MRO Transformation Case Study: How a Five Plant Manufacturer Reduced Costs by More Than 18%

The Challenge: Fragmented Data and Independent Plant Purchasing

The first challenge was obtaining a complete and accurate view of the company’s spend.

Purchasing data was distributed across several internal sources, including multiple requisition systems that were not integrated. Supplier information, item descriptions, transaction histories, and plant specific purchasing practices all had to be collected and reconciled before the sourcing strategy could be developed.

Each plant also had its own purchasing process. Most requirements were purchased through spot requisitions, while only a limited number of items had established contract pricing. Similar products were often purchased from different suppliers, under different descriptions, and at different prices.

K2 Sourcing worked directly with the five plant managers, maintenance supervisors, crib buyers, and accounts payable personnel to normalize the data and understand how each location purchased, used, and paid for its MRO products.

Organizing More Than $5 Million in Spend

Once the data was collected, K2 Sourcing categorized the spend into logical subcategories that could be competitively sourced through separate RFPs.

This analysis identified areas where supplier consolidation could create additional volume leverage. It also revealed categories with a large number of individual SKUs that required further review before they could be taken to market.

Gloves were one example. Each plant had selected products independently, resulting in a large number of similar SKUs. Rather than simply requesting prices for every existing item, K2 Sourcing brought representatives from the plants together to review specifications, applications, and user requirements.

The team rationalized the glove assortment and selected a much smaller list of approved products. This allowed the company to combine volumes across its locations, simplify the RFP, and present suppliers with a clearer and more attractive opportunity.

Conducting Five Competitive RFPs

K2 Sourcing conducted approximately five RFPs covering the selected industrial MRO subcategories.

Suppliers were asked to provide manufacturer part number exact match pricing, substitute pricing, service capabilities, inventory programs, delivery support, and implementation plans. The evaluation included much more than unit prices. It considered the total operating impact of each proposal, including supplier coverage, vending services, inventory replenishment, transaction volume, price stability, and the ability to support all five plants consistently.

K2 Sourcing’s strategic sourcing platform was an important enabling component of the project. The platform made it possible to manage and analyze the large volume of item, supplier, pricing, and service data generated across five plants and multiple RFPs. Attempting to conduct the same analysis through emails and separate spreadsheets would have made consistent comparisons and accurate award scenarios extremely difficult.

The structured electronic sourcing process also allowed the company to pursue the 5% to 8% greater savings associated with using an eSourcing solution rather than relying solely on traditional manual sourcing methods.

Moving From Sourcing Results to Implementation

The project did not end when suppliers were selected.

Because the plants had historically relied heavily on spot requisitions, employees needed a clear process for purchasing from the newly negotiated contracts. Without that implementation work, the company risked losing savings through continued purchases from noncontract suppliers or inconsistent use of approved products.

K2 Sourcing worked with the plants to rewrite purchasing work instructions and standard operating procedures. The new process explained which suppliers and products should be used, how employees could access contract pricing, when exceptions were permitted, and how purchases should be processed.

The selected suppliers also installed vending machines at no cost to the client and implemented vendor managed inventory programs. These programs improved product availability, reduced manual inventory activity, and provided greater control over frequently used MRO supplies.

The result was a standardized guided buying process across all five locations.

Results

The MRO transformation produced measurable financial and operational improvements.

More than 18% cost reduction across the targeted categories.

40% supplier reduction through the consolidation of fragmented plant level spend.

30% fewer purchase order to invoice transactions as purchases moved to fewer contracted suppliers.

Free vending machines and vendor managed inventory provided by selected suppliers.

Fewer SKUs through product rationalization and standardized specifications.

Consistent contract pricing and guided buying across all five manufacturing plants.

Creating Sustainable MRO Transformation

Achieving meaningful MRO savings requires much more than negotiating prices or consolidating suppliers. It requires working across plants and functions to understand how materials are specified, purchased, received, used, replenished, and paid for. It also requires consolidating an immense amount of fragmented data, normalizing item and supplier information, rationalizing requirements, and developing sourcing strategies that reflect the operational needs of each location.

The competitive RFP process must then be executed efficiently and accurately across thousands of items, multiple suppliers, and numerous commercial and service variables. K2 Sourcing’s strategic sourcing platform provided the structure needed to manage this complexity, analyze exact match and substitute pricing, compare supplier programs, and develop award scenarios based on total value rather than unit price alone.

Finally, the results had to be implemented through stakeholder alignment, supplier onboarding, revised work instructions, standardized operating procedures, contract pricing, and guided buying. The combination of strategic sourcing expertise, the ability to work directly with plant personnel and suppliers, and a technology platform capable of managing the underlying data allowed the manufacturer to achieve more than cost reduction. Together, these capabilities created a sustainable MRO transformation across all five plants.