6 Reasons to Engage in MRO Spend Analysis

Routine maintenance, unforeseen repairs, and several miscellaneous expenses. Maintenance, repair and operations (MRO) category managers have to deal with complex, multi-faceted expenditures.

Classified as indirect, a large portion of this spend is overlooked by procurement and often remains invisible. Yet, it is vital for the smooth running of business operations and minimizing downtime.

High purchase volumes with a large number of vendors including local vendors at individual sites adds to the mismanagement, as internal teams often engage in spot buying.

Fluctuating prices of materials and varied product specifications further make it difficult to manage this category.

Not surprisingly, getting a handle at MRO spend can be a daunting task for category managers.

However, there is an increasing need to closely monitor this spend category, especially as businesses look to cut down costs and find ways to navigate the prevailing economic uncertainty. This also means that there is an opportunity for procurement to make a real impact and improve the bottom line.

But how can category managers deal with the challenges and do a careful analysis of MRO spend? Let’s find out.

What is MRO Spend Analysis?

MRO spend analysis is a strategic method used to analyze and understand MRO expenditure. It involves the collection, cleansing, classification and analysis of MRO spend data. The key objective here is to gain a deeper understanding of spending patterns, identify potential savings opportunities and make informed, strategic decisions.

When applied to the realm of MRO, spend analysis presents new avenues of operational efficiency and cost savings.

By combining data from different sources such as purchase orders, invoices and supplier contracts, a business can get a comprehensive view of spend, spot irregularities, as well as negotiate better contract terms.

Spend analysis can answer a lot of questions, such as:

• What are you spending money on?
• Who are you spending money with?
• Where are you spending the most?
• Are you getting the best value for your money?
• Is there an opportunity to lower spending and boost savings?

Why Use Spend Analysis in MRO

You may be wondering how engaging in MRO spend analysis can help your business. Here are six ways this can benefit your business.

• Improved efficiency:

Spend analysis can highlight operational inefficiencies that may be leading to unnecessary costs or delays. These may stem from inefficient processes, duplicate orders or lack of preventive maintenance.

• Enhanced savings:

Spend analysis can help identify opportunities for volume discounts, standardized product specifications and negotiating better prices and contract terms. It can also identify instances of maverick spending and ensure compliance with procurement policies.

• Complete transparency:

MRO spend analysis can provide real-time visibility into all indirect spend across different business units. This ensures that nothing remains hidden, and category managers have a full understanding of the entire MRO spend.

• Informed decision-making:

Clear visibility into spend data and patterns enables category managers to make informed, data-driven decisions. They can optimize MRO inventory and anticipate future needs more accurately.

• Strong relationships with suppliers:

In-depth understanding and analysis of spend can help identify suppliers who meet contractual requirements and deliver as per expectations. At the same time, it can also highlight opportunities for negotiation or consolidation. If there are too many suppliers in a category, consolidating the supplier base can help.

• Risk mitigation:

Spend analysis can bring to light any regional- or category-specific issues and constraints. It can also help develop category strategies to address such issues and act proactively.

Quality Data is Key to Conducting Spend Analysis

The quality of spend data is the bedrock of a reliable and accurate MRO spend analysis. With high-quality data, spend analysis can generate meaningful insights and actionable intelligence. The question now is: how can you ensure data for spend analysis is high quality?

This requires data cleansing that involves detecting and removing inaccurate records. Each spend entry must be categorized correctly. This process, when done manually, is labor-intensive and prone to human error.

AI-powered spend analysis technology can sift through complex datasets, identify patterns and anomalies and then cleanse data with a high degree of accuracy. Automated data cleansing helps generate accurate data, which in turn provides a reliable spend analysis.

Remember that clean spend data is not the final goal, but only the starting point for spend analysis and understanding.

Is your business struggling with MRO spend management? Learn how leveraging a spend analysis solution and partnering with a procurement services provider can bring this spend under management, boost savings and improve the bottom line.