How to improve spend visibility

Today’s digital procurement solutions provide greater insight into MRO procurement

Since the start of the decade, those responsible for maintenance, repair and operations (MRO) procurement have faced a raft of challenges old and new. Tackling these challenges has given new impetus to the adoption of digital technology which, as well as solving immediate issues, will have long-term benefits for the future of MRO procurement.

These procurement tools deliver real savings in time and money but to access their full value, procurement professionals from across different industries are forging strong relationships with suppliers and tapping into their knowledge of digital technology.

“There’s been a really noticeable change in the way that people are working with and adopting new technologies and digital tools,” says Emma Botfield, Managing Director for UK & Ireland at RS. “Customers are working with their suppliers as partners, rather than that transactional customer/supplier relationship.”

Uncovering the true cost
A long-standing issue within MRO procurement is lack of spend visibility, which 18% of respondents to the 2024 Indirect Procurement Report produced by RS and the Chartered Institute of Procurement and Supply (CIPS) cited as their biggest challenge.

As consultancy firm McKinsey point out, this is central to the procurement function. “A procurement organisation’s primary objective is usually to optimise external spend with suppliers – commonly 40-80% of a company’s total cost – and realise a source of competitive advantage in terms of cost, quality, availability and (increasingly) sustainability,” it states.

But as CIPS points out, spend visibility gets harder when a company has a “long tail” of suppliers. “The ‘tail’ may not represent the majority of an organisation’s expenditure, but it often covers 80% of the suppliers, who often generate most of the corporate ‘noise’ about supply issues,” says CIPS guidance.

Ed Orgill, Head of Value-Added Solutions Sales at RS, regularly sees this inefficient system in action. “Of course, the true cost of ad hoc purchases varies widely between companies,” he says. “Yet there are businesses raising hundreds – if not thousands – of purchase orders a year for low-value products and not really having any appreciation for this significant hidden cost.”

Digital demand
Fortunately, there are ways to drastically reduce this figure. By taking a holistic view of the indirect procurement process, RS can offer solutions that save quantifiable amounts of time – and, therefore, money. “We have a calculator that we use with customers,” says Orgill.

“Specialists in eCommerce will get right into the detail of their end-to-end procurement process, putting real timeframes and real costs into the calculator and producing a true cost to that company.”

RS can then recommend digital tools such as its procurement platform RS PurchasingManager™, which reduces these costs. A well-known confectionery manufacturer, for example, saved more than £30,000 per annum in indirect procurement costs (the equivalent of 3.7 working weeks) when it adopted RS PurchasingManager™.

RS PurchasingManager™ is a free, web-based order management tool that can dramatically streamline the buying process without having to invest in upgraded IT systems or software. It is a self-administered system that can be set up quickly and doesn’t require extensive staff training.

Solution for all types of business
As well as automating large sections of the purchasing process, RS PurchasingManager™ allows staff to place their own orders, under specified controls, with a full suite of online management reports. It’s a flexible tool that meets the needs of a wide range of businesses.

“It’s a versatile solution that can be installed in a small business, of maybe 10 employees, and provides a level of functionality they wouldn’t otherwise have without significant investment in a costly purchasing system,” Orgill explains. “It can also be used in a large multiple-site business that has end users everywhere. It provides quick access to more than 750,000 items at RS in a user-friendly way that removes many layers of process from a business’s operation.”

RS PurchasingManager™ is helping organisations streamline their processes, either on-site, remotely or in the field. Its enhanced reporting capabilities enable users to analyse spending, anywhere in their business.

“The reports tell you not just what you’re buying but who’s buying, how often and for what purpose. These insights can highlight trends and how assets are performing,” adds Orgill. “All of the data, up to 13 months’ worth of purchases, is available to view at any time.”

One large utilities company in southern England where multiple remote users were buying low value goods through trade counter networks transformed its MRO purchasing by working with RS. The company regained control of purchasing fast-moving, low-value items using inventory replenishment system RS ScanStock® and rolling out RS PurchasingManager™ for all end-users.

Orgill says many companies are looking to digitise procurement like this. “They realise now is the time to look at solutions that can help their people stay focused on keeping the business running, rather than worrying about where the next pack of fasteners is coming from,” he says.

And for procurement professionals, digital tools offer the chance to enhance their role, says Botfield. “I think with the acceleration in the adoption of technology digitisation we can be more effective, more resilient in our business processes. Rather than going on an MRO procurement hamster wheel, we can look for solutions with partners.”

For more information about our procurement solutions, click here