Distribution: An Update,” was based on feedback from 173 end-users at U.S.
manufacturing companies, as well as input from 121 industrial distributors and
73 MRO product manufacturers. It was conducted
by Texas A&M University and the
Thomas A. Read Center for Distribution Research and Education and presented at
an ISMA/I.D.A.
convention in late 2001. The report is the sequel to “Distribution
Beyond 2000,” released in late 1999.
Besides the trend toward cost
savings as a performance metric, the report says that over the past two years
manufacturing companies have increased their use of
integrated supply, Internet
purchasing, supply base reduction and technology, and will continue
to expand their use of these tools in the next two or more years.
Of the 173 end-users surveyed,
47 were “low volume” purchasers of MRO products (less than $100,000 per
year), 66 were “medium
volume” ($100,000 to $1 million) and 60 were “high volume” (more than $1
million). The majority of
end-users surveyed held senior
management purchasing and supply chain job titles, but other job titles
included plant manager, production
manager, operations manager, plant engineer and maintenance manager. Documenting
savings, value
Texas A&M researchers see
2001 as a launching pad for cost-savings documentation. While 66 percent of
end-users say their company does not currently use the metric, 39
percent of that group stated their organization was heading in that direction in
the next 24 months.
In addition to implementation,
74 percent of end-users stated that distributors showing the ability to document
cost savings had the potential to earn more of their
company’s MRO business. That
figure included 65 percent of low-volume purchasers, 73 percent of medium-volume
purchasers and 81 percent of high-volume purchasers.
A
surge in integrated supply
While distributor documentation
was a new piece to the study, integrated supply proved to be an established
trend that keeps on growing.
End-users report that 31
percent of their annual MRO purchases are done within the framework of an
integrated supply contract. This is nearly double the results found in the 1999
study. And, end-users said integrated supply will handle 55 percent of their MRO
purchases in 2004 and 62 percent in 2006.
Integrated supply is a
component of a larger trend toward supplier reduction. Sixty-five percent said
they reduced their supply base in the past five years, and 46 percent said they
plan to keep on cutting. End-users in the study reduced their supply base, on
average, from 211 suppliers to 88 since 1996.
Internet’s
influence grows
Utilization of the Internet for
purchasing MRO products hasn’t rocketed at the rate end-users predicted in the
1999 study, but it still marks an area of growth and opportunity.
The 1999 study said end-users
conducted 5 percent of their MRO purchases over the Internet; they expected to
hit 22 percent by 2001. The new report shows they buy 10 percent of their MRO
products on the Net and eye 34 percent by 2003.
In a broader look at
technology, end-users currently use and plan to use the following procurement
tools: online catalogs (67 percent now, 79 percent in the near future), bar
coding (43, 65), e-mail (89, 91),
Web sites to check order status (52, 76), Web sites for order placement (54, 78)
and Web sites for technical support (82, 88).
This article appeared in the
April/May 2002 issue of
MRO Today magazine. Copyright 2002. Back
to top back to News
and notes section archives |
