MRO Strategic Sourcing: Research Sourcing Providers in the Market
Posted by Marshall Institute on Thu, Sep 15, 2011 @ 10:06 AM
In a recent blog post titled "MRO Strategic Sourcing: The Expensive Table Scraps", I explained that too many organizations leave money on the table due to poor procurement practices. I outlined 7 fundamental steps to optimize strategic sourcing. This post is the second in a 7-part series in which I will go into more detail for each of the 7-steps and discuss how it applies to MRO Storeroom operations.
Today, we’ll look at the second step – Research the sourcing providers in the market
7-Steps to Optimize Strategic Sourcing:
- Assess current spending: where and with whom
- Research the sourcing providers in the market
- Review the total cost of ownership (total acquisition costs)
- Identify & select qualified suppliers
- Negotiate contract and supplier agreements
- Implement strategic sourcing strategy
- Assess, audit, and measure
In step one we discussed base-lining our current spending patterns and breaking our spending into categories. Once we have developed the item categories we can now begin to research the players in the market that can supply those items. In most instances, when looking at the defining the categories, we tend to create too many. We need to be reasonable in the time and effort when conducting research for the suppliers in the market. I suggest looking at the top 5-8 top spending categories and address those needs first. We want to capture the potentially highest reduction and ease in developing our sourcing strategies. The illustration below is one suggestion how to capture and analyze.
Once this is complete now we can begin our research. In some instances it may make sense that you research integrated suppliers to satisfy your requirements. Integrated suppliers are used when a company consolidates its supplier base for the purpose of purchasing efficiencies, contract pricing and/or inventory management. They can almost be considered a “one stop shop” for many organizations. Other suppliers may be used for unique items or contracts where volume isn’t necessarily the fulcrum but specialty or services are. Marshall Institute Inc. does not endorse any specific group but examples of this type of Integrated Supply Chain are familiar names to many Fastenal, MRC, Grainger, Motion, Mcjunkin Redman, etc.
When searching the marketplace, specialized strategic strategies need to be considered such as industry specific (i.e. oil & gas, chemical, or pharmaceutical). Perhaps the suppliers need to be in specific geographic area(s) which limits the range of our choices. Reasons to consider this may be distance to market (i.e. lead times), taxes, duty/tariffs, geopolitical, natural disasters, or quality control.
There are many reasons to do research on the suppliers in the market but more importantly its finding the right suppliers that can offer what you actually require. Let’s not spend a whole lot of time negotiating a contract with a supplier offering a Caterpillar Backhoe Loader 416m when all we need is a weed whacker and visa verse!
Below are a few websites I’ve used to help me at least begin the search:
