As we begin to establish a new normal in the wake of COVID-19, what trends are shaping MRO?
Since COVID-19 hit the headlines in early 2020, it has affected every aspect of life – and Maintenance, Repair and Operations (MRO) is no different. In the RS Components and Chartered Institute of Procurement & Supply 2020 Indirect Procurement Report for MRO supplies, participants reported several changes caused by coronavirus including supply chain disruption (56 percent) and an increase in the use of digital tools (29 percent).
The latter is an example of an existing trend accelerated by COVID-19, but in other cases, the pandemic slowed developments (see Four Ways COVID-19 Changed MRO for more on this). The longer-term impact of coronavirus on indirect procurement remains unclear but the continued importance of some pre-existing trends is apparent. Here we share two areas that heavily featured in responses from survey participants and one where change is much slower to arrive.
Cost savings are a perennial demand within MRO, with those responsible for procurement regularly reporting that financial pressures are a major challenge. Respondents to the 2018 RS Components and CIPS survey, for example, cited reduced operational budgets as the top business pressure (55%) and delivering annualised cost savings as one of the biggest day-to-day challenges too (41%).
The 2020 Indirect Procurement Report shows that these fiscal pressures continued alongside those generated by COVID-19. Reduced budgets remained the biggest business pressure, followed by cutting inventory costs (59% and 46% respectively) – and delivering annualised cost savings continued to be the greatest day-to-day challenge (51%).
At the same time, however, those responsible for MRO spend are increasingly aware that value is a more effective framework for decision-making than price alone. Buyers who attended a recent series of virtual roundtables hosted by RS Components, for example, talked about how the right suppliers can bring more to the table than simply the cheapest products. They prized other benefits including continuous supply, alternative solutions and strategic innovations – all of which deliver a monetary benefit in the long run.
Choosing the right suppliers is key to achieving both value and cost savings. Well recognised amongst procurement professionals and by far the most popular way to increase procurement efficiency is supplier rationalisation, mentioned by 60% of survey participants. Moreover, procurement professionals look to the suppliers that they do use to help them deliver further efficiencies through value-added services such as inventory management and eProcurement; this was mentioned by 37% of respondents.
Environmental and Social Governance
Back in 2018, 36% of those involved in the RS and CIPS survey said they were concerned about sourcing ethical and sustainable products. In 2020, this figure stood at 39%. The relatively small increase, however, belies the enormous amount of change taking place in these areas.
Terms such as modern-day slavery and sustainability have been joined by concepts such as circular economy and net carbon zero – and many companies have plans in places for these areas of Environmental and Social Governance (ESG). According to the 2020 survey, 50% have a strategy for sustainable and ethical procurement while 38% also have a strategy for reducing carbon emissions and 20% for energy monitoring of specific assets.
How are these strategies being put into action? In terms of ethical issues, businesses are increasingly using internal approval processes to vet their suppliers, with 88% of respondents reporting that some or all MRO providers have undergone such a check.
In terms of reducing carbon emissions, respondents listed a range of approaches. Most popular is waste recycling (79%), followed by reduced waste to landfill (58%), reduced energy usage (57%), use of renewable energy (56%), energy management (also 56%), reduced plastic packaging (54%), reduced water usage (40%), using eco-friendly cleaning products (also 40%), consolidated orders to reduce transportation (35%) and electric vehicles (29%).
Just as new ideas have become part of the discussion around ESG, existing concepts are part of the digital technologies lexicon. Industry 4.0 and the Industrial Internet of Things (IIoT) have huge potential for MRO, taking predictive maintenance to a whole new level.
However, there is vast gulf between theory and reality on the factory or warehouse floor. Actual take up levels for new technologies remain low. The 2020 RS and CIPS report revealed that just 5% of businesses have a strategy for Industry 4.0 and the Industrial Internet of Things (IIoT). The figures for industrial cloud computing and cyber security services are higher, at 12% and 35%, but this is hardly widespread – particularly compared to the figures for ESG strategies.
Although coronavirus may have prevented or delayed plans to adopt a strategy for Industry 4.0, it is not the only explanation. In the pre-pandemic survey of 2018, for instance, the figure similarly stood at just 7%. In MRO, as in other areas of business, trends are not embraced at an equal pace. Some accelerate more quickly than others – but budget pressures, ESG and new technologies look set to be agenda items throughout the rest of the 2020s too.
To find out more about MRO and why it’s a vital part of every business, check out What is MRO?