The first in a series of articles sharing insights from senior MRO procurement professionals outlines the challenges, and solutions, surrounding demand management
“Our biggest challenge is demand management,” said an indirect procurement manager from a large infrastructure organisation. “Although we can get visibility of the demand in a nice big spreadsheet, we don’t have the intelligent analysis that would give us insights into the efficiency, selection and use of items within the business.”
It’s a scenario familiar to many supporting their teams with supplies for Maintenance, Repair and Operations (MRO).
How do you manage demand – and how do you address the issues that make this challenging? These were two of the most pressing questions at a roundtable discussion featuring senior indirect procurement professionals held at RS Group headquarters in London at the end of 2022.
This article is the first in a series reflecting on this discussion and exploring key concerns for those responsible for MRO: how best to manage demand, navigate change and mitigate risk.
Like the roundtable itself, these articles are also informed by the results of a global survey of indirect procurement professionals conducted by RS and the Chartered Institute for Procurement and Supply (CIPS). The 2022 Indirect Procurement Report, Taking control as the pressure rises, offers further analysis of the survey’s findings.
Here we start with what makes demand management so difficult before considering the solutions available.
Demands of the job
“The last thing operations want to do is spend their time talking about whether they’ve got the right hammer or the right PPE,” said the indirect procurement manager working in infrastructure. “They just want it because the cost of not having it has more impact on our business.”
The same is true in other industries where a fast response is needed to avoid disruption to critical services, when unplanned downtime is not only inconvenient but can also be dangerous for the end user – and can result in fines or even the loss of contracts for the provider.
“Demand planning is a massive challenge,” agreed the global category manager for MRO at a leading energy company. “80% of our work is unplanned and it is incredibly difficult for procurement to do our job effectively without good quality demand protocols.”
The nature of the industry can make managing demand challenging in other ways too. A procurement lead for materials, components and manufacturing working in defence, for instance, shared how the security requirements of their customers drives “a predilection for everything to sit in a silo.
“There are lots of good reasons, but the effect is the number of internal stakeholders just doubles then doubles again. Each silo has its own individual requests.”
What’s the priority?
Unplanned maintenance and silos result in more off-contract spend, which in turn makes managing demand even harder. Ensuring contract compliance is already a big challenge within MRO, cited as one of the top three day-to-day challenges by respondents to the RS and CIPS survey.
“More than 50% of our purchases are off contract”
“More than 50% of our purchases are off contract,” rued a discussion participant, wryly adding, “Everybody wants to work in procurement, don’t they?” There was recognition from around the table.
Some off-contract spend is motivated by a focus on cost price. “The ops team focus on whether it arrived on time and if it was cheap,” said the infrastructure representative. “Of course, they don’t have a full view of the cost.”
Changing this behaviour can be particularly tough in industries where speed of response may trump all other considerations. “The engineers have credit cards and there’s no limit on spend because we’re a maintenance company,” explained a procurement manager from a utilities firm. “We maintain big assets and they don’t always fail when you expect them to fail – and they don’t always fail for the reasons you expect them to fail for.
“This means you don’t always have the right tools in the right place at the right time to do the job, so you go to a nearby store and buy what you need. This is genuinely the right thing to do.
“What we don’t want is to have the ops force sitting there afterwards saying I couldn’t fix that and get it back on because I needed a £2 piece of tape and it wasn’t going to arrive until tomorrow – and by the way, it cost us £1 million while we waited.”
Many survey respondents share this dilemma too. When asked about the anticipated drivers of downtime in the next 12 months, by far the biggest answers were supply chain problems (30%) and lead time to get hold of repair and maintenance parts (29%).
You can’t manage what you can’t measure
An energy company MRO procurement professional picked up on this. “You have strategic intent,” they stated, “but to translate that across hundreds of sites and over 1,000 users with their own preferences, the data piece is the critical element.”
Data does indeed play a crucial role in addressing some of the issues that make managing demand difficult. “It all comes down to data,” said one participant. “If you haven’t got rich data, you can’t do the machine learning.”
“That’s the first step, the visibility,” observed another procurement professional. “It’s the old classic you can’t manage what you can’t measure, so you have to get that visibility.”
Organisations that don’t have the capacity to process the data they generate need to look for external support, with 13% of survey respondents saying that they outsource data management, reporting and information.
Trusted suppliers may be able to help. “To do it internally, I’d need an army of people or systems and I can’t invest in that,” said a participant from the infrastructure industry.
“I need a supplier who’s big enough to put together all that information and provide us with analysis of what we’re doing in a way that enables us to leverage our interested parties, the ops directors, enough to say it’s worthwhile thinking about.”
According to the RS and CIPS survey, 24% of indirect procurement professionals also use supplier reporting as a data source for managing spend. Digital tools alone, however, don’t provide a complete solution to the challenges of demand management. The procurement team is vital too. As one energy company MRO manager put it, “At the end of the day, it’s about empowering us with better data so we can do our jobs more effectively.”
There are also valid concerns around digital tools opening businesses up to security threats. The same energy company MRO manager spoke for many participants when they stated candidly that “Cybersecurity is obviously a massive risk for us all, particularly given some of the industries we work in.”
Confidence in handling cyber risks varied, with some discussion participants more worried than others. Several felt confident in the assistance and protection provided by their organisation’s in-house IT and security services, demonstrating again that working with trusted partners – whether internal or external – is important to running a successful procurement function.
Support from suppliers
Among the sources of external support, those suppliers who are leading the field are aware of the contribution they can make to supporting MRO and are collaborating with other organisations to develop and strengthen their offerings. Managing Director for the UK & Ireland at RS, Emma Botfield, for example, told those gathered at the roundtable that “We’re talking to Ariba and Coupa to find out how we can partner because our customers are telling us that integration is critical.”
“A good customer experience enables you to do things differently.”Simon Fletcher, UK Sales Director, RS
During the event, the Director of UK Sales at RS, Simon Fletcher, also discussed with participants how suppliers can assist with efforts to manage demand. “A lot of this is about customer experience,” he said, “making it easy and simple for those who don’t necessarily want to change. If they have a good customer experience, it enables you to do things differently.”
This was welcome news, with one attendee calling for more of this kind of co-operation. “We need our suppliers and key stakeholders in the business to help drive that journey,” they said. “Those in the operations areas have their own cost objectives and budgets to hit, so when we’re trying to make these changes, it’s a lot about interacting and engaging with people in the right way.”
“It’s hearts and minds as well,” added the energy company MRO procurement manager.
Exactly, said Fletcher. “It’s about getting that balance of digital automation with the human touch to add value and give you insights that help people to stay in the right location to do their jobs rather than having to walk to the opposite side of the facility or head out in a van to buy an item off contract.
“Wherever we can, we will do that to help our customers and these kinds of conversations really help to guide the way we approach this.”
For more insights from experienced indirect procurement professionals on the challenges of MRO today, see the next article in this series, “Six ways to manage change”