A gathering of procurement professionals to discuss changes within MRO revealed the importance of relationships and trust in managing change successfully
In spring 2019, 20 procurement experts gathered at the RS Components head office in the technology hub of London’s Pancras Square to discuss the RS Components and CIPS 2018 whitepaper, Indirect Procurement Report 2018: Drivers of Change & how to respond. Together, the attendees represented industries from food to building materials, national energy to regional utilities, nuclear power to broadcasting. Also joining in the discussion were Peter Malpas, President for EMEA at RS and Helen Alder, Head of Knowledge The Chartered Institute for Procurement and Supply (CIPS).
Over a period of four hours, participants covered a range of issues. While their examples may have been specific to their sector, or even their individual organisation, there were clear commonalities across their experiences.
Whether they’d been working in the Maintenance, Repair & Operations (MRO) space for six months or 30 years, all recognised that change is a constant within indirect procurement. Equipment requires ongoing maintenance; businesses evolve – or even transform; the political and economic climate changes.
This continual cycle of change means that all organisations are on an indirect procurement journey: never static, always moving in one direction or another. Of the organisations represented by the delegates, some were very much at the start of their journey, acting reactively, with little strategy – but looking to change this model. Others had an established procurement policy that is widely adhered to. Many fell somewhere between these two positions.
Cost is key… but it isn’t the only concern
Cost is a vital consideration. For those overseeing procurement, the bottom line remains critical and making savings is important, whether that is achieved by like-for-like product replacements, adding value or other ways of working smarter.
However, purchase price is not everything. Lauren Coombes, Senior Buyer for Global Logistics at National Grid, captured the prevailing view when she said: “We’re looking at total cost of ownership going forward. If an engineer needs a certain instrument to do his work, if we buy it once and it lasts him the whole of his career then I’m happy to do that. That’s where we’re coming from now as a business. “Having said that, we still want it to be at a competitive price and we still want to leverage that across our business.”
As Coombes’ comment indicates, longevity is a consideration. Several other participants mentioned longevity when emphasising the importance of asset management. They are focused on improving the life of their assets both in terms of longevity and using predictive maintenance to reduce downtime, as this can be both inconvenient and costly if it holds up production.
“Being out of operation for a couple of hours has far more impact than the bill at the end of the service”James Platt, Head of Procurement, Hovis
Kevin Cheetham, Category Manager at Ibstock, put it this way: “Our main driver at the moment is trying to manage our assets. The mantra is to reduce machine downtime and one of the ways to do that is to make sure that the equipment is in better condition than it has been.” James Platt, who was Head of Procurement at Hovis before becoming a Director at Staverton Consulting, was frank about the implications of such downtime: “At Hovis, our machine downtime costs more than our MRO contract. Being out of operation for a couple of hours has far more impact than the bill at the end of the service.”
Another consideration that is becoming increasingly important for all aspects of business, including MRO, is sustainability. Alison Czeres, Senior Procurement Manager at the BBC, highlighted this when she explained that her team are focused on sustainability in their tendering process. Eliminating single-use plastic is a high priority.
Reducing the number of MRO suppliers is also a goal for a number of participants. Aggregate Industries, for example, went from 500 suppliers to 20 in the space of just five years. Its Senior Category Manager, Adam Boulter, is clear about the benefits of this. “We used to have a large P2P department,” he said, but fewer suppliers mean fewer invoices, so, “It's now less than half of what it used to be, this is achieved by working strategically with fewer suppliers to reduce manual invoicing and move to automation which equates to huge savings per year.”
There are other advantages to supplier rationalisation. For Emma Edwards, who was Senior Procurement Manager – Northern European Packaging at DS Smith: “It’s control: knowing where we’re spending our money, the quality of the product coming through the door and what’s on our machines.”
For Yorkshire Water, health and safety is a big factor. As David Llewellyn, former Category Manager at the utlity company before moving to the role of Lead Buyer at civil engineering firm JN Bentley, explained: “At Yorkshire Water, we were on a health and safety drive. By rationalising, we were better able to make sure that all the suppliers we used provided genuine items reducing the risk of counterfeit products.”
The importance of compliance
Reducing your supplier base and using a smaller number of vetted businesses may help with standardisation and control as well as health and safety, but only if staff actually use these preferred suppliers. And for many organisations, compliance is a major problem.
According Indirect Procurement Report 2018: Drivers of Change & how to respond, a 2018 global survey by RS Components and CIPS, the alignment of internal stakeholders with procurement is mixed, with 42% fully aligned, 30% highly aligned, 30% partially aligned – and 28% not aligned. Delegates at the discussion echoed this finding.
Peter Malpas, President for EMEA at RS, is clear about why lack of stakeholder alignment is problematic. Without it, he argues, other changes are difficult to achieve: “Stakeholder engagement across customer locations is key to achieving sustainable cost savings.”
In some instances, part of the problem is the sheer number of staff authorised to make purchases. A firm with 5,000 buyers, for example, is far more likely to struggle with compliance than one with five. In other instances, the issue is staff’s willingness to use unorthodox methods to procure items. One delegate shared an anecdote about a senior employee issuing a personal cheque for £1,000 to buy MRO supplies – then claiming the money back via expenses.
In certain cases, procurement professionals understand the motives behind non-compliance. Colin Bland, Purchasing Director at Johnson Controls, recognised why some employees prefer to continue with their own systems rather than complying with new ones: “I think there’s an element of the fact that people are so busy, so whenever you try to change something, there’s a sigh of exasperation because they are so buried in what they’re doing that it’s hard to take on a new process. We’re probably seen as interfering in their jobs.”
An additional factor is lack of overall visibility. Participants knew that employees on the ground sometimes believe that they’ve found better value with a product that they can source locally or online rather than via the preferred suppliers. However, their calculations usually don’t take into account the time cost of individual employees continually sourcing their own items.
Moreover, employees may only be seeing the catalogue price of the preferred supplier, rather than the cost secured by the procurement team. This is why good communication between procurement professionals and the employees affected by their decisions is essential.
Communication is fundamental to tackling the problem of non-compliance. Helen Alder from CIPS advised participants to maintain ongoing communication about changes to MRO practices. “Communicate what you’re doing and why. But once you’ve implemented it, keep communicating why you’ve gone down that route and what the benefits are,” she said.
“Publicise why you’re doing it. But once you’ve done it, keep publicising why you’ve gone down that route and what the benefits are”Helen Alder, Head of Knowledge, The Chartered Institute of Procurement & Supply
Those present shared various examples of good practice. Gillian Skimming, Senior Procurement Business Partner at the BBC, travelled around the regions hosting roadshows to explain the changes following the broadcaster’s most recent changes to procurement. Meanwhile, at Severn Trent, Rachel Passey, Supply Chain Lead and Judith Gaskin, Category Manager, use a combination of approaches that include face-to-face conversations, updates via an internal communication system and shorter messages via a company-wide Twitter-style platform.
While technology is useful, particularly for organisations spread over a wide geographical area, participants acknowledged that nothing beats personal conversations. “The maintenance team always love a face-to-face conversation,” said Rachel Passey. “You get thrown all sorts of questions when they see a face from commercial, but that’s the way we land messages. And then we follow up with the internal Twitter.”
Another face-to-face strategy that Severn Trent uses is communities of practice. As Judith Gaskin explains, “We have an MRO community of practice that involves colleagues from across the business, including employees from the Maintenance, Standards and Commercial teams. They meet on a regular basis to test, bringing their specialist knowledge to the testing and approval of products.
“It is this community of practice that drives improvements in MRO procurement forward – and shares details about changes with their colleagues.”
Others shared similar sentiments about the importance of forging personal connections. Lauren Coombes explained how getting to know the engineers at National Grid over time had helped. “It was interesting to see the difference between a non-operational person like me and engineers like my working groups,” she said. “A lot of them just didn’t want to listen to what I had to say at all to start off with. But this has changed as they’ve got to know me. Some of the decisions that I made on their behalf helped them to trust me.”
“Local engagement, showing good examples of best practice and sharing case studies wins hearts and minds”Peter Malpas, President for EMEA, RS
The word ‘trust’ is crucial, coming up again and again during the discussion. The representatives from RS present identified this as a theme. “What you guys are saying,” observed Peter Malpas, “is that local engagement, showing good examples of best practice and sharing case studies wins hearts and minds.”
By gaining trust, you improve levels of compliance and reduce levels of risks. But developing trust is important in other respects, too. Participants also want to forge good relationships with the organisations that they work with: “A trusted partnership where the MRO supplier gets what you’re on about,” is how James Platt of Hovis described it.
Why is this useful? Because the experience and expertise of suppliers such as RS is beneficial for firms looking to continue to the next stage of their MRO journey.
Delegates revealed that many firms are proactive in soliciting such knowledge. “We encourage our preferred suppliers to bring innovation to us,” said Kevin Cheetham from Ibstock. Likewise, commented Alison Czeres from the BBC: “We’re always having to take advice from the suppliers because they need to tell us where the next-generation technology is coming from and what that’s going to look like. We’re trying to look now at what some of the technology will do in 10 years’ time.”
Adam Boulter offered a specific example that had worked well for Aggregate Industries. Previously, engineers had used large amounts of scaffolding to repair machinery during outages, but a supplier suggested that they use rope access instead. This change has now been rolled out across the company, saving a huge amount in scaffolding costs. “Broader conversations about any other services a supplier provides, and allowing them to come to the table with ideas, works really well,” he reflected.
However, trust needs to develop before organisations begin adopting large-scale innovations proposed by suppliers. Colin Bland from Johnson Controls advised caution: “Some of these changes are quite small and easy to implement, but a lot of the ones with technology can be really far reaching. They are big changes that will impact your organisation and use up a lot of resources, so you have to be really sure that they will deliver results and that you trust in them.”
Trust, therefore, is crucial – both between procurement professionals and MRO suppliers, as well as between procurement professionals and other employees within their business. And it is those who are responsible for procurement that provide a lynchpin in this system, learning from and communicating between the suppliers and stakeholders.
All three groups have an important role to play in an organisation’s MRO journey. However, it is the procurement professionals who build trust by developing relationships internally and externally. Success comes when they successfully connect the two.
For more information on the changes affecting indirect procurement, and how you can respond to them, download the RS and CIPS 2018 Indirect Procurement Report: Drivers of Change & how to respond, here.