1. What is integrated supply?
Purchasing managers buy two kinds of products: those
that are consumed directly in the manufacturing process
and those that are indirectly involved in the manufacturing
process. The latter products are those that make up the
huge MRO market.
The problem that has plagued purchasing managers for years is that
MRO products can consume almost 80% of their
time while commanding only 20% of their budget, according
to industry surveys. MRO products preoccupy
a buyer's time because a) there is a huge number of items
to choose from, and b) there is an army of vendors
to work with. To solve this problem, the industry developed
Integrated Supply.
Integrated Supply is a complex subject. But for our purposes,
it can be defined as a contract
between a manufacturer and a vendor that names the vendor
as the sole source of a manufacturer's MRO needs.
The contract
is good for the manufacturer because it not only reduces
to one the number of vendors she must deal with, but
also gets the following results:
reduces inventories
lowers inventory costs
improves on-hand parts availability
shortens the time to repair machinery or down-time
The contract is good for
the vendor because it enables him to reduce his costs
of marketing, stocking, and purchasing inventory.
Integrated supply contracts work for the buyer
and the supplier because they are both able to reduce
expenses with fewer, yet closer relationships.
2. How is T & H involved in Integrated
Supply?
Integrated Supply is a contractual service that T & H
offers to many of our larger customers. This service
includes holding inventory and providing
trained specialists to help customers operate
their facilities more cost-effectively. We provide this
support at sites
located close to customer
plants. Typically, we manage inventories on a consignment
basis, which means that customers don't pay for items until
they use them. This arrangement allows customers to significantly
reduce their total cost of doing business and enables
T & H to ship volumes of product we would not otherwise move. The products
we inventory and the services we render comprise a broad
range of customer needs. Some of these needs include:
- Electrical maintenance products
- Repair services and spare parts
- Lighting fixtures
- Wiring and tubing
- Switch boxes and cabling
- Datacom equipment
Several major integrated supply contracts have recently been
awarded to Turtle & Hughes.
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