Learn how to overcome MRO procurement challenges created by volatile markets with robust, proven strategies.

Introduction

Imagine a raw material shortage halting your production, sending ripples through your entire supply chain. This is the reality for MRO procurement in volatile markets. Organizations must be agile enough to evolve and meet their targets in the current volatile economy. Volatile markets introduce additional challenges to even the most well-oiled procurement processes. In light of these difficulties, let’s examine MRO procurement’s obstacles in erratic markets and present workable solutions.

Challenges of MRO Procurement in Volatile Markets

Now, let’s get down to business: the difficulties associated with MRO procurement in volatile markets.

Rising Prices:

Imagine if prices are rising one day and falling the next. Why? Put it down to the erratic political landscape and those annoying trade barriers. All of a sudden, the materials, tools, and pieces you need are quite expensive. For instance, in the recent past, the global steel price surged by 20% due to supply chain disruptions in the procurement of coking coal caused by the pandemic and the ongoing Ukraine war. In such a scenario, unexpected expenses can harm operational costs when budgeting becomes a challenge .

Supply Chain Disruptions:

Nearly 49% of the companies surveyed last year experienced supply chain disruptions followed by shortages of critical MRO items. Such global disruptions can impact the flow of goods across borders. Unless the company has a diversified supplier base and contingency plan, delays and shortages of critical MRO items can lead to production halts and maintenance backlogs.

Lack of Focus:

Most organizations focus on short-term gains and cost reduction rather than value creation. For instance, around 85% of companies feel a high demand for sustainable procurement. The shocking part is that just 46% of people have actually fully embraced these important behaviors. It’s like not wanting to follow the X markings on a treasure map! Investors are considering such nonfinancial factors to identify risks and growth opportunities. Unless the company has a dedicated team to focus on key driving factors that bring value to your procurement practices, staying afloat in the volatile market is impossible .

Mitigating the Impact: Strategies for Effective MRO Procurement

Are you familiar with the lean procurement model? Mog lix vouches for it! They gave it to one of the best OEMs for power management systems, and guess what? It has revolutionized cost reductions throughout these wild fluctuations in the market. There’s more, though! See these additional clever approaches for creating a fantastic MRO procurement model.

Diversify Your Supplier Base:

Around 48% of companies are already considering adopting a diversified supplier base as one of their major procurement KPIs. They have understood that relying on a single supplier leaves them vulnerable to price fluctuations and potential supply chain disruptions. Search giant Google announced that it will spend around USD 1 billion annually with diverse US suppliers by 2025. Other big companies like Micron Technology, Xcel Energy, and Air Products are also considering diversifying at least 15% of their supplier base to create backup options in case of supply chain issues by 2025.

Build Strong Relationships with Vendors:

As per research by Procurement Leaders, around 47% of the supplier collaborations fail due to lack of trust and commitment. It hampers procurement success. Companies must maintain a robust vendor relationship on multiple levels as it has many benefits. For instance, if you have a good relationship with your vendor, order and quality issues go down, and you can take advantage of fixed pricing for longer.

One of the best ways to achieve a robust vendor relationship is to treat them like business partners. For instance, technology giant Intel is considering spending $300 million annually to partner with suppliers undervalued by society for so long.

Also, keeping your vendors loyal to you with timely invoice clearances is crucial. In this way, you will not be like those companies that lose 20% to 30% of their vendors due to disloyalty in payments.

Embrace eProcurement Technology:

What’s the newest hot thing in the business world? eProcurement applications! Many businesses are hopping on board to simplify their MRO purchase processes. It’s as if you could wave a magic wand and solve every annoying procurement headache. Ideal procurement tools are so beneficial that their global market size is expected to reach USD 8.17 billion in 2024. An ideal procurement software allows you to automate tasks, get real-time data on inventory levels and spending patterns, and facilitate communication with vendors, all from a single dashboard. This prepares CEOs to make faster decisions and improve visibility into their procurement process.

Conclusion

Coming through MRO procurement challenges under a volatile market is challenging for procurement managers. It requires diversifying your supplier base, building strong relationships with vendors, leveraging eProcurement software, and adopting flexible procurement practices. Once you master these strategies, you can meet your MRO needs efficiently and cost-effectively, even when the market throws curveballs your way.

Looking to build robust MRO procurement solutions to stay unhinged from future market fluctuations?

References

Navigating the Impact of Volatile Markets on MRO Procurement