Distributors As Partners

Managers look for new ways to work with MRO product distributors to streamline purchasing, control costs and improve efficiency

By Dan Hounsell  

The roles that distributors of maintenance, repair and operations (MRO) products play in maintenance and engineering departments is changing rapidly. The spread of e-procurement and ever-mounting financial pressures within institutional and commercial facilities certainly affect the process of specifying and buying products.

But to an even greater extent, distributors’ changing role has arisen as a result of the way managers think and make decisions about product purchasing. Forced to make do with less in many cases, they have become more resourceful in the ways they purchase products and equipment for their departments. And they increasingly have come to view distributors as partners who can help them address ongoing inventory-management challenges.

“A lot of us don’t have a background in procurement,” says Randy Shingleton, director of maintenance for the Clark County (Nev.) School District, which includes the city of Las Vegas. “We only know what we need and when we need it, and that’s the worst way to operate.”

Given these challenges, many distributors are looking for new ways to grow their businesses and build their relationships with maintenance and engineering departments.

Structures and Strategies

MRO procurement strategies vary, as each organization tailors its approach based on such issues as financial pressures and organizational structures. Some departments centralize their purchasing, aiming for tighter control.

“There can be a lot of waste if you have five guys doing five different jobs and all ordering parts separately,” Shingleton says.

Other departments have decentralized their purchasing, believing they can react more quickly by minimizing organizational bureaucracy.

“By having decentralized purchasing, we are able to ensure that the purchase cost savings are not eaten up in installation or operation or quality issues,” says Edward Dudek, director of engineering and maintenance at the University of Pittsburgh Medical Center. The strategy enables the department to buy most non-capital and medium-to-lower priced materials more quickly and to better streamline the flow of purchasing information.

Setting Priorities

Whatever structure and strategy a department chooses, price remains the driving force for many managers’ decisions, given the mandate from facility executives and building owners to make every cent count. But in recent years, other factors have risen on the priority list as managers have begun to think more about the long-term performance of products and equipment.

“Quality and price go hand in hand, so I’m not sure you can separate the two,” Dudek says.

As facility operations become more complex and equipment breakdowns more costly to facility operations, prompt product availability has become more critical.

Several large blown fuses in the University of Utah‘s education broadcast building demonstrate the need for prompt product availability to Pete van der Have, the university’s director of plant operations. His department worked with a local electrical distributor, who was able to locate and deliver the relatively obscure fuses on short notice.

“It’s not the kind of stuff we keep in stock,” he says. “What could have been a delay of several days lasted about six hours.” As departments seek ways to streamline operations, more of them rely on distributors’ ability to deliver quickly.

“We don’t have room to stock everything,” he says. “We rely on vendors who can bring products to us on short notice. We like those vendors who have delivery systems.”

National or Local?

Departments often rely on a mix of local and national distributors for products and equipment, in part because their departments oversee so many diverse areas of facilities that — as attractive as the idea certainly is — no single supplier can support them all.

Though distributors vary, larger national MRO distributors tend to offer departments a wider selection of products, while smaller local distributors often rely more on a good product selection reinforced by attention to understanding the specific needs of local customers.

“Local companies tend to pride themselves on technical support,” Dudek says.

Often, maintenance managers make the decision on whom to partner with based trial and error. As an example, the University of Pittsburgh Medical Center uses a local vendor for its water-treatment chemicals.

“We once used national firms, but we had serious concerns about the level of technical support we received,” Dudek says. “The pricing was competitive, but our chiller and boiler maintenance and performance was suffering. And if you have corrosion and scaling issues, you really pay many over what you might save on chemicals. This is one area where we resist having strict competitive pricing being a strong determinant.”

Going Beyond Price

These days, all distributors are trying to go beyond simply selling products in an effort to offer services that address the inventory-management challenges of maintenance and engineering departments. For example, more managers say they turn to distributors to provide training on new products and technology. In tight budgetary times, such resources are invaluable in keeping technicians up to speed.

“We have one electrical distributor that comes in and provides regular training on site for one or two hours at a time,” van der Have says. “Those are the vendors who might get more of our business. And that kind of thing is becoming more the norm than the exception.” In the Clark County School District, distributors provide training on maintaining key components of security systems.

“Closed-circuit TVs are very critical with our systems,” Shingleton says. “We can’t have cameras down for days when we have things like theft happening.” The company provides hands-on training that enables the department to keep the cameras functional and the system operational.

Ongoing Challenges

For all of the attention that distributors are paying to going beyond price and building stronger relationships with departments, managers say it remains a challenge to find suppliers that can do so consistently and successfully.

“It can be very hard to find an outfit that understands our needs and then meets those needs,” van der Have says. “We tend to go back to the people who treat us well.”

Because managers are under heavy pressure to control costs, they are more often holding distributors accountable for providing essential documentation that enables departments to monitor MRO product costs.

But not all distributors are up to the task, Dudek says.

“Our biggest challenge is having them be as accountable for paperwork as we need them to be in our auditing process,” Dudek says. “They need to be more accountable in their billing and delivery operations.”

The ‘Big Box’ Effect?

In recent years, “big box” retailers have emerged as yet another product-procurement option for managers and their departments. Because these retailers offer geographic and price advantages in some cases, they have attracted the attention of managers investigating every possible option to find lower prices and easier access to MRO products.

So far at least, their impact on traditional supplier-buyer relationships for such products is unclear.

“We have worked with them on occasion, but we’ve found they’re not as customer friendly as some of the smaller distributors,” van der Have says, adding that product selection often is limited and geared more toward new construction than ongoing maintenance. “They don’t stock all of the stuff we might need.”

But in too many cases, van der Have says, these retailers are not as customer friendly as smaller local and regional distributors, which often excel at providing service to their hometown customers. It seems likely, however, that managers will keep their options open by looking to capitalize on benefits offered by these retailers.

The role of distributors will continue to evolve in response to the ever-changing forces of supply and demand. But whatever the structure of the purchasing process or a department’s relationship with its MRO product distributor, it seems certain that there is room in the formula for a stronger partnership that goes beyond simply selling products to customers.

Says Shingleton, “When a vendor works with us to understand our situation better, that helps us work together better.”

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  posted on 3/1/2004   Article Use Policy

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