MRO procurement teams are increasingly turning to digital tools to improve efficiency. As well as delivering greater transparency, automation allows teams to delegate day-to-day decisions to end users within a controlled environment.
Digital tools have emerged as the leading driver of improving procurement efficiency in the 2021 Indirect Procurement Report, a survey conducted by RS Components in partnership with the Chartered Institute of Procurement & Supply (CIPS).
Automating transactional tasks is the most favoured efficiency strategy among 34% of UK firms and 41% globally. MRO spend remains under pressure with lower operational budgets still the top business pressure faced by a majority (55%) of procurement professionals, followed by the need to reduce inventory costs.
At the same time, nearly half of respondents (49%) say managing stakeholders across multiple sites is a challenge. Anything that standardises procurement procedures and stops off-contract, ad hoc purchasing is a blessing for procurement teams.
“People are increasingly looking at the digital solution as their first choice.”Richard Jeffers, Director of Maintenance Solutions, RS Components
So, it’s no surprise that 28% of UK respondents say they have increased their use of digital tools to support the purchase-to-pay process because of the pandemic. And 26% say they are training end users to use the digital systems.
First choice digital
It’s a trend that Richard Jeffers, Director of Maintenance Solutions at RS Components, sees first-hand. He says interest in digital tools has risen sharply because of the pandemic. Not only in relation to procurement but throughout organisations. “People are increasingly looking at the digital solution as their first choice,” he says.
That’s certainly the feeling of the people who took part in the survey. One respondent summed up a view of the immediate future shared by many when they said: “Digital tools will have importance. eProcurement systems will be in the process more and more.”
But, as others pointed out, these tools will also allow “digital collaboration” – generating data that can inform discussions across the business about improving procurement efficiency beyond cost control considerations.
Technology also has the power to improve the effectiveness of MRO itself, Jeffers believes. Condition monitoring can alert engineers to defects at an early stage, well before a breakdown occurs.
Data generated about how components perform in service allows predictive maintenance to occur at the optimum time to avoid expensive outages. And monitoring problems like leaks also enables companies to meet their environmental obligations.
Moreover, cloud-based digital tools mean that procurement teams can maintain control of their supply chains as people increasingly work remotely, points out Richard Wilding, Professor of Supply Chain Strategy at Cranfield School of Management.
Consultancy firm Accenture says digital tools also have the power to change attitudes among stakeholders, who come to embrace procurement processes instead of wasting time trying to circumvent them.
“Significant innovation in recent years has delivered a plethora of digital tools for procurement teams.”Kate Davies, Head of Global Commercial Services, Electrocomponents
In a report on the next generation of digital procurement tools, Accenture says end users expect business tools to be as intuitive as the apps they use at home. “A truly digital procurement organisation does many things that benefit the business,” says the report.
“Digital procurement automates repeatable tasks to boost efficiency and reduce costs; it equips stakeholders across the business with real-time insights and analytics … Furthermore, it transforms buyer interactions with suppliers and other third parties by serving as a platform for new levels of collaboration.”
“Digital procurement automates repeatable tasks to boost efficiency and reduce costs.”Accenture: Next generation digital procurement
Making the change
Persuading end users to adopt digital tools may not be as hard as some survey respondents fear. Emma Botfield, RS Components’ UK & Ireland Managing Director, says attitudes change when stakeholders realise they can get what they need more quickly.
“There have been noticeable changes in the way people are adopting new technologies, like digital tools, and working more with their suppliers as partners, rather than in that transactional customer/supplier relationship.”
Emma Botfield, Managing Director UK & Ireland, RS Components
That change is part of a wider shift in attitude towards procurement’s role, Botfield believes. “I think this has been a realisation of the critical role that MRO plays in the whole value chain, and how the interdependencies between stakeholders is both strategically and operationally important,” she says.
Of course, digital tools are continually evolving, opening up new opportunities to change the way processes are run. Kate Davies, Head of Global Commercial Services at RS Components’ parent company, Electrocomponents, points to the “significant innovation in recent years that has delivered a plethora of digital tools for procurement teams.”
She highlights the key role of digital tools in measuring the total cost of ownership of components and providing data to discourage end users from taking the easy route and buying cheap, but low-quality, items.
By accessing data from suppliers, digital tools can also bring a new level of transparency to supply chains, helping to monitor performance and identify risk.
But the benefits are not just about process or KPIs – there are real opportunities for people to grow and develop their skills and experience. Consultancy company Bain & Co says that digitising procurement frees up procurement people to play a more strategic role in their organisations.
For example, the in-depth knowledge that procurement people gain about the components they source make them valuable members of cross-functional teams investigating the creation of new products, according to Bain & Co.
So, the future of procurement is digital. Not just because it improves efficiency, but also because it allows procurement teams to devote themselves to the wider value they can bring to the business.
When it comes to communication, digital tools both facilitate the conversations remote workers need to have, but also provide the data to convince stakeholders of the need for change.
Paradoxically, digital tools both enable greater control and visibility over spend, but also increase the freedom of end users to buy what they need when they need it. The challenge now for procurement is to convince the rest of the business of their value.