Digital solutions are increasingly helping organisations manage the MRO category to deliver cost and time savings.
End inefficient, costly procurement processes
Procurement teams and engineers face a number of challenges when it comes to the maintenance, repair and operation of their organisation’s assets and facilities. The supply chain for indirect materials is complex due to the number of stakeholders involved, a fragmented supply base and the sheer number of products split across multiple categories. In addition, there is the constant pressure from senior management to reduce costs.
As one of the largest suppliers of industrial supplies, RS is in a unique position to understand the complex needs of its customers and to help these businesses improve their processes and make efficiencies.
The crucial statistic for organisations to understand is that with indirect procurement, process costs can be twice as much as the amount spent on the products themselves. So if your organisation spends £100,000 on purchasing products over the course of a year, you will spend a further £200,000 on processing or ‘soft costs’.
As such, there is significant value in reducing process costs, rather than focusing on the purchase price of individual items.
An example of how RS has been able to help a customer take better control of process costs is our work with a leading telecoms service provider that has thousands of sites across the UK. RS had already worked with this company for a number of years, fulfilling around 2,200 orders per annum.
The customer realised that it had a poor procure to pay process, with lots of duplication and double handling of parts in some cases. Engineers would identify a requirement then email or phone a central team about it. The central team would check pricing, stock and place an order. Sometimes the order was delivered directly to the relevant site, but often
they arrived at a central stores.
This situation meant a huge supply base with no supplier leverage and no standardised support. The absence of standardised suppliers also resulted in time delays and lack of productivity. The customer was therefore looking to simplify its indirect procurement processes, remove duplication and create efficiencies.
RS worked with the organisation to devise a solution and create a more effective way of working. A working group was setup with the customer’s finance, operations and procurement teams so that all stakeholders were involved with the change.
Having gained an understanding of the company’s process, RS advised that one of their eSolutions, RS PurchasingManager™, would help reduce duplication while at the same time increasing end user empowerment and visibility.
RS PurchasingManager™ is a web-based order management system used alongside the RS website. Buyers can create account structures across their organisation as well as assign spend controls, cost centres and approval limits to manage all RS Online purchasing. The PurchasingManager™ system allows the end user, usually an engineer, to go onto the RS website and choose the product they need, order the product and see when the delivery will be made. After an order is made, a confirmation request goes to a senior colleague, who can quickly approve the cost and the order is processed.
In the case of this customer, this process was ideal. The customisable approval functions in RS PurchasingManager™ allow them to monitor spending while striking a balance between time spent on approving orders and the ultimate cost – 80% of their orders cost less than £250 but 50% of their total spending went on orders over £250.
RS was able to advise this organisation on how to deliver savings effectively within the MRO category and the introduction of PurchasingManager™ has resulted in a range of benefits. The most obvious benefit is financial.
Both the cost per order and time spent on orders has been greatly reduced. Previously these came to £65 for process costs per order and 78 minutes spent per order. Now these figures are £22 and 26 minutes. This means greater visibility of costs for the customer while also freeing up time for procurement professionals and engineers.
These savings translate into a 66% reduction in costs for more than 2,200 orders placed with RS each year. This amounts to around £94,500 in cost savings in transactions with RS alone – a substantial figure for any business.
If you would like to find out more and have a conversation with one of our experts, please contact us here.