The five biggest disruptors revolutionising the indirect procurement process
The UK (and the rest of the world) is in the early stages of what has been dubbed the fourth industrial revolution, where disruptive digital technology will change the way manufacturing works dramatically. By the end of 2019, for instance, there were reportedly 7.6 billion Internet of Things (IoT) devices in the world, a figure predicted to rise to 24.1 billion by 2030. Amidst such information, the world of MRO procurement is also set to change.
But what are the main drivers of this change, and how will they impact MRO procurement for organisations? Here, we list the five most significant developments impacting the indirect procurement process.
Whilst many organisations have made the move to an eProcurement purchasing system, many have many manual processes around their purchase to pay processes, particularly for MRO purchases. While introducing eProcurement involves an up-front set-up cost, this should be easily offset by the benefits that the system brings in terms of reducing the process costs associated with low-value, high volume purchasing.
First, a digital system makes searching, ordering and paying for items quicker, simpler and traceable. This reduces the amount of time involved, which should see procurement costs go down and help an organisation’s bottom line. In addition, the ability to see exactly what has been ordered at all times helps take risk out of the supply chain as parts are much less likely to be counterfeit or bought from unapproved suppliers.
The inevitable output from technology such as eProcurement and the Industrial Internet of Things (IIoT) is huge amounts of data that organisations can collect, analyse and use to improve their processes. Working with suppliers such as RS, it’s possible to look at your entire MRO strategy, from the type of maintenance that is done to the parts that are ordered and how that process works.
It is then possible to identify both short- and long-term improvements that will create significant efficiencies and make your organisation more competitive.
" Disruptive digital technology will change the way manufacturing works dramatically and the world of MRO procurement is set to change with it"
Connected industrial devices speaking to each other and feeding back data to organisations is referred to as IIoT. In the MRO procurement context there is huge scope for businesses to move from unplanned, reactive maintenance to planned, preventative maintenance, thanks to this technology.
New machines or retro-fitted older machinery have sensors that alert a company’s maintenance team when a fault is about to happen. In some cases, the system may even automatically order the replacement part, which leaves the engineer to make the repair and the organisation avoids costly downtime.
4) Supply chain logistics
Recent research by RS and CIPS showed that the biggest driver of downtime for maintenance and repair teams is a long lead time to get hold of replacement parts. These parts are crucial to the ongoing operations in any organisation and the quicker they are delivered, the less costly downtime they will experience.
Technology is now impacting the supply chain for MRO parts as suppliers increase their capability to deliver products quickly and with greater transparency so that customers have clear visibility over where their order is at all points of the process. RS ships over 50,000 parcels to more than one million customers a day, with its high-tech distribution centres in Corby and Nuneaton processing 16 million orders a year.
With this level of service it is possible to expect most products to be delivered on a next-day basis, which in turn allows organisations to reduce the amount of stock they hold on site. By relying on the capabilities of trusted suppliers, it’s possible to free up storage space and, crucially, working capital.
In addition, RS ScanStock®, a vendor managed inventory service, which reduces the time and cost linked to controlling inventory. The service means that RS supply storage solutions, check and replenish stock, provide regular reporting around consumptions and consolidated invoices – all of which ensures that the correct parts are in stock when they are needed. Vendor Managed Inventory (VMI) systems such as this are becoming an increasingly widespread feature of MRO. According to the 2020 Indirect Procurement Report, conducted by RS Components and the Chartered Institute of Procurement and Supply, a quarter of UK businesses use such a system; the figure is four in ten for the rest of the world.
5) Multi channel approach
A significant part of protecting your MRO supply chain is to work with suppliers that can offer a multi channel approach. In addition to providing best-in-class web, mobile and eCommerce support, RS has a network of Local branches around the country to allow customers to order and collect products in their area. RS also has a UK call centre providing customers with 24/7 support.
While strong digital capabilities are an essential element of what suppliers need to provide, a true omni-channel offering that provides an integrated approach for customers is the future.
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