MRO Procurement Must Anticipate Risk and Stay Agile in the Face of Supply Chain Disruptions

Maintenance, Repair, and Operations (MRO) procurement involves acquiring the necessary tools, supplies, and services required to keep an organization’s operations running smoothly. It is crucial for organizations because it ensures operational efficiency and reduces downtime.

However, supply chain risks, such as delays or shortages, can significantly impact MRO procurement, leading to operational disruptions and increased costs. Unfortunately, supply chain disruptions have become all too common due to the global nature of today's supply networks.

To address this, MRO procurement leaders must anticipate risk and stay agile. Being agile in procurement allows organizations to adapt to unforeseen challenges quickly, ensuring continuity and resilience. This adaptability is essential for maintaining productivity and staying competitive in a rapidly changing market.

Here, we'll explore current risks in the supply chain and provide insights into how MRO procurement teams can become more agile and risk averse.

The Current Climate of Supply Chain Disruptions

Today’s supply chain landscape is fraught with challenges, from geopolitical tensions to natural disasters. These disruptions can have a cascading effect on MRO procurement, especially in terms of costs.

Other supply chain disruptions facing procurement leaders include:

• Raw materials shortages: As global demand for raw materials increases, supply shortages have become a common occurrence. This can significantly impact the cost and availability of necessary MRO supplies.
• Transportation delays: With the rise of e-commerce, transportation networks are under immense strain. Delays in shipping can lead to increased costs and delays in receiving crucial MRO supplies.
• Supplier bankruptcies: The pandemic has caused significant financial strain on many businesses, leading to an increase in supplier bankruptcies. This can result in disruptions to the supply chain and delays in receiving necessary MRO supplies.
• Labor shortages: Labor shortages have become a significant challenge for procurement leaders. This can impact production and delivery schedules, leading to increased costs and delays in operations.

As we learned from the COVID-19 pandemic, not all risks can be predicted. However, there are steps that MRO procurement leaders can take to make their operations more adaptable, so they can avoid the worst impacts of disruptions.

"Businesses may need to react to supplier geopolitical risks by diversifying their supplier base, which potentially raises procurement and management costs. Similarly, maintaining higher inventory levels as a buffer against supplier financial performance risks can tie up capital,” said Inbound Logistics in an article.

"Businesses need to consider not just the financial costs of their supply chain strategies but also the potential risks of different sourcing and inventory decisions. This requires a nuanced understanding of their supply chain ecosystem and a willingness to invest in risk management strategies that may not yield immediate financial returns, but will contribute to long-term stability and resilience.”

How MRO Procurement Can Prepare for Risk

Anticipating risk in MRO procurement begins with thorough and continual risk assessment. Procurement leaders should regularly evaluate their supply chain to identify potential vulnerabilities.

This involves analyzing critical suppliers, assessing geopolitical and economic conditions, and monitoring industry trends that could impact supply availability and pricing.

Data Analytics and Automation

Implementing advanced data analytics is another effective strategy for anticipating risk. By leveraging predictive analytics, procurement teams can forecast potential disruptions and price fluctuations with greater accuracy. With the right tools, procurement teams can analyze historical data, market trends, and various external factors to provide real-time insights into the supply chain, helping leaders make proactive decisions.

Investing in automation can also play a significant role in risk anticipation. Modern procurement software solutions offer enhanced visibility into the supply chain and enable real-time monitoring of inventory levels, supplier performance, and shipment statuses. These tools help procurement teams respond swiftly to unexpected changes and maintain operational continuity.

Supplier Diversification

Diversifying the supplier base is also crucial for reducing risk exposure. Relying on a single supplier or a limited number of suppliers can exacerbate the impact of disruptions. MRO procurement leaders should establish relationships with multiple suppliers and consider alternative sources for critical components and materials.

This diversification ensures that if one supply line is compromised, others can still provide needed products and services.

Building Stronger Supplier Relationships

Another strategy is to develop stronger supplier relationships. Building collaborative partnerships with key suppliers can lead to more reliable supply chains and better communication during crises.

Regular communication with suppliers about their capacity, constraints, and challenges can help procurement leaders prepare for potential disruptions more effectively.

Creating Contingency Plans

Lastly, developing a robust contingency plan is essential. This plan should outline specific steps to take in the event of various disruptions, including alternative suppliers, emergency stockpiles, and expedited shipping options.

Regularly updating and testing these plans ensures that the procurement team is well-prepared to handle any situation.

Achieving Agility in MRO Procurement

In the context of MRO procurement, agility refers to the ability of an organization to quickly adapt to changes and unforeseen challenges within the supply chain, so it can acquire the goods and services it needs to maintain operations. This includes adjusting procurement strategies, modifying supply sources, and altering delivery schedules as needed to ensure that essential maintenance, repair, and operations supplies are consistently available.

According to a report by Deloitte, "Procurement organizations need to rethink how they deliver value by adopting more flexible ways of working and designing a delivery model that is more responsive to change and fast-paced environments. Procurement needs to classify its current activities and processes, looking at which areas require more efficiency and which ones would benefit from greater agility."

In this context, agility is achieved through a combination of real-time data analytics, automation, flexible supplier relationships, and internal culture change. Each of these facets enables procurement teams to make informed decisions swiftly and effectively.

By maintaining a dynamic approach, organizations can better manage disruptions, mitigate risks, and sustain operational efficiency.

Securing the Future of MRO Procurement through Proactivity and Agility

Successful MRO procurement hinges on a proactive approach to risk management and the cultivation of agility within the supply chain. By leveraging data analytics, expanding supplier networks, and maintaining robust contingency plans, procurement leaders can better navigate disruptions.

Ultimately, these strategies ensure the continuous availability of critical supplies, sustaining operational efficiency.

To learn more about how your procurement organization can become more agile and reduce supply chain risk, don't miss ProcureCon MRO 2024. It's happening from October 28th to 29th at the Marriott City Center in Charlotte, North Carolina.

Download the agenda and register for the event today.