3 February 2011 | Adviser Q&A

I am preparing a tender for a multi-site maintenance, repair and overhaul (MRO) procurement and supply and need some tips, especially on putting in controls to monitor supply/usage and spend.
Category manager, north London

Brynn Woods, Purchasing and distribution director, Brammer

The first step should be to understand MRO spend patterns by product, supplier and site. The objective should always be to consolidate the MRO supply chain into a smaller number of authorised distributors – or even just one – guaranteeing competitive pricing, product quality and continuity of supply.
Potential suppliers should be asked to quote on a standard “basket” of MRO purchases and provide a framework for pricing all other items.

The cost element will need to be balanced with suppliers’ ability to meet individual site operational, technical and service needs, with all ultimate “customers” – plant managers, maintenance engineers, etc – involved in the decision.

Effective monitoring and control depends on internal process controls linked to usage patterns – eliminating the “just in case” mentality, maverick spend and unnecessary stockholding. These issues can be overcome by outsourcing spares procurement and management to a proven MRO partner who can establish an “in‑site” – effectively a dedicated branch – paying only for parts used, reducing inventory and maximising the benefits of supplier consolidation.

Tom McKeag, Category manager – indirects, Weetabix

One of the most important aspects of a tender is being clear about how the successful company will be measured. This can be done using clear key performance indicators. You must be clear exactly what they are and how they will be measured and verified. Some examples you could include are:

• Stock age profile;
• Counter service response time;
• Stock unavailability;
• Carriage as percentage of total turnover;
• Savings;
• Stock availability on critical or non-critical items;
• Stock lead times from request;
• Stock reduction target;
• Health and safety standards.

Ensure that you hold a formal review meeting monthly with the key internal stakeholders and their counterparts from the external company. You may wish to use a balanced scorecard to track changes month on month.

Andrew Christophers, Interim manager, ARC Purchasing Management

All major MRO suppliers should be able to provide you with various reports that give quality management information. As a starting point get them to propose the reports they would provide, which you can compare when you receive your proposals. Vendors will want to push this as one of their key strengths. There should be no issue in providing you with line item detail that is plant and even cost-centre specific. Many can also provide online ordering systems that will enable bespoke controls to be put in place to help avoid unauthorised purchases.

Key to this is the added value that the suppliers can provide using this information, such as cost‑reduction targets that they will buy into. The reports your suppliers provide should be able to demonstrate the savings they deliver (from your perspective, not just theirs) which you can then use to demonstrate the success of the exercise.

Key points

• Effective monitoring depends on internal process controls linked to usage patterns
  
• You must be clear about how performance will be measured
  
• The reports your suppliers provide should demonstrate the savings they deliver
  

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• Please note: responses can only be given on this page, represent writers’ personal views and should be regarded as general guidance only.