Guess-free decision-making

Big Data will help take the guesswork out of decision-making when it comes to MRO procurement, but quite often, the availability and analysis of data is the barrier to many organisations acting upon it. It is a recognised issue, but one that few companies feel they can do anything about.

Recognising this issue, RS Components set about conducting research into data held on its customers’ consumption to see how to unlock significant savings in the MRO procurement process. RS has a vast data capability that was ripe to be tapped into, and the firm decided to invest further in this area and determine a process from which customers could achieve true cost savings. RS partnered with Manchester Business School, to achieve an independent verification to maintain credibility.

Didier Goguelin, RS Components country manager, explains: "The vast inefficiencies that many organisations are working with are usually ones they are very aware of, but don’t know how to solve. Investing in research based on our data capability meant we could explore consumption habits to find viable savings opportunities, and create a process that could be followed by all kinds of businesses to help them make dramatic savings.

"What will surprise many companies is just how the procurement process stacks up cost-wise in relation to actual product cost; which is at a ratio of 3:1 of procurement versus product costs. However, these procurement costs go unnoticed because they are largely unseen - and that is the reason that data over guesswork becomes crucial in enabling an organisation to modify consumption behaviour to create cost savings.”

RS states that inefficiencies can be the result of the organisation not working in a joined up way – with different motivations for different departments. In production or operations, availability of a product when it’s needed is key; for design it’s about the right kind of product (without necessarily exploring alternatives that could yield cost savings through energy efficiency and reduced maintenance); whilst for finance the motivation is cost of product. The lack of coordination is where the process becomes costly.

By focusing on optimising key areas such as product range, inventory and frequency requirements - the process can be made more efficient.

Didier continued: "Having too much stock can not only affect the cash flow of the company but increase the risk of product wastage through obsolescence, so focusing on that as one area can create savings in itself. Considering alternative products that could be either more energy efficient or incur less product training is one step in the right direction. Another could be removing category boundaries on products, moving the focus towards  quantity, regularity of use and criticality to the job. It is when these kinds of changes are implemented across a multi-site business that savings can be created instantly.”

RS has created a Value Process as a result of its research, which is a formalised end-to-end process that focuses on key areas, but importantly, takes the onus of data availability and analysis off customers, as RS handles the entire process. 

However, the organisation still has to work in keeping their end of the bargain with joined-up thinking. Key stakeholders in the process have to work together for the end goal of cost savings.

Goguelin concludes: "The disparate elements in the procurement process comprising finance, engineering/design and operations representatives must join forces if they are to achieve optimum savings of up to 35%, according to our research. In addition, benchmarking is a key part of the process so that it can be monitored and reviewed to ensure cost savings are maintained. It must become a new way of working – and the sensible way is to use a single supplier that can keep track of this data for optimum savings on a continual basis.”