Purchasers Recognize Advantages of Integrated Supply Relationships
CHICAGO, Dec. 10 /PRNewswire/ -_ In their efforts to improve overall
operations, many large companies plan to improve their indirect materials
management through a combination of product standardization, supplier
consolidation and outsourcing arrangements, three practices associated with
integrated supply.
As part of a survey of U.S. businesses commissioned by Grainger,
North America's leading distributor of maintenance, repair and operating (MRO)
supplies and services, nearly 200 purchasing decision-makers for large
companies (500+ employees) were asked about their plans to improve MRO supply
management functions. The questions were part of a comprehensive study
of purchasing trends and issues among businesses and institutions
representing construction, manufacturing, transportation, communications,
utilities, hospitality, health care, and education.
According to the study, nearly 8 out of 10 (78%) large companies plan
to implement some type of product standardization in the next two years to
improve indirect materials management. In addition, almost half (48%) plan to
consolidate the number of MRO suppliers they use, and a quarter (25%) of
the respondents plan to outsource at least a part of the MRO purchasing or
management function.
"Large companies are recognizing that integrated supply management
practices can provide a significant reduction of total indirect materials
costs, improved productivity, and the ability to redirect resources to other
activities," says Pete Torrenti, vice president and general manager,
Grainger Integrated Supply.
Jeff Baden, an industry consultant with Chicago-based Frank Lynn &
Associates, a leading marketing consulting firm, adds, "Product
standardization, vendor consolidation, and outsourcing are parts of an
integrated supply management strategy used by large companies to reduce costs
associated with purchasing indirect materials. For some companies,
outsourcing MRO supplies and services can offer long-term savings of three to
15 percent, resulting in savings of up to $300,000 or more annually."
The survey supports Baden's view and suggests the number of companies
with an integrated supply relationship is likely to grow in the next few
years. While only 16% of large businesses surveyed currently have an
integrated supply relationship with an MRO provider, more than one-third (35%)
say it is very or somewhat likely that they will initiate one within the next
year.
Furthermore, the survey indicates purchasers are becoming more
familiar with the elements of an integrated supply solution. Those with at
least some familiarity (59%) describe integrated supply as: consolidation of
MRO supply ordering, billing, and delivery functions; standardization of
supplies; electronic ordering and billing; reduction in the number of
suppliers; vendor responsibility for a reduction of total MRO costs; cost-plus
pricing; and outsourcing some or all MRO supply functions.
Torrenti points out that Grainger Integrated Supply offers a full
complement of on-site outsourcing solutions to help companies more effectively
manage their indirect materials, such as business process reengineering,
inventory management, supply chain management, tool crib management,
product sourcing, and information management.
"If it is more appropriate for a company to outsource only a portion
of its indirect materials management, Grainger offers a number of customized
solutions. For example, Grainger Custom Solutions can offer planned purchases
of MRO products and services with scheduled deliveries and documented cost
savings," says Torrenti.
"Grainger Consulting Services, another division of Grainger, provides
management consulting and implementation services. They can assist a client
in determining whether outsourcing is an appropriate strategy for that
company's specific business needs."
W.W. Grainger, Inc. (NYSE: GWW), with 1997 sales of $4.1 billion, is the
leading distributor of maintenance, repair, and operating (MRO) supplies and
related information to the commercial, industrial, contractor, and
institutional markets in North America. GWW shares are traded on the
New York and Chicago stock exchanges. For more information, visit
Grainger online at http://www.grainger.com.
SOURCE W.W. Grainger, Inc.
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