After the disruption caused by the pandemic, recovery has brought its own problems as organisations try to scale up production. The pressure is on to get things moving again. So what should MRO do next?
Just as there was no rulebook to follow when the pandemic hit, so the recovery from COVID-19 will call for pragmatism and innovation. Experts say the bounce-back is coming faster than after many previous major events, including the 2008 financial crisis.
Economists point to a V-shaped recovery, especially in retail, as activity climbs sharply after the steep drop caused by the pandemic. But the world of MRO procurement has changed. Some suppliers have gone out of business, prices are rising and there are maintenance backlogs in some industries.
Maintenance was deferred in some sectors because demand soared during the pandemic. At the same time, COVID-19 restrictions prevented contractors coming on site and disrupted supply chains, hitting stock holdings.
“Maintenance is a long-term investment. Organisations that have stopped activity are going to see the impact starting to hit them in terms of reliability over the next 12 months.”Richard Jeffers, Director of Maintenance Solutions, RS Components
Richard Jeffers, Director of Maintenance Solutions at RS Components, says increased productivity during the pandemic may have stored up trouble for the recovery. “When everyone was in response mode, a lot of them were stopping maintenance because they were so busy producing,” he says.
“But maintenance is a long-term investment. Organisations that have stopped activity are going to see the impact starting to hit them in terms of reliability over the next 12 months.”
He says digital tools like condition monitoring should be part of any manufacturer’s COVID recovery plan to help them predict failures. “Anything that you can do to increase your reaction time is always a good thing in the world of maintenance,” he adds.
A COVID wake-up call
Of course, you need the right components in order to do the maintenance. Andrea Barrett, Vice President for Social Responsibility and Sustainability at RS Components’ parent company Electrocomponents, says the pandemic has shown just how vulnerable some supply chains really were.
She says it’s been a wake-up call to organisations that they cannot just continue with business as usual, but need to look at all aspects of their supply chains to ensure they are more resilient.
As the economic recovery from the pandemic gathers pace, Barrett says only those companies that have built stronger, more resilient supply chains will be able to take advantage of the opportunities recovery will bring.
“I think the pandemic has brought MRO teams and procurement teams closer together, and, by necessity, a greater understanding of each other’s role has definitely happened.”Kate Davies, Head of Global Commercial Services, Electrocomponents
Kate Davies, Head of Global Commercial Services at Electrocomponents, says this can only be done by collaborating, not just with suppliers, but across the business. All stakeholders need to be involved to understand the issues facing an organisation’s supply chain, she says.
“I think the pandemic has brought MRO teams and procurement teams closer together, and, by necessity, a greater understanding of each other’s role has definitely happened,” Davies says.
“My view is that they’ll be able to deliver greater overall value to the business as a result of that, but that needs to be enabled by things like technology and the reduction of KPIs that are too narrow, that don’t focus more widely on the value that it can bring to the business.”
Describing the closer working relationships as “a really huge step forward for MRO”, Davies says collaboration needs to extend beyond working internally within the business.
“Businesses are more receptive, there’s more of an openness and willingness to consider alternative ways of doing things, like inviting your supply chain in to look at opportunities together and collaborate,” she adds.
“Advanced procurement functions know that supplier collaboration offers opportunities for both parties to boost revenue and profits.”
McKinsey & Co: Five themes can help procurement shape recovery in the next normal
In a recent report on the role procurement can play in shaping the recovery, consultancy firm McKinsey said: “Beyond a focus on cost, companies with advanced procurement functions know that supplier collaboration offers opportunities for both parties to boost revenue and profits.
“Indeed, companies that innovate regularly in partnership with suppliers can achieve higher earnings growth (by up to 10%),” the report added.
Focus on innovation
Kate Davies agrees that innovation is essential. But success in the recovery will depend on having the right people in your MRO procurement team. “Over the past 12 months, it’s become far harder to recruit in procurement roles than it was pre-COVID,” she says.
“Procurement is a finite resource which should be used sparingly and where they’ll deliver the most value,” says Davies. Value added services, industrial vending and digital tools can free them up to use their expertise to concentrate on supplier relationships and making the supply chain more resilient.
The 2021 Indirect Procurement report, produced by RS Components in partnership with the Chartered Institute of Procurement & Supply (CIPS), found that almost a third (28%) of those who responded had increased their use of digital tools.
A further one-third (36%) said collaboration with suppliers was increasing. Although pressure to deliver annualised savings had eased, lower operational budgets and the need to reduce inventory costs remain among the top three business pressures.
In some ways, the COVID-19 recovery poses almost as many business challenges as the lockdowns that accompanied the pandemic. But with a pragmatic approach and collaborating with suppliers, these can be overcome.
Prices are rising, putting pressure on already stretched budgets. It’s going to require innovation to keep processes running − but it can be done, especially if you use digital tools to increase transparency.
Emma Botfield, RS Components’ UK and Ireland Managing Director, sums it up like this: “Our survey points clearly to the business value of having a trusted, resilient supplier, like RS Components, by your side in these difficult times. We encourage our customers to draw on our experience and expertise to help them achieve their goals.”