Procurement outsourcing vs. MRO distributor

Two models that solve similar problems

Both the MRO distributor and procurement outsourcing are used for the same thing: taking the small, frequent, low-value purchases that make up tail spend off the procurement team. Both reduce the number of suppliers in the vendor master and the number of orders the team handles.

The difference is the model. The distributor sells products: it has a catalog and its income is the margin on what it sells. Procurement outsourcing sells a service: it has no catalog of its own, sources quotes in the market and charges for the management.

1. The MRO distributor: the industrial supplies specialist

An MRO distributor is a traditional wholesaler focused on maintenance, repair and operations materials.

• How it operates. It buys large volumes of tools, PPE (helmets, gloves, harnesses), bearings or lubricants directly from manufacturers, stores them in its own warehouses in Chile and resells them to you when you need them.
• Its value. Immediate physical stock and technical product knowledge. If you need a specific valve or a certified harness, its team knows what to recommend.
• How it makes money. Through the resale margin: the difference between what it pays the manufacturer and the price it charges you. That margin is built into the price and is not shown separately.
• Its limit. It only sells what is in its industrial catalog. You cannot ask it to buy computers, office furniture or a service for an event.

2. Procurement outsourcing: the process manager

These companies, known as procurement BPOs or low-value purchasing managers, do not specialize in a product but in the buying process: handling many small transactions quickly and in an orderly way. They take care of small or one-off purchases, known as tail spend. A frequently cited rule of thumb is that the tail accounts for about 80% of a large company’s purchase orders but only around 20% of its spend.

• How it operates. You hand over a mix of needs, for example five ergonomic chairs, three coffee machines, fifty USB drives and ten rolls of artificial turf. The manager finds suppliers in the market, gets quotes, buys, consolidates and delivers.
• Its value. It saves you administrative time. Instead of your purchasing team spending hours onboarding fifty small suppliers in your ERP (SAP, Oracle or another), you work with a single supplier that sends you one invoice a month.
• How it makes money. Through a management fee, either as a percentage of total purchases or as a fixed charge per order processed. The supplier’s price and the cost of the service are shown separately.
• Its limit. It usually has no warehouse or stock of its own: it buys to order, so it depends on market availability.

Where they blur: the gray zone

Large MRO distributors have modernized. Today they offer catalogs integrated with the customer’s ERP, B2B portals and, in some cases, they take over a company’s maintenance storeroom entirely. From the outside, that looks a lot like procurement outsourcing.

The difference is the incentive. The distributor manages in order to secure sales of its own products; the outsourcer manages in order to charge for the service. That is why the former will rarely quote against its competitors, while the latter has to do so on every order to justify its fee.

Side-by-side comparison

When an MRO distributor fits

• When most of the tail is standard, high-turnover products: gloves, cutting discs, bolts, lubricants, hand tools.
• When immediate availability matters more than price, because the distributor keeps stock close to the operation.
• When you need technical product advice to choose the right part.
• When there is already an agreement with audited prices and someone regularly checks that they are honored.

The limit shows up outside the catalog. The distributor will not quote a motor repair, a trade fair stand rental or an imported part from a specific manufacturer. Those purchases go back to the procurement team, and with them the onboarding of new suppliers.

When procurement outsourcing fits

• When the tail is heterogeneous: a mix of products, third-party services, technical spare parts and purchases in other categories that do not fit in a catalog.
• When the main problem is supplier onboarding and the labor hours lost on small orders.
• When you need to see your full tail spend and know what you pay for each item, with prices compared on every order.
• When it matters to have lead times committed by contract, not just good intentions.

Its limit is stock: a purchasing service does not have a warehouse with thousands of products waiting. For very high-turnover consumables, a distributor with stock near the site can be faster.

You don't have to choose just one

In practice, many companies combine the two. The MRO distributor covers the high-turnover catalog under its agreement. Procurement outsourcing covers everything else and, when it makes sense, also quotes the distributor as one more supplier, which keeps its prices benchmarked against the market.

How AROLICO works

AROLICO is an outsourced procurement service for tail spend, working under a purchasing mandate for each order. We have no catalog and sell no products of our own: for every request we quote several suppliers, present you the comparison and issue the order once you approve it. You onboard us once and receive one consolidated invoice a month and a classified spend report.

Unlike a purely administrative manager, we add early-stage engineering to specify technical purchases properly before quoting them. We handle MRO and consumables, technical spare parts, third-party services, facility services, events and trade fairs. Permitting is always outside the scope of the service.

We won't promise you a savings percentage before seeing your data: that is measured in the assessment. What we do sign from day one are the lead times.

Frequently asked questions