Procurement can and should focus not only backwards into the supply chain, but forwards. Procurement should look at the needs of the customer and create supply solutions that meet their demands.
We saw a great example of this in a company that provides outsourced maintenance services.
The issue they came to us with was about how to reduce the cost of spare parts stock whilst, at the same time, minimising time to fix.
As we delved into the problem by interviewing the engineers who drove around the UK fixing equipment, we learned that their solution to reducing the time to fix had been to have a large stock holding in each van "just in case" it was needed.
For obvious reasons, this had been curtailed and engineers were encouraged to drive to a depot to collect the specific spares they needed prior to each job.
However, whilst that solution dealt with the stock level issues, it entailed a lot of extra mileage and slowed response times. As a result, customer satisfaction levels were falling and they were under competitive pressure.
This company was in the business of maintaining assets. Their focus was on how to take calls from customers, identify the source of the problem and put together requirements in terms of parts and skills to get the fix completed in as short a time as possible.
They looked at the solution as a whole - how they could get a qualified engineer together with the right parts to the right place at the right time.
They were experts in call handling, engineer routing and customer service, but none of the team had a background in distribution.
When our expert in food logistics looked at the problem they uncoupled the maintenance job from the spare parts supply and focused on the issue of getting the right parts to the right place at the right time.
We introduced new suppliers based on their ability to fulfil the logistics element of the operation and changed the way spare parts were sourced.
We then looked at the call-handling element of the job and refreshed the triage process to improve the identification of the problem and therefore the parts that were likely to be needed.
By breaking down the need and optimising the solution in each area, the end result was amazing:
- 33% total cost reduction
- 25% reduction in working capitial (MRO stocks)
- 3% asset uptime improvement
- improved time to fix
- improved customer satisfaction
Applying expertise from another industry is one of the key ingredients of disruptive procurement and this example shows how a field service company can learn from catering distribution services.
To learn about more examples of disruptive procurement, download our eBook "11 thought-provoking examples of disruptive procurement".