MRO Magazine

Firm aims to lower MRO costs for big companies

Pittsburgh, PA -- Nov. 19, 2002 --MRO Direct Inc. has opened its Terminal Way corporate headquarters, and establish...

Pittsburgh, PA — Nov. 19, 2002 –MRO Direct Inc. has opened its Terminal Way corporate headquarters, and established a new business model specifically designed for Fortune 500 manufacturing companies seeking to increase their earnings by lowering the costs associated with MRO (indirect materials) procurement.

According to Industrial Market Information Inc., North American companies spent approximately $224 billion in maintenance, repair, and operations (MRO) purchases in 2000. Studies show that 75% of corporate purchase orders total less than $1,000, yet the average cost of processing each purchase order is approximately $125 — regardless of transaction size.

“There is no doubt that savings potential exists for companies willing to streamline procurement processes and optimize their supply chain. However, the obstacles many companies encounter include: spending the time and effort necessary to source MRO materials, managing inventory on demand, and evaluating the myriad of logistical delivery options,” says Don Belt, president and CEO of MRO Direct, Inc.

“In most cases, it is the miscellaneous MRO transactions that represent approximately 20% of an organization’s purchases, but constitute more than 80% of the organization’s administrative procurement costs.”


Services and products, along with MRO Direct’s technology enabled systems, can produce tangible hard cost price reductions of MRO supplies, the company says. “Through continual analysis and rationalization of the entire MRO (indirect) materials supply chain, substantial and subsequent long-term savings can be realized,” says Belt.

The company’s MRO professionals actively work in the trenches analyzing data, inventory cycle counts and seeking continuous improvement through procurement best practices. Their expertise, based on long-standing end-user and supplier relationships, product knowledge and use of the latest technology, can be used to form a VPI (Vendor Product Index) which will offer over 3 million SKUs.

“Comparatively,” states Belt, “consolidation has already occurred in the retail hardware marketplace, where price discounts on hardware and home maintenance items have been driven by competition between large box stores (i.e. Home Depot and Lowes) and regional retail chains. Our concept is very much the same for industrial miscellaneous MRO items.”

“Accessing a broad range of MRO products directly through cooperative buying groups and master distributors, MRO Direct provides customers with a localized custom electronic catalogue. MRO Direct represents a new business model that will have a significant impact on the structure of the MRO Industry,” Belt contends.

MRO Direct’s suppliers include real-time purchasing through TruServ Corporation, United Stationers Supply Company, AirGas Direct Industrial, SecureRite, Production Tool Supply, and Lagasse Inc.

Although the venture just recently started, the company’s initial capital requirements have been funded by management contributions and private investment. MRO Direct is currently purchasing over 10,000 line items per week for customers in North America and for plants as far away as Mexico and Guam.

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