SDI was proud to sponsor and participate in this year’s Procurecon MRO. Procurecon events always share inspiring content from insightful guest speakers and provide a natural atmosphere that helps cultivate networking. At this year’s MRO show attendees heard from senior-level MRO procurement innovators representing some of the world’s largest manufacturers. These trailblazers provided detailed, strategic insights on various subjects ranging from cost saving to digital disruption. Walking away from this event it’s clear that having a strong MRO foundation within your organization is critical to operational success in a post-pandemic world. For companies that have already started the MRO sourcing journey and for those still in the early stages of adoption, ProcureCon MRO proved to be a gathering of minds that has electrified the supply chain community with insights and learnings that we at SDI believe will accelerate the digital transformation of the MRO supply chain into 2023 and beyond.
Key Themes and Shifting Paradigms from the Presenters and SDI Booth Visitors
1. The pandemic aftermath is presenting new challenges that are creating a sense of urgency to transform and optimize.
The pandemic was an inflection point that exposed the inherent (enterprise) risks that come when organizations fail to proactively manage their MRO supply chain. Procurecon MRO heightened awareness of the reality that supply chain disruptions will continue for the foreseeable future, and that with a risk-management approach the effects of disruptions could be minimalized and mitigated. The pandemic uncovered that many MRO items are mission-critical and or essential to operations leaders and facility managers. The world is coming back into balance and organizational leaders now have a unique opportunity to shift and transform how MRO is viewed and managed internally. Now solutions centering around the management of the storeroom, inventory, sourcing, and procurement are front of mind and the demand is driving innovative solutions to be implemented before the next disruption cycle triggers the next sequence of procurement challenges.
2. A way forward with data, AI, analytics, and new procurement technology
Lack of action leads to operational shutdowns. The pandemic shut down everyone first, but when organizations could operate again, most leaders took a wait-and-see approach to long-term strategy while focusing on short-term firefighting. When disruption continued after the height of the pandemic, i.e. chip shortage, port staffing shortages, food crises, Russia-Ukraine War, inflation, etc… The frequency of unplanned downtime due to parts shortage continued to rise across various sectors. At Procurecon 2022 it was clear that the time of waiting passed. Leaders were engaged and actively seeking ways to leverage AI and Predictive Analytics to reduce supply chain risk. Procurement professionals were surprised to learn that new technologies had been developed that can anticipate when the company will need spare parts, components, and materials. Automation also plays a critical role as orders can be made in advance taking into account shifting lead times, enabling replacement parts to be readily available when maintenance is required.
At SDi’s booth, we showed how to integrate sourcing and procurement technology with order management and inventory management systems giving unparalleled visibility and control. This visibility enables tactical MRO strategies to be implemented across an organization leveraging spend and driving compliance while reducing waste and eliminating unplanned downtime. Scaling this type of process can be challenging, but many companies are already adopting AI and predictive maintenance as a core part of their procurement processes.
3. Add depth and diversity to your supply base to reduce supplier dependency and prevent over and under stocked inventory levels.
Conventional sourcing wisdom has advocated for a single source of supply to reduce cost, simplify ordering processes, and drive efficiency to levels in a way to gain an advantage over competitors. At this year’s conference procurement experts unanimously agreed that having a single source of supply is an obsolete methodology in today’s supply chain environment. The pandemic opened the supply leverage approach and the need for secondary and tertiary sources of supply became apparent as continuous disruptions to the supply chain caused a ripple effect that affected everything surging the cost of total ownership for MRO, while at the same time extending lead times on critical supplies and spare parts. “Even before the pandemic, inventory overstock and understock contributed to millions of lost dollars every year—a lack of real-time inventory visibility played a pivotal role in these issues,” says Forbes. “When you sync real-time data with AI, you can optimize your inventory management beyond simple reordering.”
At SDI we found that using a single source of supply to support critical functions is notably weak to unexpected shifts in demand because it requires extremely accurate demand forecasting to achieve savings. At this year’s conference booth, visitors were surprised to learn that SDI was supplier agnostic and that we had hundreds of verified suppliers (local and national) within our network with price histories and reliability scores for countless parts and supplies needed to support an organization’s MRO Supply Chain. Our partners who had access to this supply chain network were better prepared and were able to adapt quickly as different disruptions affected the market and closed off sources of supply. This essentially proved to us that supply chain resiliency and flexibility are derived from supply diversity.
Future Market Factors, Trends, and Predictions
Assessing organizational supply chain health from a tactical MRO point of view is critical for the process that experts are now calling futureproofing – that is to enhance the resiliency and adaptability of a facilities maintenance, repair, and operations, to the end goal of removing and reducing the potential failure of assets, the unplanned closure of facility locations and guarding against rising operational costs. These “futureproofers” predicted the following:
- Companies interested in outsourcing are seeking next-generation solutions, not labor arbitrage, which means the demand for MRO technology and end-to-end management will steadily increase.
- Rising inflation is another factor forcing a shift from focusing on piece-price savings and the last paid price to an estimation of the expenses associated with purchasing, deploying, using, and retiring an asset or piece of equipment. This shift to understanding the total cost of ownership will drive solutions aimed at asset management and condition monitoring for preventive maintenance as a response to the unplanned downtime experienced through the pandemic.
- Rising Interest rates will further limit inventory that suppliers are willing to carry and increase the carrying costs for MRO buyers that capitalize their spares. This will present a unique challenge for plant and facility managers that are attempting to put into practice the learnings that came out of the pandemic as their budgets tighten. Inventory analytics and data visibility are the critical intelligence that managers will need to best navigate through the waters of uncertainty, yet the vast majority admit to having data that is unactionable or too large for their systems to read and incorporate into their decision-making.
- Supplier consolidation due to mergers and acquisitions is accelerating. The organizations that failed to deliver as expected are being cornered and their market share is being absorbed by those who did. This will make it harder to diversify and have contingent suppliers in place for many industrial manufacturers.
In conclusion, the Pandemic and the Great Shutdown are over, and the on-site workers have returned to find that MRO is a mess simply because it was neglected during the time of pandemic firefighting. Most organizations had minimal controls in place with regard to procurement and storeroom/inventory throughout the pandemic. A short-term survival mindset encouraged leaders to turn a blind eye in relation to sourcing and purchasing practices in place of ensuring that people were safe, facilities stayed open, and assets kept running. In addition, we heard from multiple show participants that MRO initiatives had been deferred due to supply chain disruptions and other competing priorities, which implies that 2023 will be the year in which most organizations will try various implementations of supply chain technology. The pent-up frustration may finally be high enough to drive digital transformation and supply chain partnership initiatives, as organizations invest in MRO solutions that welcome all the advancements of Industry 4.0 and shift the industry into the long-awaited age of “smart” plants and facilities.
If you are experiencing these similar trends and challenges that we heard about at this year’s show in your plants and facilities, I highly encourage you to have a discovery call with us as this quarter closes. Let’s talk through some quick wins to help you start 2023 off strong and shift from MRO recovery to Supply Chain innovation. To the other trailblazers, we’ll see you next October at Procurecon MRO 2023!