In Part II.1, after noting how BravoSolution transformed a solution that was a complete category management solution for nine (9) somewhat disparate categories, to a complete vertical solution for five different verticals (with more coming in the future) that was based on the collective decades of experience of their global sourcing team (working out of ten offices in four continents) in those verticals, we noted how in BravoSolution’s Business Center, the basic templates are loaded and ready to go. All that an organization has to do to get started with a basic event is upload its item list, market baskets, list pricing for each supplier (and current / previous bid discounts), and current contracts; define it’s service level equations and cost-vs-service level trade-offs; and define its bidding guidelines and key milestones, and a basic event is ready to go!

In addition to being able to capture all of the categories, sub-categories, and items of interest, the platform can also capture all of the buyer locations — organized by region, state, and city — and supplier service locations — also organized by region, state, and city — and the platform allows a buyer to restrict which service locations can service a buyer location and the supplier is still able to define further restrictions still based on the supplier’s capabilities. In addition, a supplier can also suggest alternate items, with alternate pricing, for each item (over those selected by the buyer) and a buyer can accept or reject the alternates that are proposed. These alternates can have their own pricing, discount, and shipping & handling rules as well. For any category, sub-category, or item with a price that is largely driven off of one or more market costs (like steel or energy), the supplier can specify the relevant price index(es) and the percent that the market cost is driven off of the index(es). So, if a steel part is 50% steel, 10% energy, 25% specialized labour, and 15% other, the supplier can indicate that steel, energy, and specialized labour are the primary cost drivers, link them to the buyer recognized indices, and indicate the threshold change at which a price will need to increase or decrease. The buyer can then accept, or reject, the bid and if accepted, do multi-year what-if scenarios and make optimized multi-year awards that take expected cost increases or decreases into account, reducing the number of sourcing events and freeing up its strategic sourcing team for more strategic value-add activities, such as supplier performance improvement.

And the best thing about the solution is that the entire workflow is mapped out and easy to follow by even the most novice buyer on the sourcing team. First, the buyer is walked through setting up the guidelines for the supplier and customizing the workflow. This involves sending out an intent to respond (to avoid wasting time creating RFX sheets for uninterested suppliers), creating the general instructions for the event, identifying the milestones (steps) and target dates for completing each milestone (step), drafting the announcements for the various milestones and tracking their distribution, and selecting/creating the appropriate training materials for download by the suppliers (which can include step-by-step instructional videos for each step of the process).

Then the RFI is initiated to collect basic supplier information, product and service capabilities, service history, and standard pricing practices. Based on this, a basic product and service level evaluation is conducted (which insures that minimum required service levels can be met and that minimum quality levels are achievable), and any suppliers that don’t meet the minimum requirements are eliminated before the RFQ. At this point, the required service areas are defined (based upon the uploaded and/or historical service areas that can be defined at the region, state, and/or city level), the market baskets (and the component categories, sub-categories, and items and their mappings to default, pre-approved, supplier items) are finalized, discount categories are created, and any required shipping & handling rules are created.

The RFQ is then sent out and the suppliers can either enter their bids through the supplier portal, or download an Excel sheet, which can include their historical bids (if they bid in a previous event) that they can complete offline and upload if it’s easier. The suppliers can then define any general or (basket specific) discounts through the portal in a powerful and flexible manner on their list-price bids (which makes bidding for them as easy as cutting and pasting their list-price bid-sheet into the Excel sheet and then defining their discount categories, versus having to create multiple pricing sheets for each type of discount). Finally, the suppliers can fill in their shipping and handling costs and requirements (such as minimum order size, service location restrictions, etc.) and submit their bid. Optionally, the suppliers can also specify the dependence of high-dollar, or variable, categories on price-indices and additional discounts for alternate payment terms.

When all of the suppliers have bid, or the cut-off date is reached, the buyer can then push all of the bids into BravoSolution’s Collaborative Sourcing Solution into a pre-built, ready-to-go, optimization model that, based on the predefined service rules, cost trade-offs, and preferred contract length, will compute the optimal solution. The buyer can then create multiple what-if scenarios to determine the cost dependency on service level (or vice versa) or the potential savings with different contract terms. Once an award scenario is chosen, it can be saved, pushed into the contract management solution, and template contracts generated for each supplier in the award scenario.

It’s a very well thought out solution for MRO optimized to make sourcing, and re-sourcing, as quick, easy, painless, and error-free as possible so that, if needed, it can be driven by a junior buyer (under the guidance of a senior buyer) and free up the senior buyer in the organization for more value-add or strategic activities. And with the decades upon decades of experience in BravoSolution’s Global Team, they can get it up, running, and customized to your specific organizational needs in a matter of weeks. If you are an MRO organization, or an organization with a large MRO spend, BravoSolution’s MRO Business Center is definitely a solution to look at closely.

In Part I, we discussed how BravoSolution, realizing the limitations in their original, ground-breaking business center solution, enhanced the solution to be a complete solution for certain verticals that have standardized, predictable workflow-driven processes at the heart of their categories. We discussed how they transformed a solution that was a complete category management solution for nine (9) somewhat disparate categories, to a complete vertical solution for five different verticals (with more coming in the future) that was based on the collective decades of experience of their global sourcing team (working out of ten offices in four continents) in those verticals.

MRO, short for Maintenance, Repair and Operations, is a vertical that’s almost tailor-made for a business center solution. Even though, as a category, it is one of the broadest categories imaginable as it has to deal with whatever is required to keep any and all electrical, mechanical, hydraulic, telecommunication, or other physical system operating at normal levels — be it a production line, telecommunication backbone, power center, water plant, ventilation system, or office building — from both an (emergency) repair perspective and preventative maintenance perspective. As a result, depending on the company in question, the category could include just about any product or service under the sun. However, unlike CPG categories, the organization is generally not sourcing in volume and not looking for production capabilities, innovation capabilities, partnerships, or other value-adds that are required for success in those CPG categories.

As a result, MRO success often depends not on identifying the supplier who can give you the best price at the best service level on a part, but on identifying the supplier who can give you the best average price at the best average service level over a large market basket of parts, or the supplier who can bundle the services associated with installing a related market basket of parts (as part of preventative maintenance) at a competitive rate (which not only reduces the direct costs of having to deal with two different suppliers for parts and services, but the indirect administration and communication costs).

In addition, MRO suppliers tend to quote differently than volume-based manufacturing production facilities. Manufacturers will often quote based on production tiers, or give flat discounts or rebates based on production volumes for a single product, whereas MRO providers provide list pricing, and then quote discounts based on total dollar commitments across a market basket (as individual volumes for most categories aren’t enough to merit much of a discount).

Other complexities with MRO revolve around the sheer amount of data that needs to be captured, the creation of the right market basets, defining the qualitative metrics to appropriately capture the service levels of interest, defining the equations that appropriately trade off cost vs. quality vs. service level, and defining the cost drivers for the high-priced categories that will define when costs can change in a multi-year contract.

At a large MRO company, there will be thousands of products and services that need to be quoted from dozens, if not hundreds, of suppliers. Just creating all of the required data sheets that need to be distributed to the suppliers will be a challenge, breaking them down into baskets, sub-baskets, or items with alternate specifications for the sub-set of suppliers who will only bid on a sub-set of the RFX a nightmare. For some categories, service metrics are more important than cost. For example, if an automotive production line goes down, that can cost a large automotive manufacturer seven figures a day. In this case, spending an extra $10 an hour for a service provider with a guaranteed on-site service time of 4 hours vs 8 hours is a no-brainer. Even if their cost is substantially lower, service providers who cannot guarantee a required response time can not be considered for an award in some categories. In other categories, service levels, while important, can be traded off against cost. Consider warranty repairs. A five day turnaround vs. a seven day turnaround for a returned consumer item makes very little difference to a consumer that is out of a provided product for almost a week anyway, and trade-offs can be made in cost and service level. However, these trade-offs need to be evaluated in an appropriately defined equation. While a five day vs. seven day turnaround is almost equal, a five day vs. a twenty-one day is not. Unless the twenty-one day repair cost was high double-digit percentage cheaper than the five day, an organization wouldn’t risk the customer animosity that could result. And, in some categories, costs are driven by market conditions. If the service provider is supplying mostly steel parts (of 50% or more purity) that it has to source every year, and the steel index rises 10%, then the supplier will have to raise its prices (by at least 5%) to break even. Such a supplier cannot enter into a multi-year contract and give you it’s absolute best price today unless there is a cost-correction built-into the pricing model (as it would have to eat the loss otherwise).

In other words, the MRO category has some unique peculiarities that can make using a traditional sourcing solution a royal pain in the backside as the huge amount of set-up alone can be daunting. And if the solution doesn’t allow at least some of the work to be templated and re-used, the buyers will soon revert to the classic three-bids-and-a-buy through an auction just to “git-r-done“. But with BravoSolution’s Business Center, the basic templates are ready to go and once an organization uploads its item list, market baskets, list pricing for each supplier (and current / previous bid discounts), and current contracts; defines it’s service level equations and cost-vs-service level trade-offs; and defines its bidding guidelines and key milestones, a basic event is ready to go — and incumbent suppliers don’t even have to provide a price list (if the current price list in the system is still accurate), just their discounts for being awarded certain market baskets or dollar levels. In tomorrow’s post, we will dive into the BravoSolution MRO Business Center.