Getting the Most Out of MRO Supplier Relationships

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Amid disruptions, many companies have begun to rationalize their supplier bases, identifying which suppliers are critical and which ones are not. While this has decreased the number of suppliers companies use, it has also allowed them to strengthen their relationships with critical suppliers.

Unfortunately, MRO operations often have an abnormally large number of suppliers for such a small percentage of a company’s spend. Here, we'll explore how MRO procurement can achieve more value and cost savings through strategic deal-making with their most critical suppliers.

Creating Stronger Agreements with Suppliers

Most companies value their critical supply partnerships, as do the suppliers themselves. However, this doesn't always stop suppliers from taking advantage of stale and old contracts. Often, MRO procurement leaders won't' know that suppliers have tweaked the prices of parts and services unless they are actively monitoring their agreements and pursuing better deals.

MRO procurement leaders can achieve more value and cost savings through strategic deal-making with their critical suppliers. This process starts by identifying the organization's most critical suppliers, then devoting time and resources to improving those supply chain relationships.

Once a list of critical suppliers is established, MRO procurement leaders should do the following:

• Understand what each supplier does best and how they fit into the organization's overall MRO strategy.
• Communicate expectations and objectives to suppliers.
• Onboard suppliers into MRO procurement's technology ecosystem.
• Monitor supplier performance and address any issues that arise.

A strong supplier agreement should be mutually beneficial to both parties. It should outline clear expectations and responsibilities for both sides, as well as what will happen if either party fails to meet its obligations. The agreement should also include price and delivery commitments, as well as any quality or performance guarantees.

Obtaining Visibility Through Technology

MRO procurement leaders can achieve results by establishing better visibility into supplier performance. This visibility allows MRO procurement leaders to identify and address potential issues before they cause delays or disruptions in the supply chain.

Visibility also allows MRO procurement leaders to more effectively manage supplier risk, as they can quickly identify which suppliers are not meeting their commitments. By onboarding suppliers into MRO procurement's technology ecosystem, MRO procurement leaders can establish a culture of collaboration and trust with their critical suppliers.

According to McKinsey & Company, companies that regularly collaborate with suppliers have demonstrated higher rates of growth, lower operating costs, and greater profitability when compared to their industry peers.

Overcoming Obstacles To Better Supplier Relationships

Naturally, achieving better supplier relationships for critical business operations is not without its challenges. Multiple factors make collaboration challenging.

For example, there are multiple steps involved with onboarding suppliers into a new collaborative ecosystem. These include:

• Implementing new collaboration technologies
• Convincing suppliers to adopt those technologies
• Onboarding suppliers into the new technology ecosystem
• Encouraging supply partners to use actively use technologies
• Generating value through better deals and discounts

Many organizations will be tempted to search for faster initiatives to draw more value from their MRO supplier relationships. While these "quick wins" can yield results, they aren't typically as valuable as enhanced collaboration, nor do they lead to more valuable relationships in the long term.

Establishing better relationships may also involve leaders from across business functions, especially for MRO procurement. Because MRO impacts so much of the businesses, making changes to procurement processes could require buy-in from multiple leaders.

Build Better Supplier Relationships

MRO procurement leaders can achieve more through strategic relationships with their most critical suppliers. Achieving better relationships can be a long process, and it may involve the implementation of new technologies. But solidifying these partnerships now will be crucial to value generation and cost savings in the future.

To learn about building better MRO supplier relationships, don't miss ProcureCon MRO 2022, happening from October 17th to 18th at the Hyatt Regency in Atlanta, Georgia.

Download the agenda today.