One way to reduce the cost of MRO procurement is to automate the process
The impact of Covid-19 and the humanitarian effect for people, businesses and the economy will be long-lasting. Organisations have had to pivot to new business models dealing with both surges in demand on the one hand and the evaporation of orders on the other.
Through it all, social distancing has meant changes to workplaces and personal protective equipment (PPE) such as masks, visors and gloves have been rolled out at scale.
Supply chains have come under unprecedented pressure from border closures, disruption to the airline industry, and supplier failures. But these challenges have given new impetus to the adoption of digital technology which, as well as solving immediate issues, will have long term benefits for the future of MRO procurement.
Across industries, procurement professionals are forging stronger relationships with suppliers, tapping into their knowledge and working with them to deliver value. Digital procurement tools are also delivering real savings in time and money.
The 2020 Indirect Procurement Report - The Evolution of MRO, carried out by RS Components and the Chartered Institute of Procurement & Supply (CIPS), found that one of the biggest challenges in controlling purchasing activity is a lack of spend visibility (43%).
Indirect costs are an inevitable part of procurement. But consider the time involved in researching products, checking availability, negotiating prices and arranging delivery. Then there’s time spent seeking internal approval, issuing purchase orders and processing invoices.
"There are businesses raising hundreds – if not thousands – of purchase orders a year for low-value products and not really having any appreciation for this significant hidden cost."Alex Davies, Head of Value Added Services Delivery, RS Components
Alex Davies, Head of Value-Added Services Delivery for EMEA at RS Components, regularly sees this inefficient system in action. “Of course the true cost of ad hoc purchases varies widely between companies,” he says. “Yet there are businesses raising hundreds – if not thousands – of purchase orders a year for low-value products and not really having any appreciation for this significant hidden cost.”
However, there are ways to drastically reduce this figure. By taking a holistic view of the indirect procurement process, RS can offer solutions that save quantifiable amounts of time – and, therefore, money. “We have a calculator that we use with customers,” says Davies.
“Specialists in eCommerce will get right into the detail of their end-to-end procurement process, putting real timeframes and real costs into the calculator and producing a true cost to that company.”
RS can then recommend digital tools such as its RS Purchasing Manager® system, which reduces these costs. A well-known confectionery manufacturer, for example, saved more than £30,000 per annum in indirect procurement costs (the equivalent of 3.7 working weeks) when it adopted RS PurchasingManager®.
Peter Malpas, President for EMEA at RS Components believes COVID-19 has had a dramatic impact on the number of businesses seeking e-procurement solutions: “It's shone a light on a number of customers’ supply chains. More than 70% of our business is already done by some kind of eProcurement channel.
“We’ve seen a big surge in demand digitally - businesses coming to us because their existing supply chains have not been able to fulfill their requirements because they don't have a digital offering,” he explains.
RS PurchasingManager® is a free, web-based order management tool that can dramatically streamline the buying process without having to invest in upgraded IT systems or software. It is a self-administered system that can be set up quickly and doesn’t require extensive staff training.
Solution for all types of business
As well as automating large sections of the purchasing process, it allows staff to place their own orders, under specified controls, with a full suite of online management reports. It’s a flexible tool that meets the needs of a wide range of businesses.
“It’s a versatile solution that can be installed in a small business, of maybe 10 employees, and provides a level of functionality they wouldn’t otherwise have without significant investment in a costly purchasing system,” Davies explains. “It can also be used in a large multiple-site business that has end users everywhere. It provides quick access to more than 500,000 items at RS in a user-friendly way that removes many layers of process from a business’s operation.”
In an era of social distancing and remote working, RS PurchasingManager® is helping organisations streamline their processes, either on-site, remotely or in the field. Its enhanced reporting capabilities enable users to analyse spending, anywhere in their business.
"The reports tell you not just what you’re buying but who’s buying, how often and for what purpose."Alex Davies, Head of Value Added Services Delivery, RS Components
“The reports tell you not just what you’re buying but who’s buying, how often and for what purpose. These insights can highlight trends and how assets are performing,” adds Davies. "All of the data, up to 13 months’ worth of purchases, is available to view at any time."
For example, one large utilities company in southern England with multiple remote users buying low value goods through trade counter networks transformed its MRO purchasing by working with RS Components.
The company regained control of purchasing fast-moving, low-value items using RS ScanStock® and rolled out RS PurchasingManager® for all end-users, with an extension called RS ConnectPoint® which gives access to RS PurchasingManager® without the need to use a computer.
Davies says many companies are looking to digitise procurement like this. “They realise now is the time to look at solutions that can help their people stay focused on keeping the business running, rather than worrying about where the next pack of fasteners is coming from,” he says.
These digital solutions are making a difference to organisations. Find out more here