Preparing for change: The evolution of MRO procurement

According to recent research conducted by RS and the Chartered Institute of Procurement and Supply (CIPS), 74% of procurement professionals anticipate ‘some change’ or ‘a great deal of change’ to their indirect procurement strategy over the next five years. Procurement teams know they need to stay ahead of the curve to avoid drifting into obscurity – but what are some of the key considerations for them?

Embracing ‘disruptive’ technology

The pace of change is a daunting prospect for procurement teams, and the fear of adopting ever-evolving new technology is proving a key barrier to adoption for many procurement professionals. Planning in an evolving landscape can be very worrying, so ensuring flexibility and adaptability in the face of change will be vital to any future planning for any organisations.

Not moving with the changes isn’t an option. When competing with other factories making similar products globally, the ability to produce as efficiently as possible from a cost perspective is a key factor, and those businesses that adopt new technologies to improve their operating efficiency will ultimately have a competitive advantage in the market.

Many organisations have adopted eProcurement purchasing systems, which makes searching, ordering and paying for items quicker, simpler and traceable. This lowers procurement costs as a result of the reduction in the amount of time involved in processes, which ultimately reflects on an organisation’s bottom line. Another benefit of this kind of system is order chain transparency to remove risks involved in the supply chain, such as counterfeit or substandard goods from unapproved suppliers.

RS’ own independently verified research highlighted that procurement cost outweighed product cost by 2:1 – so for every £1 spent on product, the cost to the organisation is actually £3. Multiply this in large organsations or multi-site operations and the cost savings to be made from using an intelligent procurement system could be staggering.

Ditching reactive unplanned maintenance 

Procurement teams and engineers across various industries face numerous challenges regarding the maintenance, repair and operation of their organisation’s assets and facilities. The supply chain for indirect parts, materials and tools is complex due to the number of stakeholders involved, a fragmented supply base and the number of products split across multiple categories. In addition, there is constant pressure from senior management to reduce costs. These are issues that need addressing if they are to capitalise on efficiencies that will lead to cost savings.

When it comes to ageing assets and the risk of unplanned maintenance, a major challenge is terms of lead times and availability of parts - a big factor driving downtime. Using suppliers that can create a dynamic inventory profile to support their customers will help in this area. Longer-term, companies should start to think about retrofitting machines with sensors to help them to move along the predictive maintenance journey. In the future, more companies will start to deploy smart asset management technologies, allowing them to monitor ageing assets and to start to predict failure more readily.

When organisations move away from a reactive unplanned maintenance environment and towards planned and preventative maintenance, it’s possible to reduce inventory costs by working with a smaller group of suppliers who can provide products quickly when needed, reducing the need to hold items on site. 

Navigating Brexit

Another key challenge on the horizon for organisations’ procurement and supply teams – and one which was highlighted in RS and CIPS’ research – is Brexit. The procurement team will have a vital role to play both in the run up to the deal and the aftermath, and there should already be plans underway focusing on best and worst-case scenarios for individual businesses, to help deal with the impact of changes once a Brexit deal is in place – whenever that may be. 

The message is clear – ignore change in MRO procurement at your peril. Rest assured, the support will be there to help those organisations that are willing to embrace new technology to use it to their best advantage. 

For more insights into MRO Procurement, visit www.rs-connectedthinking.comhttp://www.rs-connectedthinking.com