Three industry experts explore attitudes towards new technologies and how these innovations help to solve common business issues related to Indirect procurement and the category for Maintenance, Repair and Operations (MRO) supplies.
Change brings challenges, large and small – but it also represents opportunity. A recent global survey of 851 procurement professionals by RS Components and the Chartered Institute of Procurement and Supply (CIPS) highlights the level of change anticipated within the industry. When asked about company procurement over the next five years, the majority of respondents expect either ‘some’ or ‘complete’ change (34% and 44% respectively). Just over one-fifth of those taking part in the survey expect ‘no change at all’ (22%).
Both internal and external factors are driving this change. Survey respondents list the need to reduce operational budgets (55%), reduce inventory costs (52%) and improve asset performance (42%) as the top three business pressures.
Day-to-day challenges facing those responsible for procurement include ensuring contract compliance with preferred suppliers (47%), maintaining ageing assets (46%), delivering annualised cost savings (41%), lack of spend visibility (40%) and lack of investment in technology to control purchasing (35%).
Discussion of all the challenges and more can be found in the Indirect Procurement 2018: drivers of change – & how to respond whitepaper.
Here Mike England, Chief Operating Officer, Electrocomponents, Helen Alder, Head of Knowledge, CIPS, and John Patsavellas from the Institution of Engineering and Technology Manufacturing Policy Panel explain how embracing innovation is one way to respond to challenges – and how it opens up opportunities for your business.
“We’re at the start of the journey. Organisations are aware of the technology and looking at its applications.”Helen Alder, Head of Knowledge, The Chartered Institute of Procurement & Supply
Why so little take-up of new technologies?
More than half of survey participants want to speak with suppliers about knowledge services (56%), with a similar number wanting to talk about new product innovations (53%).
These figures suggest that organisations are looking to gain insights into emerging technology and how such innovations could provide solutions. Yet take-up of technologies such as the Industrial Internet of Things (IIoT – also known as Industry 4.0) remains minimal. Furthermore few companies are even thinking about strategies for embracing new developments; only 7% of respondents say their company has a strategy in place for IIoT.
This figure doesn’t surprise John Patsavellas. “I’ve yet to see an organisation put all the technology, processes and programming together on a large scale,” he says.
But why is there such a disparity between interest in new technologies and the actual take-up rates?
Patsavellas believes that “Maintenance engineers are practical: they won’t switch to a new system unless they have stress-tested it thoroughly, so only a handful of early adopters are experimenting with the technology.”
Alder agrees: “I still think we’re at the start of the journey. Organisations are aware of the technology and looking at its applications – but not many have any sort of solid strategy in place yet.”
England expresses a similar sentiment. “A lot of engineers are seeing the Industry 4.0 trend but haven’t worked out how to embrace it on the shop floor,” he says. “Engineers and procurement teams won’t attempt a large-scale overhaul of equipment and processes in one go. A phased approach of test and learn is the most sensible way to explore the benefits of new technology. “It is important, though, that companies get moving with this test. The pace of change will speed up over the next five years – and anyone burying their head in the sand will be left behind.”
How the IIoT can benefit MRO
MRO reaps considerable benefits from the IIoT. “Connected devices, condition monitoring and the big data they create provide significant opportunities to improve MRO and refine the whole maintenance process,” says England.
Specifically, IIoT enables business to develop a predictive maintenance strategy based upon monitoring of machines for required maintenance.
Predictive maintenance would help improve asset performance, which 42% of respondents list as a business pressure. It would also solve the problem of maintaining ageing assets, which 46% of respondents list as a day-to-day challenge.
“Connected devices, condition monitoring and the big data they create provide significant opportunities to improve MRO and refine the whole maintenance process”Mike England, Chief Operating Officer, RS Components
Other innovations also help organisations to better manage indirect procurement.
One option is RS PurchasingManager®, a free and customisable web-based order management tool. RS PurchasingManager® doesn’t require businesses to upgrade their IT systems or software, hence it doesn’t involve any costs or investment. RS PurchasingManager® saves money by reducing the costs involved in the procure-to-pay process of each order. It also saves time by freeing staff from low-value manual tasks and inefficient, non-compliant ordering methods.
RS PurchasingManager® also improves control by keeping up to date with purchasing activity and restricting maverick purchase. It increases efficiency, too, with authorised staff ordering products whenever they need them. In addition, RS PurchasingManager® reduces errors in ordering, processing and invoice reconciliation, thanks to clear data from requisition to invoice.
Another innovative technology is PunchOut, an eProcurement tool that controls purchasing costs. With PunchOut, an organisation can search directly within the RS website, build a basket of products and raise a requisition from its own procurement system. PunchOut saves money on administration and process costs. PunchOut also improves control on spending and approvals. By capturing purchasing data electronically, with no manual re-keying of product data, it increases efficiency too.
Furthermore, PunchOut ensures the contract compliance that almost half of procurement professionals are looking for. PunchOut offers a single platform for users to source products from preferred suppliers across agreed categories, minimising maverick spend.
The benefits of such tools are not to be underestimated.
RS Components has calculated that sourcing and processing costs are typically more than twice your product costs. So if your indirect product spend is £100,000, then your process costs are probably more than £200,000.
Embracing existing and new technological innovations can therefore help procurement professionals to make the kinds of cost savings that they are looking to secure. The same technologies also allow better management of assets by moving organisations to a predictive maintenance model.
In fact, whether it’s IIoT or tools such as RS PurchasingManager®, technological innovations address all of the business pressures and day-to-day challenges that procurement professionals currently face.
Which innovation do you want to embrace?