FAQs

Q: What does MRO Direct do?

A: MRO DIRECT provides sourcing and procurement processes designed to generate both hard cost savings (greater than 20%) and process savings in order to achieve the lowest total procurement cost solution for purchasing MRO supplies.

Q: How does MRO Direct’s Procurement Program do this for MRO sourcing?

A: MRO Direct adds value to the MRO sourcing process in these ways: 

Client “Hard Cost” Savings are achieved by Systematic Leveraged Buying 

• Cycle 1 – Disintermediation: MRO Direct sources competitively at existing plant volumes, eliminating heavy reliance on local distribution and sourcing early in the supply chain from Master Distributor and Manufacturers. 

• Cycle 2 – Demand Aggregation and Optimization: MRO Direct bundles corporate-wide volumes along with other MRO Direct clients and negotiates cost reductions based on the total demand. 

• Cycle 3 – Standardization: Establish a common type and quality of MRO products, reduce variation of item purchases focusing demand on a narrower assortment of items.

Q: Why should my company use MRO Direct’s procurement solutions instead of another option?

A: The reasons for utilizing MRO Direct versus other competitors are the following: 

1. Guaranteed “Hard Cost” savings of 20% or more over a three year period. 

2. Process savings that could be 60% or more of the "Hard Cost" savings. 

3. On site implementation team that overcomes internal organization obstacles.

4. Flexibility to customize solution to client needs. 

5. Low cost solution MRO Direct has the greatest opportunity for cost reductions with the MRO Direct business model. For example, MRO Direct takes as much of the sourcing to the manufacturer level. 

6. MRO Direct can source 100% of the MRO needs.

Q: What savings besides price can MRO Direct deliver?

A: MRO Direct can deliver the following Process savings: 

1. Administrative savings resulting from electronic ordering and invoicing / payment process.

2. Potential Reduction in MRO inventory

3. Organization resources required for sourcing "Spot Buys" and developing new strategic procurement agreements will be significantly reduced…and procurement resources can be reallocated to high impact initiatives.

Q: What differentiates you from your competition? 

A: MRO Direct competitive advantages include: 

• Guaranteed 20% “hard cost” savings over 3 years—none of our competitors can provide this guarantee. 

• MRO Direct works on lowest gross margin in the industry with the pricing formula based on client needs 

• No operating fees 

• The breadth of the MRO supply chain with brand neutrality. None of our competitors have the breadth and depth of MRO Direct’s supply chain. 

• Sourcing capability at Master Distributor and Manufacturer levels 

• Tri-lateral Agreements (Distributor/MFG/MRO Direct/PinnOak) 

• Custom sourcing capability 

• Custom e-Catalog reflecting client tailored pricing 

• Consistent on-site support (Field Engineer) 

• Spot buy / special order sourcing service 

• Expediting and emergency delivery capability 

• System integration at no cost with client 

• Open view of supply chain (Access to MRO Direct costs) 

• Continuous improvement process including standardization and aggregation processes 

• Substitution process coupled with organizational approval 

• Dedicated team of experienced experts including customer service and tactical and strategic sourcing specialists assigned to your company.

Q: How much can I expect to save?

A: Hard Cost Savings (Purchases-$15 mils/year)

Year	Savings Rate	Savings ($ Mills)
#1	10%	$1.6
#2	6%	$2.6
#3	4%	$3.5
Total Savings		$7.7

Potential Annual Process Savings 

Q: What do suppliers think of MRO Direct and your sourcing process?

A: MRO Direct has established a positive rapport with suppliers because the MRO Direct role is to take costs out of the supply chain. MRO Direct utilizes the following strategies when building supplier relationships: 

1. Determine cost efficient processing of orders through EDI or other electronic relationships whenever possible. 

2. Aggregate demand and concentrating purchases to ensure the relationship is important to the supplier. 

3. Offer complete assortment (or at a minimum their best selling SKU’s) in the electronic catalog. Theses suppliers have the first opportunity for “spot buy” purchases. 

4. Involving suppliers in the Continuous Improvement Process with our client. 

5. Ensuring MRO Direct clients are aware of the supplier’s new products. 

6. Utilizing supplier’s technical expertise with our clients so a value added relationship is developed.

Q: Who are MRO Direct’s customers?

A: MRO Direct clients are classified in the following categories: 

1. Fortune 500 Manufacturing businesses that want to implement MRO procurement process to save costs over multiple locations.

2. Manufacturing firms that have a concentration of MRO purchases in one location 

3. Process industries (i.e. mining, energy businesses) 

4. Health care systems 

5. Property management businesses

Q: What kind of training will we need? Are MRO Direct’s solutions difficult to deploy and/or use?

A: The main obstacle in implementing the MRO Direct procurement process is resistance to change…utilizing a new procurement process that is a departure from the traditional approach to purchasing MRO products. There is a tendency to maintaining the traditional approach of taking tactical strategy in MRO procurement. Reverse auctions, the traditional RFQ approach. And other similar strategies will not enable the business to optimize the total procurement costs on MRO products. Individuals within businesses tend not to evaluate MRO procurement from an enterprise perspective. Your associates tend to take a single invoice perspective, which does reflect the optimization of MRO costs. Therefore MRO Direct takes a major role in educating our clients’ employees to a new strategic procurement perspective.

The following are implementation strategies employed by MRO Direct: 

• Develop Corporate Power Team from the client’s staff that is responsible to remove obstacles to implementing the MRO Direct procurement solution. 

• Develop a Location Power Team from the location staff that is responsible for implementing the solution at a specific location. 

• Three stage training program that focuses on the following issues: 

  • How to utilize the MRO supply chain provided by MRO Direct 

  • How to communicate and leverage the resources of MRO Direct 

  • How to utilize the MRO Direct e-commerce platform 

  • How to resolve issues in the supply chain and transaction process. 

  • Vision as to the client’s three phase procurement process being implemented by MRO Direct that requires an extended period of time to implement.

MRO Direct allocates the following resources to implementation:

• MRO Direct will support the initiative with the following resources:

  • A dedicated Customer Service Representative(s) 

  • Tactical Sourcing Specialist 

  • Field Engineer who will train and service the mines 

  • Technical Support to facilitate electronic communication and process savings 

• MRO Direct will provide the following services to clients: 

  • Train all buyers to effectively utilize the MRO Direct Procurement Process and the e-commerce system. 

  • Develop strategic supply agreements with unique suppliers and trilateral agreements between distributors, manufacturers, and EGI/MRO Direct. 

  • Source “spot buys.” 

  • Facilitate technology or engineering support. 

  • Suggest other cost saving improvements not directly associated with procuring MRO products. 

  • In order to reach cost savings goals, MRO Direct will facilitate demand aggregation and product substitution and standardization procurement strategies.

Considering the client is entering into an intensive initiative, the resource requirement from is very reasonable with high payback potential. MRO Direct has learned through experience the keys to implementation success.

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