MRO Procurement Needs to be Adaptable to Supply Chain Disruptions
The 2020 pandemic showed how vulnerable supply chains can be to external disruptions. Organizations that were prepared and able to adapt quickly saw the best outcomes. Still, for those without robust processes in place, costly gaps in their operations revealed themselves just as pressing customer demands increased.
With procurement teams under increasing pressure to ensure smooth and uninterrupted facility operation during unexpected events like natural disasters or global recessions, there is now a greater focus on MRO procurement than ever. In this blog post, we explore why adaptive standards need to be part of any adaptive MRO procurement strategy if organizations are going to survive future disruptions and remain competitive in the years ahead.
Supply Chain Disruptions Weren't Isolated to the Pandemic
Now that the harshest points of the COVID-19 pandemic have subsided, many companies are looking forward to returning to business as usual. There have indeed been some positive signs in the economy compared to 2020, including the re-opening of stores, the return of employees to offices, and companies' new investments in technologies and services.
However, recent supply chain disruptions weren’t only caused by the pandemic. They can stem from various sources.
Many companies are still struggling to procure the products and services they need to keep their operations functional. For example, according to an article by Supply Chain Brain, 83% of chemical manufacturers said conditions in the second half of 2022 were "worse than before the beginning of the COVID-19 Pandemic."
Some of the most common disruptions affecting MRO procurement today include raw materials, labor, and transportation shortages. Global incidents, including the war in Ukraine, have also made it more difficult to acquire some types of goods necessary for operations. Even when suppliers aren't experiencing disruptions, organizations may struggle to obtain the necessary parts and services for their operations promptly.
Adaptive MRO Procurement Strategies Need Adaptive Standards
To make sure companies can react quickly and effectively to supply chain disruptions, they need adaptive standards for their MRO procurement strategies. These standards should include:
- Risk Assessments: Organizations need to identify potential risks associated with suppliers and develop mitigation plans accordingly. This includes understanding the supplier's capabilities, capacity, financial stability, and more.
- Contract Flexibility: Having flexible contracts allows companies to adjust terms quickly when needed without having to renegotiate or sign new contracts each time.
- Automation: Companies should consider deploying MRO procurement automation tools to streamline the process and eliminate human error. This can help ensure that orders are accurate, timely, and compliant with applicable regulations.
- Supplier Management: Effective supplier management is essential for preventing supply chain disruptions. A company should be able to vet potential suppliers, assess their capacity and capabilities, and ensure that they are meeting the required standards for quality and delivery.
Organizations that can't adapt risk not having replacements on hand for critical MRO items. That means they risk some manufacturing processes, or even entire facilities, shutting down temporarily until those products can be required.
Analytics Can Help MRO Leaders Identify Potential Disruptions
Procurement leaders should also have analytics and reporting tools on hand so they can monitor the global supply chain in real time. Not long ago, real-time analytics were considered advanced, but they have become much more accessible since the onset of artificial intelligence, the Internet of Things, and automation.
According to McKinsey & Company, "Procurement organizations have major opportunities to automate processes and analyses. The need to automate is growing in line with the volume and complexity of procurement data, which are increasingly difficult to analyze manually in a way that leads to specific, actionable insights."
Achieving end-to-end visibility into the supply chain may require a significant amount of testing and piloting, and it may depend on the organization's ability to restructure its decision-making regarding MRO procurement. However, it will be a critical component to achieving supply chain resilience as disruptions continue to affect companies' ability to operate.
A More Robust MRO Supply Chain
The 2020 pandemic may have been an extreme example of how vulnerable supply chains can be, but it has also highlighted the need for more robust processes in place to quickly identify and respond to potential disruptions. Companies that can quickly adapt and overcome supply chain disruptions will be in a much better position than those that are unable to.
If you'd like to learn more about MRO procurement resilience, don’t miss ProcueCon MRO 2023. The event is scheduled for October 23rd through 24th at the Grand Hyatt Atlanta Buckhead.
Download the agenda and register for the event today.