Managing MRO spend: overcome challenges, strategize data, and be a step ahead with next-generation technology
We recently attended the ProcureCon MRO virtual event that brought together senior-level maintenance, repair, and operations (MRO) procurement innovators representing some of the world’s largest manufacturing companies. Although the event was held behind computer screens, industry experts, practitioners, and solution providers gathered virtually to discuss the various ways organizations have been impacted, how to better manage risk, and how to proactively respond for the future. Read on to learn our most valuable takeaways.
Now is the time for laser focus and a guided buying process
The main emphasis throughout the day was put on the idea of a strategic shift and the importance of implementing advanced, next-generation technologies into your MRO program.
Participants Michael Beauregard, Global Category Lead, and Mark Triggs, Senior Category Manager, both from IBM explained that within facilities and MRO, they are often not quick to adapt to changes and that it’s important to look at the situation as disruptive. The issue is that companies that were not keeping strong spend data are currently scrambling because they don’t have a baseline of which to start – creating a need to quickly assess where they were positioned and how to prioritize now. Additionally, the speakers discussed how part of the confusion for organizations lies in the question, “what does tomorrow look like?”
We’re hearing a similar theme from many of the companies that we speak to daily. Increasingly since the pandemic, procurement teams are being asked to gain visibility into savings opportunities, drive sustainable cost-efficiency, and maximize their impact. The challenge, though, is that many organizations don’t have the proper level of visibility into spend due to it being fragmented, incomplete, inaccurate, or the like. This is when a spend analytics software can be helpful to quickly cleanse, classify, and enrich imperfect data to uncover actionable insights.
Related: Manufacturing success: how procurement can leverage Industry 4.0 to manage MRO spend
The conversation went on to explain that the biggest key to a strategic approach is data. Beauregard explained that “there needs to be a laser focus on where your money is going…And so, that idea of knowledge transfer is going to become really important with MRO because that’s one of those spaces historically where the data could be better and the approach could be better. And now when you’re asked, ‘how could we work better,’ it’s going to be laser-focused on ‘well, what data do we have in place and how are we positioned in such a way that we can make those data-driven positions?’” With a data-driven indirect spend management solution, like Xeeva, you’ll be empowered to answer these questions properly by simplifying, consolidating, managing, controlling, and conducting all spend-related activities in one place.
Beauregard and Triggs also talked about how a decentralized, unguided buying process normally has data that is authored by the various users. Triggs stated that “If you’re able to flip over to a more guided buying process, the result of that is having the data, being able to compare prices, compare and rationalize the SKUs, and be able to better have that laser focus for your overall MRO spend, which is hugely valuable.”
Leveraging a guided buying process makes the complete procurement process easier and more intuitive for users to create any type of procurement request. These actions can include buying, sourcing, and making services and non-catalog requests, as well as other types of requests. Procurement managers gain improved compliance and more user adoption by making procurement more visual and smarter for everyone.
The session ended with the industry experts sharing their advice with attendees. The three most valuable pieces we took away were:
- The importance of differentiating desired changes from necessary changes
- Having a filtration process and a focus on where to direct attention
- A more guided buying process starts with having proper spend visibility
Tackling tail spend is an uphill battle you can start to win
The advice then led to another conversation centered around tackling tail spend, where Gaston Alvarado, Global Category Manager at Materion discussed the importance of managing tail spend in MRO.
“Sometimes senior management thinks addressing tail spend is a less strategic activity and that they should focus on high dollar spend, and this is a battle we needed to fight. We focus on all this spend in the bigger categories, but then when you turn around and look at the tail spend, you realize that these smaller spends can add up and be larger than some of the bigger categories. And so, tail spend is worth tackling and trying to find savings in,” Alvarado explained.
He went on to express the benefits he’s experienced from partaking in MRO tail spend initiatives, explaining that it leads to a much more streamlined process, where buyers are faster and more efficient and the turnaround time between requisition to PO significantly improves.
Alvarado’s last piece of advice was to not delay the process because tail spend can be like a disease that continues to grow in organizations. The more you delay it, the bigger mess you will find when trying to tackle it. Tail spend often goes unnoticed by procurement departments, and controlling it can introduce many cost-saving opportunities.
Optimize your MRO spend
After listening to all of the insightful sessions and conversations, it became even more clear that there is a real need for specialized AI technology and indirect spend management, especially for MRO. Optimizing your MRO spend has the potential to significantly improve your business performance and agility and help create strategic value for your business’ future.