Industrial distributors see it too: The MRO buy is more strategic and purchasing has new expectations of suppliers.

This view matches the results from Purchasing magazine’s reader surveys conducted earlier this year, as well as the view in corporate offices and plant sites all over the country, distributors say. (Purchasing is a sister publication to INDUSTRIAL DISTRIBUTION.) Companies recognize the impact purchasing—even MRO purchasing—has on the bottom line, and with prices rising and competition intensifying, resourceful buyers are turning to suppliers for help managing costs and generating revenue.

MRO purchasers have even more responsibility today for inventory, warranty and demand management, Flanders says.

“Procurement translates that into what they expect from MRO suppliers,” he notes.

These expectations consist of assistance beyond distribution’s traditional strengths (procuring product and managing inventory). Buyers are asking for help identifying cost drivers, over and above price, and ways to better keep them in check. The suppliers, in response, are tracking savings and beefing up service offerings, tailoring programs to meet purchasing’s needs. Now they routinely provide such services as kitting and energy audits and they’re investigating new, low-cost sources of supply. And they are enlisting manufacturers’ help with technical training and other product assistance.

While many of these services are not entirely new to most distributors and MRO buyers, the suppliers say more customers are asking for them more often.

“We are providing services for customers today that we could not imagine five years ago,” says Mike Molinini, executive vice president and COO at Airgas in Radnor, Pa.

Tom Armold, vice president of marketing and strategic accounts at Applied Industrial Technologies in Cleveland, says it is a sign of the times. Because of the uncertain economy, MRO purchasers are being asked to do more with less.

“Becoming more strategic might not necessarily mean fewer people, although that is one of the elements,” Armold says. “It is more a streamlining of what they are doing and more of a reliance on the supply base.”

Purchasing pros are talking about total cost of ownership, say the distributor executives who regularly meet with them. They’re asking suppliers for ideas to cut costs and to track and document the savings that result from implementing them.

They face such challenges as improving operational efficiency and producing savings, which is proving to be tough as prices of the raw materials—copper, steel, zinc and energy—that go into manufacturing MRO items continue to rise, says John Mansfield, vice president of corporate accounts at Graybar in St. Louis.

“It’s forcing MRO buyers to be more creative. If they haven’t taken a total-cost-of-ownership approach to purchasing, they almost have to now,” Mansfield says, adding that he sees purchasers including that metric in requests for information and requests for proposal. “They want us to step up to the plate and say we know how to do that and we are willing to do that for them.”

Graybar uses SalesStrat software from Strategic Business Solutions to track cost savings for customers. In regular meetings, they discuss progress toward goals and new ideas going forward. With the software, Graybar also can identify best practices related to managing costs, which it shares with customers.

Mansfield uses the image of a pyramid to identify activities that produce profit for customers, with three angles: Reducing first costs (price), improving processes, or generating revenue. Automating purchasing, or setting up contracts with a small number of preferred suppliers and having end users at the plants place orders through online catalogs, is one way a company can improve its processes, he says. Kitting and customizing products to help reduce manufacturing and assembly time is a way distributors can help customers generate revenues.

Though Airgas has been providing its Outlook Services to customers for about 15 years, the offering, which is essentially a fee-based program consisting of supply chain management services, is becoming more complex and sophisticated, says Molinini.

Under the program, Airgas assumes responsibility for managing the supply chain for the gases, welding products and safety supplies it provides, which helps reduce costs and improve efficiency for customers. For one client, a university, the distributor provides gases to individual labs and departments. Airgas used to send the customer one monthly invoice for its services, but has since designed a system that tracks individual flow, enabling the distributor to itemize the bill so each lab or department knows exactly what’s being purchased and how much it costs.

In her role as vice president of sales at W.W. Grainger Inc. in Lake Forest, Ill., Deb Oler says conversations with MRO buyers long ago moved past price.

“Buyers’ earlier focus on price translated into up to 40 percent more inventory sitting on the shelf than they need,” she says. “Buyers want to get the products they need easily without having to carry excess inventory.”

One way Grainger helps is by providing vendor managed inventory through its new Inventory Solutions Service.

Other discussions, Oler says, focus on sustainability and helping customers meet environmental and safety regulations.

“We partner with manufacturers that conduct energy audits, prepare a business case and let buyers know how to reduce costs,” she explains.

MRO purchasers are giving thought to where they see their relationships with distributors heading. Some are asking suppliers to take on more purchasing responsibility, essentially outsourcing the tactical part of the MRO buy. Others are considering integrated supply. New are queries about low-cost sources of supply.

Armold says AIT researches low-cost country sources for customers. In so doing, it ensures they take into account all costs involved, considering logistics, inventory management and product quality and lifecycle.

As companies strive to maintain their competitive edge, distributors say purchasing will continue to consolidate the MRO supply base, forming stronger relationships with fewer suppliers. The leverage should help to hold costs in line, and bring in even more new ideas.

This story was re-printed from the June 2008 issue of Purchasing magazine, www.purchasing.com.