Outsourcing Indirect/MRO materials management to a service provider
As direct spend reaches the limits of optimization, in part due to increasing digitization and automation, more and more organizations are looking at how to drive efficiencies and cost savings in other parts of the business. This typically unfocused spend category has become ground zero, ripe with opportunities for significant profit enhancements. Although a small portion of the cost when calculated into the price of the direct product, this spend category has become the largest of the “non-direct” spend, and provides for efficiencies and cost reductions that impact a vast portion of the balance sheet landscape.
When identifying how to capture these efforts, very few manufacturers are capable or can commit valuable resources to support these non-core competence activities.
Considering the potential of turning a category that historically has been an expense to profit into an environment where the savings generated and efficiencies created support the costs of creating them with surplus annually, why wouldn’t one consider outsourcing as an option?
A few reasons Indirect Category Owners consider outsourcing as an option- (LIABILITIES):
Indirect spend out of control Too much inventory
Dead stock/inventory Stock outs on priority items
No warranty/repair tracking/mgt No spend/usage reporting/data
Purch transactions too high No vendor mgt/support
No disbursement tracking/analysis No cost savings strategy/goals
No product improvement efforts Transactional costs/PO generation
When discussions on how to rectify the issue take on the focus of a properly structured, strategically created SOW and RFQ with qualified service providers that utilize purpose specific tools, processes and procedures to manage indirect material-as part of their core competency, it’s not difficult to see there can be an implementable solution to reverse history with this category.
A few reasons decision makers decide to outsource as an option- (SAVINGS)
- Improve product thru put and machine up-time
- Reduce/optimize indirect spend
- Control/organize physical storeroom/crib
- Capture lost savings opportunities
- P2P strategies
- Challenge vendors’ product performance efforts
- Vendor auctions
- Warranty/repair savings capture
- Eliminate dead inventory
- Eliminate transactional costs
- Capture maverick buying
- Re-purpose current indirect labor to direct
When implementing an inventory management program with an outsourced Indirect Material Manager you are effectively choosing to utilize the strengths and capabilities of a seasoned group whose processes and procedures are specifically created and focused on the finite details of inventory management. It’s the core competence of these groups that can turn the expense into a positive impact to profit.
ValuePoint Material Solutions has effectively managed over $200 million in inventory for nearly twenty years running, and provided cost savings averaging 12.5% year over year-every year.
We ARE the right company for the job, no matter how big or how small.
We WILL institute focused process and procedures, KPI’s and programs to reduce costs.
We CAN improve the performance of purchasing, P2P, and product performance.
We DO reduce the negative financial impact of Indirect Material.
Contact Spence Webb at firstname.lastname@example.org to discuss how we can initiate the process of changing history with your indirect spend.
Business Development Manager
Mobile: (989) 295-0422
5310 Hampton Suite 1, Saginaw, MI 48604