Maintenance, repair and operations supply (MRO) spending makes up a significant portion of manufacturing facilities’ indirect costs. However, reducing these costs can be a challenge, as they result from the price of hundreds or thousands of individual supply items, from fixtures and tooling components for critical manufacturing equipment to trash bags and first-aid kits.
It’s tempting to simply tell department heads to cut supply purchase costs by five to 10 percent across the board and assume they’ll figure out how to accomplish it. But that kind of broad-brush approach will likely fail to work for long. Likewise, cheaper supplies can sometimes lead to increased costs, quality problems or other issues down the road.
In the last three decades, I’ve been in hundreds of manufacturing facilities to help them better control their MRO costs. At MSC Industrial Supply Co., we have a process for this that can produce significant, sustained cost savings as well as improvements in productivity, quality, safety and other measures: a business needs analysis.
Other companies offer services like these, but not every business needs analysis is equal. Here are the five key components you need to create a high-impact business needs analysis:
Secure Executive Buy-In
Sustainable cost savings and other improvements often require more than simply renegotiating supply contracts. These improvements will take time and effort, in part because they often involve multiple functional areas, including Finance, Purchasing, Maintenance and Operations, among others. Start by securing buy-in from the senior executives responsible for the facility. Their commitment to the process at the beginning will make everything else easier.
Set Clear Goals
As you involve senior executives, you should ask them to establish what they see as the most important goals for the analysis. Saving money, of course, is always one of a company’s goals. But as you gather input from leaders, you will find other pain points to address, such as inefficiencies in routine processes or excess inventory. Setting these goals also provides a way for you to measure the value of the process. Typically, a comprehensive analysis targets up to seven objectives.
Involve All Functions
As you collect the information needed for your analysis, involve every department head. This doesn’t have to be hugely time consuming; 20 or 30 minutes with each member of the leadership team will be all you need to understand their core processes and how they make MRO supply decisions. During these conversations, you’ll likely discover additional problems that might not be obvious from a review of purchasing data and may go unnoticed by high-level executives.
Map Out Processes
It’s not enough to just know the quantity of metalworking fluids and coolants used and how much they cost. You need to understand how and when they’re ordered, who makes the purchasing decision and how the payments are processed, as well as all the other details involved. By completely mapping out these processes from beginning to end, you can identify information gaps and spot-savings opportunities
Do It All At Once
Finally, it may be tempting to view this process as a side project, something you work on as you have time over the course of several weeks or months. This is a mistake, as you’ll have a much clearer understanding of problems and potential solutions if you do the project in a compressed period of time, over just a few days. Indeed, when MSC performs these analyses for clients, we frequently do the bulk of the work in a single day on-site at a facility. Doing it this quickly helps keep it at the top of everyone’s agenda, including the people to whom you need to provide information and the individuals who must approve the final changes to purchasing, inventory and other processes.
A business needs analysis can seem a little intimidating and time consuming, especially in the midst of all the other day-to-day operational demands you face. That’s why MSC offers a business needs analysis through our national accounts program. A thorough analysis can yield significant cost savings, process improvements and efficiency increases for years to come.
Darr Greenhalgh is senior manager of customer solutions at MSC Industrial Supply Co. He has more than 35 years of experience in procurement, project management, lean supply chain management and manufacturing in a range of industries.