In the competitive world of food and beverage manufacturing, achieving cost efficiencies through better MRO spend could add significant value to a business’s bottom line
The food and drink industry is the UK’s single largest manufacturing sector (ahead of automotive and aerospace combined) contributing more than £31 billion to the economy. However, the economic uncertainty and disruption caused by Brexit and the coronavirus pandemic have placed enormous pressures on businesses in this industry.
In addition, consumers are becoming more demanding, looking for better quality products and healthier or ethical alternatives, but still at a low price. This means there is a constant need to improve to stay competitive but still achieve a profit, which is why cutting costs is high on the agenda of food and beverage companies. This can result in companies pushing their manufacturing equipment harder to cope with growing demand.
The 2020 Indirect Procurement Report, produced by RS Components and the Chartered Institute of Procurement and Supply (CIPS), found that the three biggest business pressures were reducing operational budgets (59%), reducing inventory costs (46%) and sustainable and ethical procurement (39%).
However, focusing on the indirect procurement cost of industrial supplies for Maintenance, Repair and Operations (MRO) can help businesses achieve significant savings, if done correctly. The type of MRO spend in the industry varies widely, from plant components to safety equipment and facilities products. The bottom line though, is that MRO represents a hefty annual spend for most organisations and, according to Del Tiwana, Industry Sector Manager at RS Components, there are often misunderstandings about the level of spending and the potential savings that can be achieved.
Consolidate suppliers
“MRO is a complex beast and is frequently overlooked as customers spend a disproportionate time on direct spend categories,” says Tiwanna. “This is understandable due to headline savings they can make on per-unit prices. But in some cases MRO categories become overlooked, leading to MRO meaning something closer to Miscellaneous Random and Out of control.”
"There are often hundreds, and in some cases thousands, of suppliers spread across the business. Understanding who is on your books and who is delivering value is almost impossible."Del Tiwana, Industry Sector Manager, RS Components
“The MRO journey is about companies really understanding how to drive out inefficiencies in three key areas: working capital, procurement and downtime, all of which is driven by data,” he concludes.
But how do you choose the right suppliers? The first step, according to Helen Alder, Head of Knowledge at CIPS, is to draw up a list of key MRO products that are critical to your business operations. “The procurement department needs to work with engineers and other end users to draw up this list,” explains Alder. “You then need to find a reliable set of approved suppliers you can trust to have the products you need in stock, at a price you are willing to pay and that can deliver when and where you need it.”
Knowing the industry
In an industry where there are strict regulations to protect consumers, it’s also very important to work with suppliers that understand the challenges. “Food and beverage companies naturally have to be extremely vigilant around contamination and traceability, whether it’s the food products, or the lubricants and greases which help keep production runs operating,” says Tiwana. “Also, as the pressures on improving speed and efficiency increase, there are greater risks regarding health and safety.”
After new regulations on personal protective equipment came into force in April 2019, specialist knowledge became even more important.
“It’s important for companies to work with distributors with a full, traceable supply chain,” adds Tiwana. “Both the distributors and manufacturers of those products are accountable, which means a distributor can only sell products that conform to these regulations.”
Finally, but no less important, is the need to keep operations running as close to 100% as possible. Planned, and especially unplanned, maintenance must have as little effect on operations as possible, which means suppliers must have key parts in stock and be able to deliver them to site quickly. “A lot of the factories we deal with have quite a lot of ageing assets which require regular maintenance,” says Tiwana. “Our customers need to be ahead of the curve on automation and the Industrial Internet of Things (IIoT), with smart factories and machinery that communicates with cloud-based systems, analysing data so we can predict when machinery will fail.”
When it comes to business-critical parts, cost may well be lower down the priority list, according to Alder. “Price is not always the main factor,” she explains. “The importance of being able to get stock and have it delivered quickly makes it worth potentially paying a higher price for, because any delays in getting a critical part would cost the business much more in the long term.
“In some cases companies will actually get suppliers to monitor MRO stock for them, which needs a high level of trust, but ultimately means there should be less chance of something going wrong which frees up employees’ time.”
This is where RS Component’s ScanStock service comes in. It is a managed inventory service, so RS Components takes responsibility for monitoring and replenishing products for a business, freeing up the customer’s employees to concentrate on core activity.
There is also a strong argument for companies using suppliers such as RS Components to reduce the amount of MRO stock held in their own warehouses. “We have an eProcurement platform that allows customers to see what stock is live,” says Tiwana. “The system can also create bespoke pages so that repeat products can be easily repurchased, which means there is less reason to hold onto stock that takes up warehouse space and eats into working capital.”