Credit for shifting design and manufacturing costs to its distributors was first attributed to large-scale auto and PC manufacturers that were trying to cut costs while fostering innovation and efficiency. That religion is now evangelized across all manufacturing sectors and is a critical competitive advantage throughout the industry. Large and middle-market manufacturers are now focusing on shifting costs to their MROP distributors.

Cutting costs through effective MROP outsourcing defines how competitive a manufacturer can be in the future, and may determine who will come out of the downturn with an ability to grow, not just survive.

Several case studies demonstrate that MROP-related productivity gains and cost cutting can translate into millions in savings for middle-market customers and far more for larger manufacturers. Rather than focusing on the best price for product, understanding how these savings are realized and measured is the greater consideration for customer purchasing departments.

Costs can be wrung out of the supply process through more efficient tool use, better purchasing processes — such as ordering, billing and shipping — and through innovation. As some of the largest manufacturers have already done, large and middle-market companies must now demand cost-saving services from their suppliers.

However, methods for measuring savings and rationalizing process changes are essential. The most critical issues for measurement and process rationalization for MROP outsourcing include:

Expertise - What level of expertise can the distributor provide its customers? Specifically, how can the people handling MROP needs provide counsel and innovative ideas that save money and improve efficiency? It's from product expertise that most value-add flows. Product expertise lets distributors offer the insight needed to think in innovative ways, and to have the credibility with customer staff to implement ideas.

If an MROP supplier doesn't have structured, analytical methods for evaluating the value-add offered through counsel and innovation, be suspicious of its claims. If it can't measure the value, it's probably not there.

Systems Integration and Visibility - Accessible information on product availability, supply chain management and the logistics capabilities of its distributors is critical for customers. Visibility of product inventory and procurement processes allows effective planning. How will you measure the effect of having critical supplies within reach? Or more importantly, how will you measure the effect of not having the supplies needed to keep a business going?

Here again, it is imperative that MROP distributors provide customers with a rigorous methodology for measuring ROI. When a customer analyzes and measures productivity gains caused by streamlining delivery and invoicing processes, the value isn't always obvious, but is nonetheless important to the bottom line.

On Time Delivery - What is the cost of products not arriving on time? The distributor must have an established method for tracking delivery costs, on time delivery, and be able to leverage its size and scale to drive down shipping costs in the customer's favor.

In the case of one South Carolina company, having a single production-line part delivered on time saved more than $350,000 and the company was able to make its quarterly targets. Without the part, the factory would have shut down.