While events from the last couple of years may be once in a lifetime occurrence, they contain valuable lessons for indirect procurement professionals looking ahead to future challenges
“It was a perfect storm, wasn’t it?” remarks Julie Swanepoel, Procurement Officer at recycling and recovery firm SUEZ UK. “While we were still grappling with availability of everything after coronavirus, Brexit hit as well – and then of course that ship got stuck in the Suez Canal.”
A black swan event is, by definition, rare. Since 2020, however, a number have occurred, resulting in unprecedented challenges for those responsible for supplies to support Maintenance, Repair and Operations (MRO). At a series of roundtable events hosted by RS in late 2021 and early 2022, experienced indirect procurement professionals gathered to reflect on findings from the annual Indirect Procurement Report produced by RS and Chartered Institute of Procurement and Supply (CIPS) – discussions which included learnings about recent crises and better preparing for risks in the future.
Here are their insights.
Supply chain disruption
More than two years on from the start of the coronavirus pandemic, and more than a year since Brexit, these two events continue to have a profound effect on the supply chain for many businesses. As Kevin Cheetham, Category Manager at brick manufacturer Ibstock, explains, “A combination of COVID and Brexit means a lot of our principal OEM (Original Equipment Manufacturers) suppliers are having ongoing issues getting products through ports and customs and to our sites.”
As a result, some companies have explored procurement options closer to home. “Our answer to a lot of the problems we faced was to source local suppliers,” says Swanpoel. “We’ve been successful with some of our products, but it doesn’t work in every space.” Another procurement professional from the Manufacturing sector agrees, adding that “For our size of business and the size of our projects, we are not able to rely on smaller suppliers.”
The latter also highlights the impact recent events on prices: “We’re still seeing the effects of COVID and Brexit. I’ve never seen these kind of price increases before and it’s a concern. I wish I knew how much a bag of cement costs now.”
Cheetham has noticed the same. “The legacy of COVID has also meant raw material shortages, less availability of spare parts and critical items for our business,” he says, “And the outcome of that is all our suppliers want to put prices up – and not just by a few percent.”
“The balance of power within the supply chain has shifted because there aren’t the supplies out there,” observes Danielle Goodrick, Knowledge Product Manager at CIPS. While this may not last, the price increases likely will. “The tendency is that when prices go up, they never quite come back down to where they started from,” notes Cheetham. Similarly, says Martin Allen, Commercial Manager at machine builders PP Control and Automation, “The temporary surcharge often translates into something permanent.”
“The dynamic between just in time and just in case has changed”Emma Botfield, Managing Director for UK and Ireland, RS
The recent crises have encouraged many roundtable participants to adopt a different approach to inventory. “The dynamic between just in time and just in case has changed because you just cannot afford to run out of critical spares,” says the Managing Director for UK and Ireland at RS Components, Emma Botfield.
SUEZ UK provides a good example of this shift. “We changed a lot of processes because of COVID,” says Swanepoel, “But people are saying this is good and we should have been doing it before.
“You do need to plan and can’t just ask today for a piece of kit for tomorrow. Some sites have started carrying stock that they would never have done before and I’m talking to RS about vendor managed stocks. We’ve got these new areas to explore.”
A new approach to risk and risk assessment is emerging too. “There’s definitely a greater awareness of risk and what it means for organisations to weather against it,” says Botfield, “It certainly is for us as a business. It makes you look more forward with planning.”
“Brexit and COVID are probably a road test for what’s to come in a stressed global supply chain”Helen Alder, Knowledge Manager, Chartered Institute of Procurement & Supply
Roundtable participants were also aware of one of the biggest risks facing organisations in the years ahead: climate change. According to the RS & CIPS 2021 Indirect Procurement Report, sustainability is now one of the top three business pressures facing those working in MRO – and this is only set to continue. “Climate change will potentially cause massive disruption on an ongoing basis,” says Helen Alder, Knowledge Manager at CIPS. “Brexit and COVID are probably a road test for what’s to come in a stressed global supply chain.”
In response, a climate scenario risk assessment process is underway at PP Control and Automation. “What can we identify and what can we do about the impact of them sooner?” says Allen. “What will climate change mean? What disruption will it cause?
“It’s a case of making disaster recovery plans and establishing alternative routes of supply. We’ve already identified one product which we couldn’t buy if something happened to one factory, so we’ve started to mitigate that by asking our supplier who buys the product to do some work on what the lead time would be if we switched to an alternative supplier.”
Likewise at the Manufacturing business. “What is the Plan B?” says its representative at the event. “This is a hot topic. We’ve started thinking in that way now we can see that it only takes say a pandemic to change everything, like a domino effect.”
Furthermore, planning for an anticipated risk can have positive benefits when faced with an unexpected crisis as well, as a food manufacturing business discovered. As one of its engineers observes, “We found that because we prepared for Brexit and stocked up on our critical spares, when COVID hit we had that buffer.”
Do you have that kind of buffer built in ready for the next supply chain crisis? What lessons can you take from recent events to better safeguard your supply chain in the future? If there’s one thing that we’ve learnt from the 2020s so far, it’s that black swan events can and do occur – sometimes in quick succession.
Whether it’s another coronavirus variant or another pandemic, more political disruption or more transport disruption, the effects of the climate emergency or something else altogether, risks are unavoidable therefore it’s vital that we work with partners and suppliers to prepare for them as best we can.
For more insight on the Indirect category of supplies for MRO, read the RS & CIPS 2021 Indirect Procurement report here.