A leading water company in the utilities sector has seen a 70% reduction in process costs since adopting RS Scanstock™
End inefficient, costly procurement processes
Procurement teams and engineers face numerous challenges with sourcing industrial consumables and managing supply chains. On top of multiple stakeholders, a fragmented supply base and a range of products split across different categories, there is also pressure from senior management to reduce costs.
According to recent research by RS Components and CIPS (the Chartered Institute of Procurement and Supply), two of the greatest day-to-day challenges facing procurement professionals are the need to deliver annualised cost savings and lack of spend visibility, cited by 41% and 40% of global survey respondents respectively (Indirect Procurement Report 2018: Drivers of change – and how to respond).
As one of the largest distributors of industrial and electronic products, RS is in a unique position to help businesses streamline their processes and make cost efficiencies. A large part of process costs can be down to inefficient inventory management, particularly when it comes to low-value, fast-moving industrial consumables. Overstocking, poor stock monitoring and availability issues lead to lost productivity and downtime. However, RS offers innovative and unique solutions.
A leading private utility company, responsible for the public water supply and waste collection and treatment in a large region wanted to consolidate spending with a smaller number of suppliers, simplify its source-to-pay processes and improve inventory management. The organisation was transitioning from reactive to planned maintenance. As a result, it particularly wanted to partner with a single MRO supplier that could ensure standardised inventory and provide sufficient parts ahead of Mechanical, Electrical, Instrumentation, Control and Automation (MEICA) engineers needing to complete scheduled maintenance jobs.
Previously, the MEICA engineers had purchased parts reactively, buying as and when required to complete individual jobs. This had often led to delays as engineers travelled to different suppliers to source items or waited for parts to be delivered. Plus engineers would often buy more than they needed, creating stores of un-catalogued items that subsequently went unused because others were not aware of them. This company therefore had capital tied up in stock that was not being used, monitored or maintained.
Better management of its maintenance schedule, with planned maintenance and improved inventory management, would also help this customer to improve its peer-to-peer standing.
As a valued long-standing customer, RS had the knowledge and data to see how to manage its fast moving, low value supplies for Maintenance, Repair & Operations (MRO). The solution was to build a regionalised inventory hub comprising of common MRO items that engineers could draw from without the need to source from, or visit multiple providers. In partnership with stakeholders at the customer, RS Scanstock™ was implemented; a Managed Inventory system in which RS takes responsibility for controlling and replenishing agreed products. This frees up the customer to focus on other areas of business, eliminates delays in the ordering process and prevents excess un-catalogued building up.
Vendor-Managed inventory (VMI), such as RS Scanstock™, is the most common MRO strategy that companies have in place, used by 39% of respondents to the RS and CIPS Indirect Procurement Report 2018: Drivers of change – and how to respond. VMI provides better visibility spend while also ensuring that key products are readily available. Plus by reducing the time spent raising orders and awaiting delivery, such systems improve productivity.
The RS team devised a list of 10 possible pilot sites. After a series of meetings and site visits, +600 products were chosen. The range has since been extended and other lines are continually under review based on stock movement, with replenishment happening weekly.
By taking control of replenishing agreed products onsite, RS Scanstock™ has reduced time taken to manage MRO supplies and thus reduced operational downtime for the customer.
Less time spent by employees on various elements of the purchase-to-pay process and less time waiting for parts to arrive translates directly into financial savings. The original process cost of £74 per order has been reduced to £22 per order. This is a fall of 70%. Based on annualised orders, the annualised process saving is £46,176: a substantial figure, especially as the process also involves less work for the customers and its employees.
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