System Integration: How MRO Suppliers Lower Manufacturing Costs

As an essential part of any MRO supply agreement, system integration is more than a buzzword. In fact, it is a key ingredient to the cost savings companies look for from their MRO suppliers.

System integration lowers costs by not having manual intervention,” said Keith Jack, vice president of IM Supply. “When a company’s ERP system is connected to their MRO supplier, then everything becomes more productive and the efficiencies build on each other to maximize cost savings.”

For example, if you have a relationship with an MRO supplier lacking e-commerce capabilities, then you have to mail orders and then the supplier has to enter the order into its system. At each point, a person has to make a manual intervention, such as inputting an order, which creates opportunities for errors to be introduced. In addition, each manual intervention makes the process longer.

“The more electronically connected everything is, the less intervention and the fewer errors and the faster it gets transmitted and fulfilled,” Jack said. “System integration prevents errors in the process and lowers the costs of having people involved in the process. Everything gets more efficient.”

Here’s what an ideal system integration between a manufacturing company and its MRO supplier should look like:
EDI capabilities

Electronic Data Interchange (EDI) is the transfer of data from one computer system to another via a standardized message format. EDI functionality connects the MRO supplier with the customer company and eliminates manual interventions. Since many companies grow via acquisition, it’s common for companies to have plants using different systems—a legacy from prior ownership. An MRO supplier with full EDI capabilities can integrate the different systems within your company together for efficient MRO management.

Punch-out catalog

If you have an ERP tool in place, you’ll want to use it for all your purchasing. When your MRO supplier offers punchout functionality, you can order things in their system, without ever leaving your system. No more purchasing different items through different portals. Punch-out catalogs are a much easier and convenient means of procurement and with all the extra time they save, you can put more focus on spend management.

Full analytics suite

Part of the way MRO suppliers deliver savings is by measuring everything because, if it can be measured, it can be improved. For example, complete transactional data is useful for determining what products you need and how much of them you purchase. With that information, the MRO supplier can negotiate better pricing with the manufacturers to cut MRO costs, as IM Supply did in this case study.

Having easy access to data online and the ability to slice it in different ways is key. With an analytics suite, you have options for a variety of different real-time reports, including online statements, documented cost savings, top manufacturers purchased from, total purchases, purchasing by individual location and top 100 items purchased.

This kind of system integration between a manufacturing company and their MRO supplier are deciding factors for realizing savings through eliminating inventory duplication, lowering administrative costs and negotiating better pricing. It also allows for fully-informed long-term planning and forecasting, simplified corporate accounting and easier purchasing.