Furthermore, reliance on a proprietary source increases the risk of supply disruptions resulting from, for example, geopolitical events or natural disasters. A manufacturer’s bargaining power is usually very limited in these exclusive contractual arrangements. Proprietary. It is quite common for a company to purchase 40% to 70% of spare or replacement machine parts directly from OEMs or a single supplier that is the only known source.Heavy-manufacturing industries, such as infrastructure and mining, report the highest MRO spending as a percentage of revenues.Įach of three broad categories of MRO purchasing can generate excessively high costs for a company that fails to manage them well: MRO spending by manufacturing companies worldwide totals more than Although the parts and services used in MRO processes may seem peripheral to a company’s operations, the associated costs are far from trivial. Ineffective management of MRO processes hurts a company’s performance in four interrelated ways. The better availability of spare parts promoted a 15% improvement in the throughput of the manufacturer’s bottlenecked equipment. A pharmaceutical manufacturer reduced the idle time associated with breakdowns through more aggressive spare-part inventory management. The manufacturer’s initiatives included better planning for spare-part purchases, expanding the scope of individual contracts, buying from aggregators, and sourcing from low-cost countries (LCCs). For example, a large steel manufacturer reduced its MRO spending by approximately 10% and its transaction volume by approximately 25%. The savings potential from optimizing MRO spending and planning is-in most cases-significant. In all industries, poorly managed MRO processes can mean unnecessarily high costs, low plant and worker productivity, poor product quality, and elevated inventory-holding costs.
MRO spending, which includes expenditures for services and spare parts, ranges from 0.5% to 4.5% of revenues, depending on the industry. Maintenance, repair, and operations (MRO) is a critical area. To ensure their competitiveness in the rapidly changing global marketplace, manufacturers in all regions are seeking ways to radically reduce their costs. Technology, Media, and Telecommunications.
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