In the competitive world of food and beverage manufacturing, achieving cost efficiencies through better MRO spend could add significant value to a business’s bottom line
The food and drink industry is the UK’s single largest manufacturing sector (ahead of automotive and aerospace combined) contributing just under £30 billion to the economy. However, skills shortages, concerns around Brexit (the EU is a major export market and one-third of the sector’s workforce come from the EU) and rising inflation are all putting pressure on businesses.
In addition, consumers are becoming more demanding, looking for better quality products and healthier or ethical alternatives, but still at a low price. This means there is a constant need to improve to stay competitive but still achieve a profit, which is why cutting costs is high on the agenda of food and beverage companies. This can result in companies pushing their manufacturing equipment harder to cope with growing demand.
However, focusing on MRO (maintenance, repairs and operations) or indirect spending can help businesses achieve significant savings, if done correctly. The type of MRO spend in the industry varies widely, from plant components to safety equipment and facilities products. The bottom line though, is that MRO represents a hefty annual spend for most organisations and, according to Del Tiwana, Industry Sector Manager at RS, there are often misunderstandings about the level of spending and the potential savings that can be achieved.
“There is so much inefficiency in the typical MRO purchasing process that companies simply aren’t aware of because they don’t effectively monitor MRO spending,” says Tiwana. “There are often hundreds, and in some cases thousands, of suppliers spread across the business. Understanding who is on your books and who is delivering value is almost impossible.
"The MRO journey is about companies really understanding how to reduce the number of their suppliers"Del Tiwana, Industry Sector Manager, RS
“The MRO journey is about companies really understanding how to reduce the number of suppliers and how to use someone like RS, which can supply most of their needs. Quite simply, the more suppliers you can take off, the more you can reduce costs, which is better for everyone.”
But how do you choose the right suppliers? The first step, according to Helen Alder, head of knowledge and product development at the Chartered Institute of Procurement and Supply, is to draw up a list of key MRO products that are critical to your business operations. “The procurement department needs to work with engineers and other end users to draw up this list,” explains Alder. “You then need to find a reliable set of approved suppliers you can trust to have the products you need in stock, at a price you are willing to pay and that can deliver when and where you need it.”
Knowing the industry
In an industry where there are strict regulations to protect consumers, it’s also very important to work with suppliers that understand the challenges. “Food and beverage companies naturally have to be extremely vigilant around contamination and traceability, whether it’s the food products, or the lubricants and greases which help keep production runs operating,” says Tiwana. “Also, as the pressures on improving speed and efficiency increase, there are greater risks regarding health and safety. There is a real focus in this area around personal protective equipment.
“You need a supplier that understands this, can provide quality branded products that meet legislation and will work to help adapt as new laws and practices come into place.”
Finally, but no less important, is the need to keep operations running as close to 100% as possible. Planned, and especially unplanned, maintenance must have as little affect on operations as possible, which means suppliers must have key parts in stock and be able to deliver them to site quickly. “Demand from customers is so high that preventative maintenance is crucial,” says Tiwana. “Companies are looking to reduce costs and make themselves more efficient; they are looking to be running smoother and faster, without interruption.”
When it comes to business-critical parts, cost may well be lower down the priority list, according to Alder. “Price is not always the main factor,” she explains. “The importance of being able to get stock and have it delivered quickly makes it worth potentially paying a higher price for, because any delays in getting a critical part would cost the business much more in the long term.
“In some cases companies will actually get suppliers to monitor MRO stock for them, which needs a high level of trust, but ultimately means there should be less chance of something going wrong, and frees up employees’ time.”
There is also a strong argument for companies using suppliers such as RS to reduce the amount of MRO stock held in their own warehouses. “We have an eProcurement platform that allows customers to see what stock is live,” says Tiwana. “The system can also create bespoke pages so that repeat products can be easily repurchased, which means there is less reason to hold onto stock that takes up warehouse space and eats into working capital.”