Manufacturing success: how procurement can leverage Industry 4.0 to manage MRO spend

August 1, 2019 | Guest Contributor

Xeeva welcomes this guest post from Matthew York, Senior Research Analyst, Ardent Partners.

For the past two decades, the modern manufacturing facility has become highly automated, employing robots to assemble automobiles and other large and complex consumer goods – sometimes without any direct human intervention (i.e., “lights-out manufacturing”, a hallmark of Industry 4.0). But as these robots and robotically-driven assembly lines age, they need regular maintenance, repair, and operating (MRO) services and supplies. Service calls must be made, parts must be ordered, and eventually, whole units must be replaced. These indirect expenditures can be unpredictable and costly but are necessary to keep assembly lines rolling and businesses afloat.

Improve MRO spend with tools & technology

Ultimately, indirect/MRO spend need not be a drag on the enterprise’s budget. There are innovative ways for manufacturing and procurement teams to gain visibility into MRO spend and collaborate with each other and their supplier base to better predict service needs. With the right tools, MRO can even be a value driver for the enterprise.

For starters, many commercial and industrial machines today feature embedded microsensors and processors that can collect and transmit system data (e.g., up/down times, “bug reports,” life expectancy of parts, etc.). Another Industry 4.0 hallmark – connected devices, or the “Industrial Internet of Things” – can enable manufacturing teams to service machines and replace parts before they fail (which is often significantly more cost-effective). They can also help procurement forecast expected MRO costs.

Related: On-demand webinar – Insights from CPO Rising 2019: #ValueExpansion

In the age of Industry 4.0, there are other solutions that can be used to foster visibility, enhance collaboration, and improve performance via superior management of breakdowns, repairs, and downtime, including:

  • Artificial Intelligence (AI), which incorporates machine learning algorithms and predictive analytics that can analyze large datasets, like past and present MRO spend, spot patterns within the data, learn from it, and enable users to forecast expenditures. It also includes natural language processing, which enhances the user interface with chatbots/digital assistants, voice interaction, push notifications, and touchless interfacing. Artificial intelligence absorbs tactical and scalable work and enables knowledge workers to perform more strategic, value-adding work, like stakeholder engagement and long-term planning.
  • eProcurement solutions that draw intelligence from ERP and MRO databases can help procurement teams proactively manage routine MRO services and avoid reactive scrambling when parts fail or systems break down. When inventories near pre-established minimum levels, or when parts or systems approach the end of their service lives, AI-driven eProcurement tools can alert users and suggest they re-order a given part or commodity, schedule a maintenance call, or consider replacing a machine. Some platforms enable auto-replenishment when inventories near pre-established minimum levels, which can be convenient for managing indirect spend categories, like MRO.

Artificial intelligence absorbs tactical and scalable work and enables knowledge workers to perform more strategic, value-adding work, like stakeholder engagement and long-term planning. – @MattYork_Ardent @ArdentPartners

For many end users, an eProcurement tool with a touchless interface that speaks to them, provides suggestions, executes on commands, and delivers results is a game-changer and value driver. When procurement teams leverage the power of big data from manufacturing systems, and the touchless efficiency gains of AI, they can become more proactive vis-à-vis MRO. They can achieve real-time visibility into the health and lifespan of these systems, and proactively plan for and address their stakeholders’ MRO needs. But, the efficiency gains and benefits do not stop there. Procurement teams can provide accurate MRO forecasts to service providers and parts and equipment suppliers, which can enable these external stakeholders to adequately staff operations and stock inventories so that they can meet or exceed their customers’ needs.

For more from Ardent Partners about the current state of procurement & technology’s potential impact, read the CPO Rising 2019: #ValueExpansion report!

About the Author

Matthew York is a senior research analyst at Ardent Partners, a research and advisory firm focused on supply management. He is also the co-author of the CPO Rising 2019: #ValueExpansion report.