Procurement report airs supply chain concerns
Sustainable and ethical procurement has emerged as a business pressure in RS Components’ 2021 Indirect Procurement Report ‘From Disruption to Recovery’.
Only reduced operational budgets and the need to reduce inventory costs remain above it in the number one and two spots as the top business pressures.
The responses are included in this fifth annual survey produced in association with the Chartered Institute of Procurement & Supply (CIPS).
It explores how the category of supplies for Maintenance, Repair and Operations (MRO) is managed. The survey was the biggest yet, with more than 1,300 global respondents from the procurement profession.
These respondents are from sectors including manufacturing, public sector, energy, logistics & retail, transport & defence and technology, covering job roles from operational through to senior and director level.
Other main themes emerging from this year’s survey included COVID-19, sustainability and digital technology enabled growth.
The 2021 Indirect Procurement Report highlights include:
- After being largely postponed in 2020 due to the pandemic, efforts to tackle climate change were prioritised again by many organisations, with more than half (56%) of those surveyed having a sustainable and ethical procurement strategy in place and a similar number (48%) having a carbon reduction strategy, adopting measures such as electric vehicle use, energy management and better logistics to reduce transport.
- While the pressures of the COVID-19 recovery included disrupted supply chains due to firms going out of business, furloughed staff and decreased MRO spend, it’s by no means a negative picture as more than a third (36%) said collaboration with suppliers is increasing and opportunities for agility have been created.
- Supplier rationalisation in the UK has seen a decrease year on year, but over the last year, this will likely have been driven by supply chain issues, companies failing, reduced headcounts/furlough – so while supplier rationalisation is the right strategy, it may not be the best time to employ it.
- The impact of COVID-19 remains and the role of digitisation and new technology, as well as remote working, are anticipated to continue for the next 6-12 months. Digital solutions are improving efficiencies: a third (34%) of UK organisations are using eProcurement to automate transactional tasks, with more than half (53%) of the stakeholders using eProcurement channels for purchasing and 25% are actively training end users on these systems to increase MRO procurement efficiencies.
- Despite the disruption caused by the pandemic, the percentage of respondents having a strategy in place for business continuity planning (BCP) for critical parts has risen by just four percentage points from 2020 to 50%.
- Encouragingly, industrial cloud computing and cyber security services have seen big increases year on year in the UK: 21% vs 14% in 2020 for industrial cloud computing and 49% vs 42% in 2020 for cyber security services.
- 58% of UK respondents claim their business is issuing an average of 13 MRO tenders a year.
- Average annual indirect spend is up about 10% year on year, although pressure to deliver annualised cost savings has eased, with 45% identifying it as a challenge, down from 51% last year.
- Delivery on time remains the number one KPI for suppliers, while cost savings generated ranks fifth.
- After several years of incremental increases, the claimed use of using online marketplaces for tenders and ordering has decreased slightly across all markets.
- The ‘war on talent’ going on in the profession continues to be a day-to-day challenge, with almost a third of respondents (32%) citing the difficulties in finding people that understand best practice procurement. This is despite a higher-than-average UK pay increase of 5% (national average 4.2%) for procurement professionals, according to the CIP/Hays salary survey.
Emma Botfield, Managing Director UK & Ireland at RS Components, said: “This comprehensive and insightful report has highlighted that while the MRO procurement profession is still feeling the impact of COVID-19, a post-pandemic procurement world is starting to emerge. With a bigger than ever survey sample, we’ve been able to really get to the heart of the issues affecting MRO procurement and how firms are dealing with it. We’re pleased to be able to share this valuable insight and help drive best practice across the whole industry.
“It’s great to see that despite the additional challenges indirect procurement has faced over the last year, sustainable and ethical procurement has been put back firmly on the agenda, and technology adoption continues to grow, providing opportunities for organisations to drive efficiencies. The procurement profession clearly plays a key role in survival for many organisations, and we look forward to continuing to support them in their mission to navigate the COVID-19 impact recovery and embrace automation and digital tools that will enable them to do more with less.”
Helen Alder, CIPS Group head of Knowledge, added: “Forecasting a pandemic probably didn’t appear on most organisations’ business continuity plans - and the impact could never have been predicted – but most are now reacting and maximising relationships and adapting to working online where they can to get things back to normal.
“It’s understandable that supplier rationalisation has decreased as organisations have to buy the goods and services in to keep the business going. More enlightened organisations realise it’s not just about the price paid, but the total cost, including process costs, and cost of buying and storing the goods. Also, it’s important to factor in the additional value suppliers can add can to help mitigate risk, improve efficiencies and help with continuity planning. The pandemic has certainly highlighted how we should evaluate new suppliers.”
The 2021 report can be found on Connected Thinking, a website launched by RS Components in 2016 to provide advice and best practice for professionals involved within the indirect category of MRO.
Connecting Thinking features contributors with knowledge on the category, including senior leaders from RS, industry experts and CIPS.