MRO Sourcing Goes Global: Article Review
The sourcing process entails operations concerned with how and where a business’ products and services can be obtained. Companies accrue the opportunity to identify and select potential suppliers with the best value. Maintenance, repair, and operations (MRO) involve goods or services used in the manufacturing of the final product offered by a particular business (Carey, n.d). MRO sourcing has long been a local or regional affair. However, several companies have resolved to extend their strategies globally, only if the required conditions are satisfied. Organizations must identify the best practice areas in MRO sourcing and enact measures to improve them, thereby enhancing their performance.
First and foremost, an organization should identify the appropriate spend type in its expenditure base. A spending category is a grouping of goods or services with similar characteristics. United Technologies Corp., UTC, has developed MRO as its primary spend type in purchasing, which is more of an indirect spend category (Susan, 2009). These supplies constitute a significant part of the organization’s purchases. Nonetheless, more effort is needed to lower costs and improve the company’s profitability. Improving its category knowledge is a good start at boosting activities under MRO. Thus, I would suggest that the organization outsource a segment of its MRO, like inventory management. In this way, the company will reduce inventory-cost levels and enhance the performance of its processes.
Additionally, a company should analyze its potential distributors and the supply approach in its sourcing processes. Research has shown that most of the suppliers in the U.S. conduct their businesses globally, while almost half are setting up their stations internationally. UTC works with North American integrators in its Pratt &Whitney facility and others in the Carrier site (Susan, 2009). The company uses an integrated supply approach where the suppliers buy in goods and services from low-cost areas, source locally, and develop relationships with suppliers in that region. The organization has established several capabilities that the suppliers must possess to be approved, such as the ability to meet delivery requirements and those of service. However, the challenge that the organization faces is its incapability to develop the integrated supply model in every country. To enhance its supply approach, I would suggest creating a silo-free environment. The company cannot expect to penetrate the global climate with its integrated approach if its operations are not integrated enough. In this way, the organization will pave the way for effective performance.
Moreover, a business can enhance its sourcing by improving how it tracks supplier performance in aspects like quality, delivery, and responsiveness. It can achieve this by examining how suppliers manage the cost of ownership and outsourcing strategies. Generally, the cost of ownership is the actual cost of purchasing and maintaining a particular good or service (Ellram, 2002). Informally, the company promotes daily feedback while formally, the corporation incorporates processes that are part of the SRM program. Concerning the cost of ownership, parties understand that MRO goods and services’ prices constitute about a third of the overall cost. Suppliers work hand in hand with the company to streamline the non-value costs during the sourcing process. I would recommend establishing well-defined outsourcing tracking procedures to ensure that the distributors align with the set regulations. All in all, I believe that measures that address and regulate the remaining costs that surround MRO goods and services would improve its TCO operations.
Conclusively, MRO sourcing is proven to be a useful technique for any organization that requires global recognition. Any company interested in this concept should create a favorable environment that supports MRO’s best practices.