When it comes to successful MRO, supply, solutions and services are more important than price alone
For those responsible for managing indirect procurement, as in every aspect of business, the bottom line is always a major consideration in purchasing decisions. In a 2020 survey of 1,001 members of the Chartered Institute of Procurement & Supply (CIPS), 56 percent of participants reported that reduced operational budgets were the biggest pressure they face. Financial matters were the biggest day-to-day challenge too, with 51 percent mentioning the need to deliver annualised savings.
In such circumstances, it is easy to focus on the price paid to the exclusion of all other factors. This approach, however, is short sighted. In the long term, unquestioningly choosing the cheapest products carries major risks – risks with enormous monetary implications for both the Maintenance, Repair and Operations (MRO) budget and the company itself. What seems like the cheapest option can, for example, end up being more costly further down the line if it means more faults and breakages or a shorter lifespan – especially if this leads to machine downtime and possibly plant closure.
“If you focus purely on cost reduction, you might be drawn away from the value suppliers can add,” says Emma Botfield, Managing Director for UK & Ireland at RS Components. “So that value lens is critical. What’s valuable to your organisation? What’s valuable to your customers? This sets your priorities, and from there you can ask how to leverage the most value.”
Emma Botfield made these comments during an online roundtable discussion with MRO professionals hosted by RS Components. During this series of events, participants shared how COVID-19 has affected procurement and how they try to mitigate risk within supply chains. Here we summarise the conversation about why value is a more important consideration than just cost price.
The value of continuous supply
The coronavirus pandemic has reinforced the importance of looking at the concept of value more broadly. With major disruption to supply chains and changes to how businesses of all kinds operated, the prospect of machine downtime and plant closure suddenly loomed large. In this context, “it was definitely not just about price but continuity of supply,” says Lisa Billington, Senior Category Leader, European Services, at analytic instruments and lab equipment manufacturer Thermo Fisher Scientific.
The value of alternative solutions
COVID-19 also highlighted the benefits of using specialised, expert suppliers with in-depth knowledge of MRO even if not the cheapest option. In testing times, they can provide vital support and problem solving in ways that an anonymous website or sole trader cannot.
A roundtable participant working for an automotive manufacturer reports seeing for himself the value in being able to rely on suppliers to provide alternative solutions. “One of the things that I’ve found really positive during the pandemic,” he says, “was the level of problem solving that was coming through. The resourcefulness that suppliers showed in trying to localise sourcing or find new manufacturers so that we had continuity of supply was impressive.”
The right suppliers can also offer innovative new solutions that will support business development, including value-added services such as e-procurement and vendor-managed inventory. As Chris Lett, UK Sales Director for RS Components, explains, “We’ve accelerated our approach in terms of our service offerings to customers to bridge that gap from where they are to where they want to be. What good looks like? Where do they really see the value?”
The value of strategic solutions
It isn’t only during crises such as COVID-19 that the advantages of using knowledgeable MRO specialists becomes apparent. Suppliers with the capacity and capability to provide innovative services, for instance, can help procurement professionals to achieve larger commercial goals – and drive additional value from existing relationships.
The Head of Procurement at a defence technology business recognises the value in thinking about the bigger picture. This includes the logistics of how the products arrive where they are needed. “How can we make sure those goods are there on time without relying on next-day delivery models?” she asks. She sees the answer in services such as vendor managed inventory onsite and vending machines for PPE and other common components – and needs an MRO partner who can provide them.
Kevin Cheetham, Category Manager at brick manufacturer Ibstock, also prioritises systems thinking. “There’s no point in sending somebody to one of our sites to try and sell us more bearings or sprockets or whatever,” he states. “What MRO suppliers need to be doing is going through the factory with one of our engineering operatives and looking at what the issues are, then coming back to us and talking about what value-added services they can offer to help us work smarter, increase machine uptime and therefore become more productive.”
Other roundtable participants echoed these sentiments, emphasising partnerships and business progression over price. “When it does become just a cost conversation, it’s the wrong relationship to have,” says Brad Stone, UK Commodity Manager at technology giant Siemens. “It is more important than ever that supplier collaboration is in place.”
“Come and look at what gives us the biggest issues then come back and share the expertise that makes you the supplier in innovation, technology and the things that are really going to drive manufacturing,” requests the representative from the automotive manufacturer. “How are you going to help us achieve our objectives, not just in the short term? “That to me is the key thing for any sort of supplier.”
For more on the challenges facing MRO professionals and how they are dealing with them, download the RS Components and CIPS 2020 Indirect Procurement Report