From the importance of sustainable sourcing to the impact of COVID-19, here are some key takeaways from this year’s report
The 2020 Indirect Procurement Report – RS Components’ fourth annual survey of the state of maintenance, repair and operations (MRO) procurement, conducted in partnership with the Chartered Institute of Procurement & Supply (CIPS) – provides a unique insight into the state of MRO procurement in the age of COVID-19. Here are seven key things revealed by the report.
1. COVID-19 has changed everything about procurement
Procurement professionals have had to pivot quickly to keep MRO supplies flowing. It’s been challenging, but it has also raised the profile of the profession – more than half say the crisis has elevated procurement’s status – and enabled changes that would otherwise have taken month or years.
As well as disruption to supply chains, respondents to the survey said the pandemic had led to greater collaboration with suppliers and increased digitalisation of procurement. Among the challenges cited were coping with remote working and fewer employees, either through furloughing or procurement headcount reductions.
2. Procurement wants to increase stakeholder engagement
Communication is the key word on the lips of procurement people in the survey. They want to increase engagement with stakeholders, not just to get their message across, but to get buy-in to the need to end procurement inefficiency.
Four in 10 say it’s hard to persuade stakeholders of the need to change processes. As well as straightforward resistance to change, the procurement people surveyed said stakeholders feared losing control of buying decisions.
3. Sustainable, ethical sourcing remains as important as ever
Sustainability permeates business at all levels, but procurement has a key role to play in ensuring a company lives its ethical principles. Procurement people need to be at the table when the issues are discussed and expect improved visibility and traceability from suppliers.
Six in 10 of those surveyed said their company had a sustainable and ethical procurement policy in place, and 39% said it was one of the business pressures that most impacted the procurement of indirect MRO supplies.
4. There is still a way to go on supplier rationalisation
The average UK company has 82 suppliers for indirect MRO supplies, the most significant year-on-year increase in the survey. Last year, the figure was 39. Yet 60% told the survey that rationalisation was their key procurement efficiency strategy.
Individual survey comments show that some procurement professionals see rationalisation as vital to improve supply chain risk management, while others are planning to introduce new suppliers while reviewing the viability of existing suppliers in this changed market.
5. Cost reduction is still a dominant driver
Reducing costs is still the number one challenge for the procurement profession in the UK, while 59% say their biggest personal challenge is reduced operational budgets. The economic impact of the pandemic has only accentuated an issue which has been at the forefront of procurement concerns in previous surveys.
As well as curbing spending, 46% of those surveyed said that they faced pressure to reduce inventory costs. But individuals told the researchers they also faced pressure to increase inventory levels to cope with supply chain uncertainty during the pandemic.
6. Technology is the answer – but not everyone is on board
eProcurement not only helps to control costs, it also increases visibility of MRO spend. The survey shows 43% struggle with spend visibility. So it’s no surprise that half of respondents use eProcurement solutions to manage spend across stakeholder purchasing channels.
But 27% complain of lack of investment in technology to control purchasing and only 15% have a strategy in place for industrial vending. Among those who have embraced managed inventory services, 56% use bin stock, 45% use a managed stores solution and 33% use industrial vending.
7. Maintaining ageing assets continues to be a daily headache
More than two-fifths of procurement people say maintaining ageing assets is a day-to-day challenge and a third say improving asset performance and increasing plant uptime is one of their top three business pressures.
Vibration monitoring and oil analysis have the potential to spot asset problems before they occur. But only 15% have a condition monitoring strategy in place that could help them avoid breakdowns and costly downtime. Only 6% have a strategy in place to leverage the benefits of analysing asset performance through the Industrial Internet of Things.
For in-depth data and analysis on how COVID-19 has impacted indirect procurement, download the 2020 Indirect Procurement Report here.