Chinese MRO B2B Platform Ruigu Nets CNY 300 million
MRO got another investment this month, following Tencent's ambitions on B2B transaction sectors.
Chinese MRO (Maintenance, Repair, and Operations) B2B e-commerce platform Ruigu (锐锢商城) announced CNY 300 million (USD 42.17 million) Series C1 round of funding today, led by Eastern Bell Ventures and a leading PE firm CDH Investments.
Ruigu has grabbed investment from Source Code Capital and Chengwei Capital since its inception in 2013. It has served 50,000 industry clients to date. MRO is a niche market that Tencent bets on as well.
“Due to the complex of MRO categories and fragmented SKUs in the industry, the traditional supply chain is lack of quality and order delivery control. Ruigu provides a better solution with the lowest costs and highest efficiency. In our ecosystem, our partners can achieve higher inventory turnover and cash use efficiency, which improves their competitiveness. We hope to serve more upstream and downstream partners and enable industry upgrading. ” Ruigu founder and CEO Gao Yang (高瑒) said.
“As the new technology infrastructure and entrepreneurs are leveraging their power to transform industry integration, we see a lot of opportunities buried in the merchandise circulation of industrial products.” Partner of Eastern Bell Ventures Zhu Yingchun claimed.
Understand the complex world of MRO
Maintenance, Repair, and Operations (MRO) is a growing segment in China, with its market size surpassed CNY 1 trillion (USD 141 million) in 2014. According to investigations, MRO procurement contributes to 26% of total enterprise procurement on average. Thus, MRO presents unique opportunities for corporations to reduce expenses, streamline processes, and improve operational effectiveness.
Before understanding what makes them unique, we first need to look into the fundamentals of MRO to build a framework. The graph above elaborates a typical industrial manufacturer purchase record according to its ERP data. The horizontal axis represents the type of product (SKU) it purchase and the vertical axis represents the number of the SKU it purchases annually. For segment A, top 20 SKUs (ranked by purchase frequency) contribute to 40% of its annual procurement expenses. Usually, the enterprise will facilitate bids to achieve the best value for goods with the lowest costs. For segment B, the enterprise often faces hundreds of suppliers that provide tens of thousands of SKUs (i.e. 300-500 suppliers and each has 20K-30K SKUs).
This is where MRO integrators specialize. MRO industrial supermarkets serve the broad-line and longtail needs best. For segment C, local small retailers (i.e. pop and mom stores) serve the market best. In an urgent case, prompt delivery is essential. Below are two characteristics of MRO that must be taken into consideration when looking at the market.
Inordinate cost. There is an inordinate cost associated with service disruption in relation to cost of MRO products. Industry insiders said inordinate costs (hidden costs) take up to total ownership costs. For instance, a USD 5 bearing can shut down a line that processes thousands, tens of thousands or even hundreds of thousands of dollars of product.
Inconsistent data along the supply chain. There is poor and inconsistent MRO supply chain-related data across business units. SKU descriptions are often with complicated nomenclature. Key sourcing data like manufacturer and manufacturer part number is often incomplete, inaccurate or just not available. MRO data collection can be a daunting task considering the number of SKUs involved.