MRO PROCUREMENT BUSINESS PRESSURES

Those working in MRO procurement face a convergence of internal and external business pressures, driving them to develop strategies to meet cost savings targets while ensuring security of supply.

The current climate remains a testing time for those working in procurement, according to the 2025 Indirect Procurement Report, produced by RS and the Chartered Institute of Procurement & Supply (CIPS). Coping with inflation and higher costs is seen as the biggest challenge, with 62 per cent highlighting this as a concern, a significant increase from the previous year’s 37 per cent. This may reflect the impact of price rises still filtering through to buyers.

Internally, the function is facing demands to reduce costs. Delivering annual cost savings is seen as the biggest day-to-day challenge, with 40 per cent pointing to this, up from 29 per cent a year ago. Six in 10 (60%) say they are facing reduced operational budgets, and 40% are under pressure to reduce inventory costs.

But there’s only so far procurement can go with stripping out costs, points out Jane Lynch, Professor of Procurement at Cardiff Business School and Director of the Centre of Public Value Procurement. “We have seen this in many industry sector supply chains previously, such as the automotive sector,” she says. “But there comes a point at which you can’t take any further cost out before it starts to impact on quality. The challenge now is to balance lowest cost with the highest quality and value, and that applies to both products and services.”

One issue to consider is the true cost of any transaction, says Liam Kettlewell, Commercial Director at RS. “We need to build increased awareness that procuring products carries both a product and a processing cost,” he points out.

“It’s not just the cost of the product but how much it costs to process that and procure it.”

Commercial Director at RS

“Usually, there’s a ratio of two to one in terms of those process versus product costs.” Having such an understanding can help buyers make the most efficient choice, he adds, which may not always be the one with the lowest headline price.

Supply chain risk
Alongside this, another issue occupying the attention of procurement teams is security of supply. Almost half (47%) of respondents are concerned about managing risk in the supply chain, and 46 per cent highlight supply chain disruption as a pressure. “This is without doubt the strategic priority that everyone needs to address following the lessons learned from inventory shortages experienced during the Covid pandemic,” says Lynch.

A particular challenge for procurement professionals in the MRO space is maintaining ageing assets, with 39 per cent identifying this as an issue. This has increased from 28 per cent a year ago and suggests organisations are seeking to avoid making major investments in tough economic conditions.

The key to ensuring ageing assets can continue to function effectively is for procurement to work closely with engineers when buying parts and equipment, says Lynch. “We need to use the expertise from engineers to make sure that what we’re buying will have as long a lifecycle as possible. With the climate change and wider sustainability agenda, we must be prioritising circular economy, focusing on the longest lifecycle, and not necessarily always buying new.”

“The relationship between procurement and engineering is always important, but when it is about ageing assets, it is crucial.”

Agata Evans, Senior Procurement Manager for MRO at Aston Martin

This means procurement needs to focus on building relationships with internal stakeholders. “The relationship between procurement and engineering is always important, but when it is about ageing assets, it is crucial,” says Agata Evans, Senior Procurement Manager for MRO at Aston Martin.

“We procurement people are responsible for securing the right parts, but engineering teams know what’s needed to keep the equipment running. If we work together, we will be able to mitigate delays, downtime or the failure of equipment, which is a high risk with ageing assets.”

But the study also suggests there is room for improvement when it comes to developing such relationships with other parts of the business. Just 33 per cent describe the relationship between procurement and key stakeholders as collaborative, and 27 per cent say it needs improving.

It’s important that all parties understand the common goals and outcomes that are required, says Kettlewell. “There has to be an effort from all stakeholders, and often procurement has to take a leading role within that, to both seek and help facilitate understanding around what those common goals are,” he says.

“It’s crucial that efforts are taken to understand which stakeholders need to be communicated to, and then work with them proactively to understand any overlap in needs and agree on what the expected outcomes are.” The use of shared key performance indicators can help ensure goals are aligned, and progress tracked, he adds.

Supplier strategy
Externally, organisations are looking to develop closer relationships with suppliers as they seek to ensure both value and security of supply. Half (51%) are looking to implement a supplier relationship management strategy, and a further 46 per cent intend to drive value through supplier partnerships.

“Relational procurement emphasises the role of collaboration and partnership working,” says Lynch. “Building better relationships will result in both partners working together to mutual benefit and lead to delivering greater value for money overall.”

“Managing fewer suppliers allows for stronger relationships, better pricing and more consistent service delivery.”

Agata Evans, Senior Procurement Manager for MRO at Aston Martin

For some organisations, this also means reducing the number of suppliers they use. Half (50%) intend to consolidate the supplier base; and for good reason, with 18 per cent reporting a rise in the number of suppliers used over the past year. Organisations use an average of 92 suppliers, which rises to 100 for medium-sized firms and 120 for larger entities.

“Businesses are looking to work closer with fewer suppliers, and this is something that we all should be doing to ensure more resilient operations,” says Evans. “Managing fewer suppliers allows for stronger relationships, better pricing and more consistent service delivery. [MC1] When you have a consolidated supplier base, you can consult with those suppliers to standardise what you buy, and this is much easier with a smaller group of vendors.”

To download the 2025 Indirect Procurement Report, click here.