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Improve Your Bottom Line by Increasing MRO Spend Under Management
MRO (maintenance, repair, and operations) spending can generate thousands of documents and significant overhead costs. Leveraging existing Ariba investments and ThomasNet supplier catalogs and content can help capture more MRO spending and improve a company's bottom line. Partnering with ThomasNet allows companies to streamline MRO supplier relationships, identify new suppliers, and get supplier catalogs ready for procurement through Ariba to reduce costs.
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Improve Your Bottom Line by Increasing MRO Spend Under Management
- 1. Improve Your BottomLine by Increasing MRO Spend Under Management MRO can be a messy category; estimates from industry analysts suggest that as many as 3,500 purchase orders, invoices and related documents are generated for every $1 Million in MRO spend. At an estimated average cost of $57 per document, this flurry of activity adds $200,000 in overhead – before factoring in the costs associated with managing an over-sized supplier base. Join Ariba partner ThomasNet to learn how to leverage your existing Ariba investments to capture more MRO as spend-under-management and improve your bottom line through the effective use of supplier catalogs and high quality procurement content. © 2013 Ariba, Inc. All rights reserved.
- 2. Improve Your BottomLine by Increasing MRO Spend Under Management Claudio Pinto Sr. Director, Business Development, ThomasNet Steve Pateuk Strategic Alliances & Business Development, Network & Financial Solutions, Ariba © 2013 Ariba, an SAP Company. All rights reserved.
- 3. © 2013 Ariba,Inc. All rights reserved.3 As many as 3,500 POs, invoices and related documents are generated for every $1 million in MRO spend… At an estimated average cost of $57 each, this activity adds $200,000 in overhead – before factoring in the costs associated with managing hundreds of “informal” suppliers.
- 4. Agenda • Defining IndustrialMRO as a category • Why its worth watching • A look at the Implications, if you don’t keep an eye out • “A day in the life …” • The value of it all • Putting it altogether and making it happen • What’s next? 4 © 2013 Ariba, Inc. All rights reserved.
- 5. MRO as aSpend Category 5 Indirect Spend Materials and consumables purchased that do not become part of produced goods or services that a company delivers to the market for the supporting operations of a business. Indirect Spend – Industrial MRO A subset of Indirect Spend, typically materials that specifically support the manufacturing process. Direct Spend Direct materials (raw materials, ingredients, standard parts, specialized parts) that go into the manufacture of a finished good. © 2013 Ariba, Inc. All rights reserved.
- 6. Some Common IndustrialMRO Categories 6 Cleaning HVAC Electrical Material Handling Janitorial Energy/Green Safety Packaging Plumbing Tools Lighting © 2013 Ariba, Inc. All rights reserved.
- 7. It’s Worth Watching… 7 ONLY 50% ofMRO parts available… in storerooms and inventory 16% Of COGS Attributed to MRO $500K PER DAY Cost of a broken gasket in a chemical plantUp to 25% Of MRO spend leakage is due to poor supply chain visibility © 2013 Ariba, Inc. All rights reserved.
- 8. The Procurement “Pain”with MRO © 2013 Ariba, Inc. All rights reserved.8 Receive and Invoice Exceptions Lack of visibility, auditing and tracking High number of exceptions from AP to procurement PO Transmit, Confirm and Track High FTE costs doing re-issues & expediting Supply chain risk Request and Replenish, Catalog and Contract Lack of controls risks compliance Maverick buying
- 9. The Financial “Pain”with MRO © 2013 Ariba, Inc. All rights reserved.9 Timing and Discounts Small amount of payables under early pay discounts Inconsistent payment terms Exceptions and Approvals Assuring proper approvals Knowing if non-PO invoice prices are correct Receipt and Capture High paper entry costs High % of exceptions
- 10. A Day inthe Life… 10 © 2013 Ariba, Inc. All rights reserved.
- 11. A Day inthe Life …revisited © 2012 Ariba, an SAP Company. All rights reserved.11
- 12. 50% Negotiated Savings Leaked Through non-compliance, penaltiesand missed discount opportunities 64% Best-in- Class Organizations capture 64% of suppliers, representing 80% of Spend Under Management The Power of Procurement Content • Consumer-like buying experience • Reduces maverick spend • Drives contract compliance • Improves the spot buying process • Delivers a “Perfect PO” 12 © 2013 Ariba, Inc. All rights reserved.
- 13. Let’s put thisaltogether now… 13 Supplier Supplier Supplier Supplier Supplier Supplier Supplier cXML EDI Email CSV HTML cXML AS2 Paper Supplier Support Discount & Pay PO & Invoice Auto Catalogs & Contracts PO Management Invoicing Discount & Pay Catalog Shopping Components • e-commerce Adapter for Ariba • Connectivity with the Ariba Network for PO & Invoice Automation, SMART Invoicing • Procurement content and catalogs, powered by ThomasNet’s Marketplace SPEC • Integrated delivery methodology and implementation services • Ariba software applications a la carte • Supplier enablement and support © 2013 Ariba, Inc. All rights reserved.
- 14. How ThomasNet CanHelp… Known Suppliers Unknown Suppliers Recommend Suppliers Streamline your current MRO supplier relationships with PunchOut catalogs to comply with your Ariba realm processes. Identify new suppliers currently being viewed on Ariba.ThomasNet.com by your company. Contact and PunchOut enable those that are prioritized. Survey Ariba.ThomasNet.com and connect you with suppliers in new categories. Contract and PunchOut enable those that are prioritized. © 2013 Ariba, Inc. All rights reserved.14
- 15. ThomasNet’s Solution… • Customizedfor each supplier…. • Pricing • Product selection • Compliance adherence • Easy and timely implementation for suppliers • Supplier funded content development © 2013 Ariba, Inc. All rights reserved.15
- 16. Making it happen…theprocess… STEP 1 – Contact Your Ariba CMO • Your CMO will collaborate with ThomasNet and you to identify the MRO suppliers, current or new, that you’d like to get Ariba-ready. STEP 2 – ThomasNet Connects with Your Target Suppliers on Your Behalf •ThomasNet’s project manager will coordinate with Ariba and the supplier to ensure that we gather the appropriate set of products information and contracted pricing details. •There will be a quality review process between the supplier and you to ensure the accuracy of the product details and pricing. STEP 3 – ThomasNet Gets Supplier Catalogs Ariba-ready •Suppliers’ rich product data is made Ariba-ready with ThomasNet’s Marketplace SPEC technology for you to access within your Ariba realm. STEP 4 – ThomasNet Establishes Supplier Network Connectivity •Your suppliers completed catalog is loaded to your Ariba realm so that you can begin procurement directly from their product information. •ThomasNet continues to maintain and update the suppliers catalogs as required to continue to meet your specific procurement needs. © 2013 Ariba, Inc. All rights reserved.16
- 17. Next Steps 1. Completethe response card and leave it with us – we’ll follow up 2. Contact your Ariba CEx or Account Executive 17 © 2013 Ariba, Inc. All rights reserved.
- 18. 18 © 2013Ariba, Inc. All rights reserved.
- 19. Questions? © 2013 Ariba,Inc. All rights reserved.
Editor's Notes
- #4 I’m suggesting using this to reconnect to the abstract and why these folks likely chose to attend the breakout session.This will be designed to fly in with visual emphasize of the #s
- #6 Speak to the continuum of managing Indirect Spend and moving into the subset of Indirect Spend, Industrial MRO with the ultimately possibility/goal to manage direct spend as well.
- #7 Steve, you wanted to add other categories
- #8 Each of these points can fly in and you can briefly speak to them.For a typical manufacturer – MRO is 16% of COGSOnly 50% of MRO parts are found in storerooms, when they are neededThe rest are spot buys – typically outside “standard” processesDrives “squirreling” behavior – undocumented inventory and high cost5% - 25% of MRO spend leakage is due to poor supply chain visibility, controls and complianceThe high cost of down time (Accenture)Broken gasket in a chemical plant may cost $500K per day and create major safety hazardsEach day a mining truck is down may cost the company as much as $1M in lost revenueA down transformer reduces revenue and hurts customer satisfactionOften not considered strategicLarge spend, incomplete accounting roll-upsToo many suppliers, too little product informationMinimal Form-Fit-Function rationalizationFrequently handled at the plant level – not centralizedPoor contract complianceNo purchasing leverageComplex specifications & poor documentationFragmented supply chain – drives maverick spendToo many choicesEnd-user, unapproved favoritesVery high touch, for both Buyers & SuppliersManual processesMultiple conversations
- #9 This slide can build from top to bottomWe can ask the attendees to raise their hands with some of these…”how many of you can relate to this point of pain”
- #10 This slide could build from top to bottomWe can ask the attendees to raise their hands with some of these…”how many of you can relate to this point of pain”
- #11 Opening:So, let’s take a look at a “day-in-the life” to understand the profound difference between using a catalog and not, as a means of driving industrial MRO spend. Imagine you have a machine on the floor that is critical to your manufacturing process. One morning, the operator hears a strange noise coming from the machine and calls the floor engineer. After troubleshooting the machine the engineer determines it’s a cooling fan, located within the Flux Capacitor control cabinet – it needs to be replaced. The machine is old, so after wrestling with it for a while, the fan finally comes out but there are no part numbers to be found. The engineer wanders over to the parts crib, but can’t find anything that looks remotely similar. So – what does he do?Build 1: He goes to the Google Machine to see what he can find. He types in “DC Fan” to see what comes up. The first thing he notices a link that has the words “Bikini” and “Disney has a Disney Fan Club”. This peaks his interest, so surfs over to their web site to do some exploring. After a few minutes (or more) he remembers why he was online and goes back to the original Google web site and sees that a number of links appeared towards the top that look like they might be what he’s looking for. So, for no reason other than its at the top of the list, he clicks the top link.Build 2: A set of various fan types come up, some of which look similar to the one in his hand and some of which don’t. The top photo looks pretty close, so he clicks on that …Build 3: and it shows what seems to be the fan. There isn’t much information – a general summary of that it is, but there are no detailed operational specifications (i.e. input power requirements, fan speed, air flow, mechanical dimensions, mounting information, etc.). It does, however, show a big list of companies eager to sell me one of these fine fans. So – what to do? He has two choices – the first is to click on one of the supplier links and see if he can work with that supplier to figure out what he needs . Or maybe he’ll click on the supplier and use his company credit card to order whatever shows up fist, then he’ll use his hammer to make sure it fits in the machine.Build 4: Or, he will open up the company’s non-catalog procurement application and put in what he knows about the part, hit send and hope the procurement agent that is unfortunate enough to get the Req will know where to buy the part from.
- #12 Make sure we address procurement content as we discuss this “day in the life…with MRO spend under management” since it segues into that term and value in the next slides
- #13 And digging a little deeper, Procurement Content ….Drives Contract ComplianceSourced Suppliers, with contracted items and pricingIncreases wallet –share for suppliers, driving better discounts, improved customer service and better all-around relationsDelivers a “Perfect PO”Accurate meta data ensures accurate order placement – reduces manual interventionDrives “touchless” invoices – fewer supplier support callsStreamlines the invoice approval process, enabling better discount captureConsumer-like buying experienceIntuitive and easy to use – ensures accurate selection process
- #15 You should speak to the value of ThomasNet as the expert in Industrial MRO and how we can not only streamline current suppliers but support buyers’ supply chain engagement and MRO spend under management initiatives with our business intelligence
- #16 The emphasis for this slide is the “customization” of our solution for each buying organization and their particular set of suppliers. ThomasNet does all of the work and there is not cost to the buying organization….other than some resource engagement at the onset
- #17 Just to illustrate how the engagement will work with ThomasNet and Ariba CMO teams and emphasize that we’ll do it all and make it happen
- #18 As we discussed, I will be creating a “lead gen” card that we can put on the seats in the breakout and then I can walk around and collect them etc. I will also be using our flair pins and possibly another hand-out too.