Reap the benefits of better management of MRO – now and in the future
Effective management of maintenance, repair and operations (MRO) procurement benefits an entire firm, not just those directly involved. Conversely, poor management can hinder or even harm a business. This article explores three ways to approach MRO so that it proves to be an advantage to your organisation.
Ensure robust oversight of supply chain
In-house audits are no longer enough: if you’re responsible for procurement, you need to know what’s going on with your suppliers as well.
Why? The survey for the latest Indirect Procurement Report by RS and the Chartered Institute of Procurement and Supply (CIPS) revealed that alongside inflation and higher costs (37%), the biggest procurement challenges in the next 12 months are managing risk in the supply chain (31%) and supply chain disruption (30%).
Not having the right items in the right place at the right time can bring the whole business to a halt – and cause huge financial losses. It’s not worth it to save 50p on a safety switch from a random website rather than ordering from the reputable brand that you’ve done due diligence on.
There are reputational risks too. The same survey found that sustainable and ethical procurement is now one of the top business pressures facing indirect procurement professionals. Can you be sure that your supply chain is free of slave labour? Are you sourcing from businesses that uphold the standards of sustainability that your organisation – and your customers and investors – expect?
The solution? To minimise the risk of supply chain disruption as well as ethical and environmental harm, introduce a thorough audit process for all suppliers. While 62% of respondents to the Indirect Procurement Report reported confidence in their ability and processes in place to audit the suppliers they work with, this leaves 38% that are not confident. If this is you, working with a trusted supplier who has robust due diligence measures already in place can help.
Prioritise value, not just the item price
With both reduced operational budgets and inflation and higher costs being among the biggest challenges faced by indirect procurement professionals, it’s unsurprising that saving money is a high priority. However, the price paid on the item should never be the only consideration.
Why? The cheapest purchase may end up costing more over time. If it’s poorer quality, for example, it will need replacing more often – nullifying any savings and proving a false economy. If it turns out to be counterfeit, then the cost in terms of damage, repairs and potential reputational risk are likely to be far greater.
The solution? Adopt a value mindset and consider the total cost of ownership. This is the favoured approach of buyers for many leading brands, who recognise that the initial purchase price gives an incomplete picture. Again, trusted suppliers have an important role to play. Work with them to explore the solutions available to help you take control of procurement, inventory and maintenance – solutions that cut costs by increasing efficiency, not sacrificing quality.
Think long term as well as short
Responding to day-to-day demands is always a fundamental part of overseeing MRO. Those responding to the Indirect Procurement Report listed finding people that understand best practice procurement for this category (33%), ensuring contract compliance with preferred suppliers (30%) and delivering annualised cost savings (29%) as the biggest challenges in this respect. At the same time, however, effective management of indirect procurement also requires planning for the future.
Why? The organisations that MRO supports are always changing, as is the wider business context. This means indirect procurement also needs to change. Right now, you might be wrangling with inflation and higher costs, but in six months there may be a new pressure at the top of the list – and a new opportunity too. How will you respond?
The solution? Once more, you are not alone. Trusted suppliers will have experience of working with a wide range of other businesses both in your sector and other fields – so make the most of that knowledge. Draw on their expertise. Ask them what trends they see coming down the line and how you can be ready for them. They can support you with the issues you are facing today and help you prepare for the issues of the future.
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