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
With an output of £33 billion in 2022, the food and drink industry is the UK’s largest manufacturing sector – bigger than the automotive and aerospace industries combined. Yet despite growth of 8% compared with the previous twelve months, current economic and political climate is placing enormous pressure on the sector’s 12,500 businesses.
Rising inflation and energy prices are driving up costs while also contributing to a cost-of-living crisis that increases consumer demand for lower prices. At the same time, many organisations are looking to reformulate both products to comply with new regulations on fat, salt and sugar content and packaging in line with recent legislation on plastic use.
In this challenging environment, indirect procurement is an area where businesses can often achieve significant savings without compromising production or safety, argues Craig Stasik, industry sector manager for food and beverage at RS. Here he and Helen Alder, Head of Knowledge at the Chartered Institute of Procurement and Supply (CIPS), explain how.
“MRO is a complex beast and is frequently overlooked as customers spend far more time on direct spend categories,” says Stasik. “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.”
“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 Alder, 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,” she says. “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.”
Understand 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 Stasik. “Also, as the pressures on improving speed and efficiency increase, there are greater risks regarding health and safety.”
“It’s important for companies to work with distributors with a full, traceable supply chain,” adds Stasik. “Both the distributors and manufacturers of those products are accountable, which means a distributor can only sell products that conform to these regulations.”
Keep operations running
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 Stasik. “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 the RS ScanStock® service comes in. It is a managed inventory service, so RS 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 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 Stasik. “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.”
For more on the support available for food and beverage manufacturers, check out our new industry-focused hub here.