Organizations appear to be stair-stepping into outsourcing arrangements, parceling out their MRO business as providers begin to deliver promised results. New digital technologies are the keys to enabling outsourcers to make good on promises of greater savings and efficiencies. e-commerce is just becoming developed and distributed enough to ensure outsourcing success. Over the next 24 to 36 months, outsourcing MRO will become the dominant method.
Things change at the speed of light in the e-commerce space. At the time of the North Star study, Internet buying was the least-used procurement method. Indications were that many of the surveyed organizations either were not fully e-commerce enabled or were on the sidelines. Coupled with the purchase card, Internet buying creates the electronic purchase to pay synergy that is a centerpiece of e-procurement. Employees are able to leverage technology to initiate, monitor and close the entire purchase experience unassisted. Materially reduced transaction costs are also driving MRO buying in this direction. Consequently, the Internet will provide the infrastructure for most, if not all, purchases in the future.
Putting the Pieces Together
MRO purchasing, like most of today's business endeavors, is evolving toward cooperative efforts enabled by e-technologies. Traditional methods are evolving into e-methods, which combine the best aspects of each and automate the data flow between the parties. Based on the North Star study and additional developments, the following assessments can be made:
- Organizations are slow to relinquish control of their MRO business to third parties.
- Many purchasing departments continue to be highly transactional and often favor traditional, proven methods of procurement.
- Organizations are moving toward purchase cards but still consider them part of a secondary strategy.
- Organizations are open to turning over parts of MRO but not all (integrated supplier method).
- Many companies may have access to the Internet but have not fully embraced it as a strategic purchasing tool
The Future of MRO Purchasing
- Companies will move from transactional purchasing toward strategic purchasing. Retraining, redeployment and some displacement will occur.
- Traditional methods of managing MRO will merge into two primary methods desktop (self-serve) purchasing and outsourcing.
- The least-used procurement methods of today will be the dominant methods of tomorrow.
- Accelerating technology allows the rationalization of procurement methods. Before fully developed and fully deployed Web-based technology became available, MRO spend management required several methods in order to meet the inherent diversity of indirect materials.