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Achieving Consensus to Drive Real Change in your Indirect Supply Chain: Setting up the Change

Ensuring you're on the market-shaping side of a changing industry and disrupted business model.

Additive manufacturing and 3D Printing innovations, compressed product life cycles, and changing consumer expectations are forcing manufacturers to transform their operations across all industry segments. Disruption is underway and many manufacturers are moving beyond their traditional view of core competency and primary industry to redefine their value proposition and reshape their business models.
 
The Pharmaceutical Industry is moving to continuous manufacturing in an effort to produce batch sizes of one. Medical Device Manufacturers are applying image printing technology to produce hip and knee replacements personalized for an individual. The Footwear Industry has developed a new manufacturing method - computer controlled knitting technology - to produce high quality athletic shoes with zero waste.
 
The change is dramatic, visible and industry agnostic.  Still, many organizations struggle with conflicting internal interests and have difficulty in gaining consensus to solve the problems that will make the organization more effective. Unable to work through the change management process, they succumb to thinking the status quo is good enough, limiting the organization’s ability to evolve.
 
Transformation will require a fundamental shift in current leadership structures, operating processes and information flows.  To succeed, an organization must ensure that its direct, indirect, and MRO (Maintenance, Repair and Operations) supply chains work in tandem.
 

Why MRO?

In leading organizations MRO is a core-enabling, mission-critical integrated business process that, when managed as a well-defined process, helps enterprises become more effective and adaptable.
 

Setting up Change

However, in most organizations MRO is not a well-defined business process. It’s not that MRO is unimportant; it’s just difficult to manage effectively because it cuts across so many business functions - including storeroom operations, procurement, finance and operations. MRO has many functional owners, but not one process owner. MRO is traditionally viewed as transactional in nature.  MRO can have tens of thousands of SKUs, thousands of suppliers, but accounts for less than 10% total spend.  Also, the manner in which we speak about MRO relegates it to a cost of doing business.  Elevating MRO beyond piece price of spare parts and a cost of doing business will be extremely difficult unless we consistently communicate the way MRO impacts adaptable, flexible, and intelligent operations.
 
MRO management and alignment must be part of any sustainable change initiative, but MRO leaders are scarce.  Will you be the leader that won’t accept business as usual – and all of the inefficiencies, work-arounds and added costs of MRO?  The reliability of your entire operation depends on having critical spares, strategic suppliers and cost structures aligned to achieve maximum uptime and organizational agility at the lowest total cost. But how can you make your supply chain more agile and efficient when accepting an inefficient and unmanaged process for something as critical as MRO? If you take on this challenge, you’ll be fighting the greatest headwind in business – organizational and management structures that support the status quo.
 

The new winners.

Disruptive Innovation is the introduction of new technologies, products or services in an effort to promote change and gain an advantage over the competition. It stems from the need to evolve and stay 6 months, a year, or even 5 years ahead of clients’ needs.
 
Manufacturers, in particular, are entering an era of unprecedented innovation and change driven by many forces in the market. Not only are the stakes high for established companies in manufacturing; they're also getting higher. Across all industries, the Global Center for Digital Business Transformation Center has found that the average time to disrupt an industry is just 3.1 years[1]. That’s 3.1 years for your company to be on the market-shaping side of the disruption. You don’t want to be left behind. But how can you be a market disruptor when you are constantly reacting to process disruptions?
 
40% of all incumbents, across all industries will be displaced by digital upstarts in five years, according to Global Center for Digital Business Transformation. And with more than 100 so-called unicorns – venture capital backed private companies with valuations over $1billion and a testament that bets are being placed on this disruption – startups are free to employ technology to completely reimagine any industry.
 
That disruption, the market changes forcing manufacturers to be more agile, will define who the new winners and losers are in business. Winners are those who can be agile and adapt to what the market is telling them, focused outwardly on the needs of their customers. Their organizations are aligned, not disconnectedly operating in functional foxholes. Their processes and partners become strategic assets, creating value and differentiation in the market. And the new winners have a balanced perspective of value, risk and cost – understanding how they inherently play into each other.
 
To be a disruptor, your company has to have an effective, adaptable, flexible and well-defined process-driven supply chain – both direct and indirect.
 

Contact us  today to get your questions answered, or speak with an expert to learn more about what SDI's been doing to stay at the forefront of disruptive innovation in the MRO supply chain provider industry.
 
This is Part I in our three part series on Achieving Consensus to Drive Real Change in your Indirect Supply Chain. Check out Part II, Case for Change to learn the next steps. 


[1] Source: The Digital Vortex, Where Disruption is Constant and Innovation Rules. http://blogs.cisco.com/ioe/the-digital-vortex-where-disruption-is-consta...

Success Story

It takes a progressive manager to push the organization to look at indirect spend and managing it in a different way - but once you see it, then you realize the opportunity.

SDI at Work

In the third post in this series on MRO As-a-Service by Spend Matters, Pierre Mitchell and Michael Lamoureux talk about how managing MRO as a process delivers benefits from efficiency to effectiveness and beyond to an evolutionary phase. The next generation of value, MRO-as-a-Service, helps organizations build intelligent, agile, scalable and integrated supply chains (direct and indirect).

The project team has worked its way through Define, Measure, Analyze, and Improve. It’s time to begin the Control phase. The key stakeholders gather to evaluate the solution as implemented and create a plan to sustain the improvements. The goal is to standardize the improved processes, establish an audit schedule and schedule periodic follow-up to identify additional opportunities for improvement.