RS releases 2022 indirect procurement report: ‘Taking control as the pressure rises’

RS, a trading brand of RS Group, has released the 2022 Indirect Procurement Report ‘Taking control as the pressure rises’ – the resulting report of responses from the sixth annual survey produced in association with the Chartered Institute of Procurement & Supply (CIPS). It explores how the category of maintenance, repair and operations (MRO) is managed.

More than 700 global respondents from the procurement profession took part in the survey, from sectors including manufacturing, public sector, energy, logistics & retail, transport & defence and technology, covering job roles from operational through to senior and director level.  

Some of the main themes emerging from this year’s survey included economic challenges such as rising inflation and interest rates, supply chain disruption and global political uncertainty. Delivering annualised savings, managing ageing assets and contract compliance emerged as the top three daily business challenges identified this year.

The report results reflect the economic challenges being faced today in the form of rising inflation and interest rates, which is affecting MRO procurement across all sectors of the economy:

Rising inflation is putting all businesses under cost pressure, indicated by the report finding that delivering annualised savings is the leading daily challenge in the UK for more than half of those surveyed (55%) 10 points higher than in 2021

• More than eight out of 10 of UK survey respondents said inflation, along with higher energy costs and interest rates, would be the major challenge for procurement professionals over the next 12 months
• Supply chain disruption is a major concern, with three-quarters of respondents concerned about the threat it poses
• Almost two-thirds of respondents cite global political uncertainty as one of the main challenges for MRO procurement

Following on from the emergence of sustainable and ethical procurement as a business pressure among top three for the first time last year,environmental, social and governance (ESG) remains the single most important strategic objective for the organisations surveyed. Around two-thirds of UK businesses are placing it at the heart of their strategy, a five percentage point increase on 2021.

Other 2022 Indirect Procurement Report highlights include: 

• Supplier rationalisation is climbing again in priority, after a year-on-year decrease exacerbated by the pressures of COVID-19. This year’s survey highlighted almost half of UK organisations are looking to increase efficiencies through rationalising the number of suppliers they use. Many are also using eProcurement to increase efficiency, and more than 80 per cent of UK businesses measure supplier performance against KPIs
• Average annual spend on indirect supplies has increased this year to £2.5 million. Overall the percentage of indirect spend devoted to MRO has fallen this year by an average of 15 per cent
• Procurement teams using eProcurement to increase efficiency has increased since 2021, with 41 per cent using eProcurement
• Pressure to improve asset performance has increased significantly in the UK, rising from a third last year to 43 per cent of those surveyed in 2022. Ageing assets were cited as the biggest driver of downtime by a quarter of respondents working in transportation and defence
• The digital revolution is gaining pace: more companies in the UK have a strategy in place for Industry 4.0 and industrial vending than last year
• UK respondents also cited the number one benefit of digital procurement as improved spend visibility, followed by better management information and reduced order process costs
• However, a lack of investment in technology to control purchasing and poor spend visibility have both become bigger challenges than last year, as has managing cash flow. The number complaining of a lack of technology investment rose from under a quarter to almost a third
• Outsourcing data, stores management and customer payment services are being undertaken by just over an eighth of UK businesses. Almost one in 10 are using outsourcing to consolidate their supply chain.
• More than eight in 10 UK organisations say that ESG criteria are either important or very important in their procurement strategy, and a fifth rate it extremely important. A similar percentage (87%) said they are confident or completely confident that their procurement team could deliver on their organisation’s ESG plans
• Reducing their carbon footprint has increased in strategic importance for UK businesses: over half said they have a strategy in place to reduce their emissions. The use of electric vehicles (EVs) as a means to reduce company carbon footprints has increased in the UK, rising 20 percentage points on last year
• Waste recycling, reducing energy use and energy management are the top three carbon-reducing strategies companies are pursuing. The number of organisations reducing their energy use is nine percentage points higher than in 2021
• A third of UK respondents to the survey said that monitoring suppliers’ sustainability practices will be one of the main challenges for indirect procurement over the next 12 months. But only six per cent are extremely confident of their ability to audit their suppliers
• Procurement emerged as one of the principal departments managing change in UK organisations, second only to operations and ahead of both finance and engineering. Almost a quarter of survey respondents think they have a significant opportunity to drive change in their business, and more than seven in 10 advanced professionals and two-thirds of professional-level respondents believe they have a good or significant opportunity to make change happen in their role.

Said Emma Botfield, UK & Ireland Managing Director at RS: “The findings of this year’s report highlight a move in the right direction in so many areas fundamental to the progression of MRO procurement practices. Increased rationalisation of suppliers is a vital element in achieving efficiencies to help businesses operate for less – particularly at a time when an era of rising material costs means chasing supplier discounts isn’t a viable savings strategy.

"It’s great to see that sustainable and ethical procurement is still a priority in organisations across the UK, with all sectors citing environmental, social and governance (ESG) criteria as playing a key role in their procurement decisions. Measuring the carbon cost of all products arriving on site is just one way indirect procurement is walking the talk on sustainability."

“With extremely challenging times putting supply chains under constant stress, the impact of demand is weighing heavily on company revenues, putting margins under pressure. On top of these new challenges, fundamental business pressures are increasing.

"This means it’s never been more important for procurement teams responsible for supplies supporting maintenance, repair and operations (MRO) to do more with less. However, procurement professionals should embrace the opportunity to show how much they add value to the top line as well as the bottom line,” she added.

As Helen Alder, Head of Knowledge & Learning Development at the Chartered Institute of Procurement & Supply (CIPS) explained: “The last five years have just been one thing on top of the other. We’ve had COVID, and Brexit – which is still causing problems in Europe, especially for smaller companies – there’s all the natural disasters in the world, and the war in Ukraine. So for procurement professionals especially, it’s extremely tough right now, and some of the consequences of these challenges have been unexpected.

“However, procurement professionals have huge ability and opportunities to help organisations navigate these challenges. Using their unique position they can act help lead transformation and change - and as an educator of standards, spell out what the red lines of a business should be. These should include staying sustainable in an evolving world and driving technology adoption to improve efficiency and transparency. This year’s survey demonstrates beyond doubt the central role of indirect MRO procurement in transforming UK business to thrive in an uncertain future,” she concluded.

The full 2022 Indirect Procurement report can be found here.