The Supply Chain Crisis And FM Strategies

As long-held practices are challenged, there is an opportunity for facility management to digitize its acquisition of parts and supplies.

By Jim Owens
From the April 2022 Issue

The Covid-19 pandemic exposed the vulnerability and risk exposure that facilities management (FM) leaders and their organizations face in the global parts and materials supply chain. Ongoing global supply chain disruptions, labor shortages, and geo-political issues create a downstream strain on FM organizations. Unmanaged, highly volatile, and reactive supply chains with a decentralized, fragmented supply base have created operational inefficiencies and increased waste, leaving little room for innovation. The rapid exit of technician baby boomers, and the resulting loss of intellectual property has manifested in growing costs and increased risk exposure.

Supply chain crisis
(Source: Adobe Stock By ZinetroN)

The performance of any FM team is dramatically impacted by the supply chain and has consequences both upstream and downstream in that team’s organization:

  • Prices on asset components and FM parts up 12-15% on average
  • Lead times extended by 30 -50% on some commodities
  • Stock-outs increasing unplanned downtime on revenue-generating assets

Conventional practice has been for field maintenance technicians and/or third-party contractors to purchase materials locally and add a pre-negotiated surcharge/mark-up to the invoice upon completion of service or repair. This could range from 10-25% on average. This decentralized approach results in 20-30% of the aggregate FM budget for a retailer being off limits in terms of management or optimization.

However, when viewed systemically, we see that the decentralized approach to parts management inadvertently impacts several other areas, including: First call completion; Maintenance wrench time; Asset life cycle; Operating expense; Compliance with enterprise (corporate social responsibility) CSR strategies/initiatives related to energy, sustainability, and diversity; and In-store/on-site brand experience.

As the economy exits the pandemic, pressures on the supply chain will put unprecedented strain on the availability of materials, many of which are critical to the maintenance of the FM built environment. Shortages of FM parts are already resulting in increased costs, while field technicians spend a staggering 34% of their time waiting for or looking for required parts for repairs and maintenance. Additionally, the downtime experienced from not having an adequate supply of parts to service and maintain critical operations for the facility will translate into higher operating costs, resulting in a diminished buying experience at the brick and mortar locations.

Supply chain challenges will require a fresh look at the need for local Inventory to support the needs of facility maintenance. Having critical parts on hand will require an investment in not only the materials themselves but the proper supply chain management system.

Ways FM professionals can leverage the current supply chain climate to build sustainable value.

As we emerge from the pandemic, FM departments have a distinct opportunity to drive significant operational improvements while reducing costs systemically. Within this scope, FM leaders should have an expanded focus on supply chain value creation, e.g. focusing not only on purchase price but also on total costs of ownership (maximizing technician productivity, asset uptime, and the in-store experience).

Moving to a digitized, data-driven process can deliver increases in operating margin while providing organizations necessary agility and transparency across the entire supply chain ecosystem. This empowers FM professionals to respond quickly to demand and identify savings opportunities. Utilizing a robust digital supply chain ordering platform allows technicians to place and track needed materials, but it should also provide for powerful data analytics which will be the foundation for supply chain critical activities such as spend visibility and consolidation, trends and compliance tracking, material sourcing, contract negotiation, and developing supplier diversification.

With complete, accurate, accessible data and end-to-end connectivity, FMs can transform sourcing, scheduling, inventory, and other critical decisions from transactional to strategic. The same data-informed techniques and tools that optimize processing lines and warehouse organizations can collect and implement performance data to improve quality, safety, hiring, training, vendor management, and metrics in every department.

The Covid-19 pandemic accelerated the urgency in managing FM parts supply chain more holistically. Disruptions in production, transportation, and logistics highlighted the importance of redundant supply sources, manufacturing agility, and data accessibility. Moving forward, connectivity will be a prerequisite for doing business. FM professionals will need it to be confident that they can obtain the parts and supplies they require as well as the insight needed to meet demand and market dynamics. The long-term benefit is a culture shift to one of continuous improvement and a focus on the internal and external stakeholders who depend on and contribute to organizational success.

Supply chain crisisOwens is a member of the Advisory Board for Penn State’s Center for Supply Chain Research (CSCR), a member of the ConnexFM Technology Advisory Board, and Chief Growth Officer at SDI, a leader in digital supply chain services and solutions for facilities maintenance, repair, and operations.

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Check out more technology and facility management news in previous Facility Executive Tech & FM Columns.