Successfully Embedding MRO E-procurement in Operations

According to McKinsey indirect spend has been growing 7% per year since 2011. Indirect material flies under the radar with low-cost items such as the now-ubiquitous PPE or Maintenance, Repair and Operations (MRO) items like cutting tools and spare parts. Although indirect spend is growing it continues to be less than 10% of company purchases and keeps a low profile.

Siloed Spending

Even when the procurement process sets its sights on indirect spend it is difficult to gather all the relevant spend data as these purchases are fragmented across business units and locations. When each business unit and location is asked to do things better and faster, many take the quickest and easiest route to ensure they have materials to meet their operational objectives. The path of least resistance is often a B2C or even a B2B e-commerce site which offers familiar user interaction and accepts the enterprise purchasing card and does not track required accounting data. It may be “better, faster” but is difficult to trace and control.

Unifying B2B Purchasing

E-procurement solutions offer an opportunity to businesses looking to provide a seamless B2B ordering process across operational silos while adhering to enterprise purchasing guidelines. These solutions deliver familiar online shopping interactions through a technology known as punchout. Punchout allows a user to make purchases at an approved supplier’s e-commerce site directly from the e-procurement system. At checkout, the shopping cart, with product details and pre-negotiated pricing, is transferred to the e-procurement system. The e-procurement system then creates a Purchase Order (PO) or requisition which is routed for approvals. The organization retains a permanent digital record of accurate transaction details. Integration with ERPs or accounting systems add further efficiencies by eliminating paper processes and enabling enterprise data sharing across business units. Spend visibility allows a Procurement Manager to assess the amounts spent, with whom, for what purpose, and whether the vendor is delivering on commitments.

Linking MRO Inventory Use and Procurement

Access to real-time and historical MRO inventory is critical for optimizing operations such as machine or facility availability and repair turnaround. This data also contributes to optimized procurement. For example, understanding utilization patterns across locations helps in consolidating purchasing for volume discounts. Many procurement solutions also provide some form of inventory management. For enterprises with multiple locations or those that leverage industrial vending machines for inventory management, a software solution should be able to integrate all data into a single holistic view for its users.

People are the Keys to Success

The benefits of implementing an e-procurement solution are only achieved when the solution is used and used consistently. But a new solution means new processes and new systems which require a change management strategy. Change can be positive by eliminating the exchange of paper requisitions or the frustration of going to the storeroom only to find an item is out of stock. But change also triggers fear and irritation of having to learn another new system “chosen by head office”.
Successful change management is critical to conquering the siloed spend challenge. A winning strategy stages the implementation, building champions along the way. An e-procurement solution must make each user’s job easier not harder. An intuitive system softens the learning curve but adoption is even higher when the e-procurement and inventory system is also a productivity tool for the end-user. Encourage adoption by ensuring the inventory features support the storeroom data entry devices, their preferred strategy for counting and data management, and is fully mobile-friendly. Invest time to associate inventory items with account numbers so re-ordering doesn’t require individual G/L input, making it easier for users and reducing the risk of future data entry errors. A planned change management strategy will leave employees feeling empowered while working within a procurement-compliant framework.

About Tofino Software

For over a decade Tofino has been helping customers optimize operations with real-time spend and MRO inventory visibility. Tofino’s solution delivers streamlined supplier interactions through punchout, point-of-use procurement, automated inventory replenishment, and digital workflows. Tofino’s cloud-based solution is available from any browser or iOS/Android device. Tofino bridges organizational silos to help companies achieve operational excellence while managing procurement spend.
To learn more about Tofino, visit http://tofinosoftware.com.

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