As more companies look to manage their costs, the indirect and MRO spend areas are getting a much closer look than ever before. While the total dollar amount may not be as large as the direct materials spend, the lack of consolidation can provide good opportunity for spend management ROI.
One company reaping the benefits of MRO controls is Alpharetta, Ga.-based Intelligent Switchgear Organization (ISO), a joint venture between Caterpillar and Eaton Corp, that manufactures, sells, and services electric power generation equipment. Prior to implementing its control program, ISO worked with Fastenal, a distributor of fastenings and MRO supplies. Under the plan at the time, ISO had open bins for MRO items that Fastenal restocked each week and then invoiced ISO for. The open bins allowed virtually any and all employees to take free issue items as they wished.
“From what we saw, they did just that, and there was very little control,” reports J. David Lister, purchasing manager. Items included safety glasses, ear plugs, side shields, drill bits, arm sleeves, box cutters and screwdrivers.
ISO decided that it wanted to determine what if any cost reductions it could receive by actually tracking usage of MRO items down to the individual employee. Fastenal had a solution that seemed to be able to do just that called SmartStores. These are vending machines manufactured by Fastenal that the company leases to its customers. “They are like food vending machines, except that they are stocked with the operational items that we use the most,” reports Lister.
