How understanding big

data helps you unlock MRO

procurement savings
White paper Big Data

Most organisations undervalue the role of data

in devising effective MRO cost saving strategies,
largely because such data is inaccessible to
them. Yet visibility of the data – and in particular
the insights they provide about an organisation’s
consumption behaviour – ensures that decision-
making is based on the firm foundations of
actuality rather than assumption. Companies
that embraced data analytics in their decision-
making saw an average of 26% improvement in
performance in the past three years, and over the
next three years it is expected to reach 41%.1

This white paper, one of a series covering best

practice in MRO Procurement, explains the vital
importance of Big Data in planning effective MRO
procurement strategies to unlock significant
savings and efficiency gains.

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White paper Big Data

What is Big Data?

Big data refers to the sets of large volumes of Big Data is characterised by four main definitions:
data beyond that which commonly used software Volume: the massive amount of data.
such as legacy relational database management
systems can capture, process and analyse within Variety: the different types of data, data sources
a reasonable time-frame. It requires new sets of and analysis. Velocity: the speed at which the data
technology infrastructure, capable of handling very is created, processed and analysed. Veracity: the
large volumes of a wide variety of data and high- uncertainty of the data, and the level of reliability
velocity capture, discovery and/or analysis.2 associated with certain types of data.3 (Figure 01)

Companies that embraced data analytics in their

decision making saw an average 26% performance
improvement in the past three years.1

Big Data increasingly plays a role in successful business decision making

Data, which includes both internal and external executives. (‘Performance’ in the survey only refers
data, has become an increasingly important factor to a useful gauge of mood).1
in decision making for companies. It can help to
optimise cost savings by gaining new insights into According to Reza Salehnejad of Manchester Business
customers, markets, supply chains and operations. School, key drivers for the big data revolution are:
For companies that have embraced data analytics • The decline in the cost of data storage and
in their decision-making, an average of 26% computation capacity
improvement in performance has been achieved • Cloud computing - the utility model
in the past three years: while over the next three • Advances in analytics, statistical sciences and
years it is expected to reach 41% according to an software
Economist Intelligence Unit survey of 607 senior • Software commoditisation

Why is Big Data important? The definitions of Big Data

By utilising both internal data, and increasingly
external data, Big Data helps to gain new insights
VARIETY : VOLUME:
into customers, markets, supply chains and STRUCTURED,
UNSTRUCTURED
TERABYTES TO
PETABYTES
operations. According to a survey conducted by TEXT, MULTIMEDIA OF DATA

Economist Intelligence Unit in 2001, out of the

responses of 586 senior executives around the FIGURE 01
word in companies that utilised Big Data, 53%
outperformed their peers in the prior fiscal year.
Additionally 9 out of 10 survey respondents agreed
that data is now an essential factor of production, VERACITY : VELOCITY:

alongside land, labour and capital. MANAGING THE RELIABILITY

AND PREDICTABILITY OF
ALANYSIS OF STREAMING
DATA TO ENABLE
INHERANTLY IMPRECISE DECISIONS WITHIN
DATA TYPES FRACTIONS OF A SECOND

‘The importance of the database cannot be

overstated. To embark on a successful journey to
MRO cost reduction, the database becomes your
map, flight plan, compass, radar and landing lights
rolled into one.’4

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White paper Big Data

‘Companies in the top third of their industry in Big data could offer insights or business intelligence
the use of data-driven decision making were, to aid better decision-making in a number of ways:
on average, 5% more productive and 6% more
profitable than their competitors.’5 • Using historical and real-time asset data for
actionable intelligence
In order to make improvements to an organisation’s • Measuring MRO performance systematically
existing procurement process to save costs, and frequently
it is critical to understand the organisation’s • Serving asset lifecycle information to
consumption behaviour, and map its process in stakeholders on-demand
terms of procurement. • Centralising asset performance information
from numerous worksites
• Sharing asset performance and cost information
in real-time across the value chain6

How can Big Data be employed?

The main uses of big data are highlighted as follows: The vital role of data in multi-site operations
Data quality and consistency across multiple sites
Supply Chain and Logistics is crucial in the cost-saving process, to help give the
The wealth of information generated in the supply end-user a complete and transparent understanding
chain activities can be utilised to capture the of the MRO costs across sites. A thorough
complexity of the system, total transaction costs, consumption analysis helps to identify areas to focus
and the value of various activities within the supply on, measures the success of the chosen cost saving
chain. It allows for better planning and raw material strategy and persuades stakeholder buy-in to data-
procurement for the distribution/warehousing stage backed strategies.
of the process, in terms of timing and volume of
orders. It can be further used to simulate potential Analysis of the data will show the extent of the
breakdowns and delays in the process. Lastly, it savings possible, recognising which products are
allows planning for optimum usage of warehouse regularly purchased, unplanned, multi-site and which
space, distribution and delivery methods with RFID channel, which will help to maximise product and
(radio-frequency identification) data, which can process savings. Understanding the service levels of
track and assess the exact location of product. various suppliers will also helps to realise and control
the level of contract- leakage amongst various sites.
Preventive Maintenance and Repairs
Any production downtime is a potential huge loss of
revenue to companies due to decreased production
output, cost of repairs and waste generated in Big Data = transactions +
the process. Real-time information could prevent interactions + observations
waste, major repairs and minimise downtime with
proactively planned downtime based on machine
FIGURE 02
logs used by companies. Increasingly, companies
embed electronic devices with sensors, RFID or
‘internet of things’ that can actively transmit vital PETABYTES

BIG DATA
information about machines – machine variables
(temperature, oil level, humidity, etc), production TERABYTES

rate, waste metrics, life expectancy and breakdown WEB

Sensors / RFID / Devices

information.7
Mobile web
User click streams
Sentiment
GIGABYTES CRM User generated content
Web logs Social interaction & feeds
Offer history Spatial & GPS coordinates
A/B testing External demographics
ERP Dynamic pricing Business data feeds
Segmentation Affiliate networks HD videos, audio, images
MEGABYTES Purchase detail Offer details Search marketing Speech to text
Purchase record Customer touches Behavioural targeting Product / Service logs
Payment record Support contacts Dynamic funnels SMS / MMS

INCREASING DATA VARIETY AND COMPLEXITY

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White paper Big Data

Big Data adoption stages

FIGURE 03
EDUCATE EXPLORE ENGAGE EXECUTE

DELIVERING DEPLOYED TWO

FOCUSED ON PILOTING
STRATEGY AND OR MORE BIG DATA
KNOWLEDGE BIG DATA
ROADMAP BASED INITIATIVES AND
GATHERING INITIATIVES TO
ON BUSINESS CONTINUING TO
AND MARKET VALIDATE VALUE
NEEDS AND APPLY ADVANCED
OBSERVATIONS AND REQUIREMENTS
CHALLENGES ANALYTICS

24% 47% 22% 6%

PERCENTAGE OF PERCENTAGE OF PERCENTAGE OF PERCENTAGE OF
TOTAL RESPONDENTS TOTAL RESPONDENTS TOTAL RESPONDENTS TOTAL RESPONDENTS

RESPONDENTS WERE ASKED TO IDENTIFY THE CURRENT STATE OF BIG DATA ACTIVITIES WITHIN THEIR ORGANISATIONS. PERCENTAGE DOES
NOT EQUAL 100% DUE TO ROUNDING. TOTAL RESPONDANTS = 1061.

Implication
Organisations that utilise Big Data to aid
their decision-making demonstrate significant
performance improvements over those that
don’t, with 53% of Big Data-using companies
outperforming their peers, and those in the top
third of their industry in the use of data-driven
decision making being 5% more productive and 6%
more profitable than their competitors. Big Data is
increasingly vital foundation for sound decision-
making. This is especially relevant when formulating
effective MRO cost-saving strategies, since by its
nature the data around MRO is complex and often
obscure.

References:
1. The Economist Intelligence Unit , 2012; 2. Manchester Business School;
3. IBM in collaboration with Saïd Business School, 2012; 4. Joel Roth
2008; 5. Harvard Business Review 2012; 6. Ismail & Paquin 2013; 7.
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White paper Big Data

Conclusion Methodology
Any organisation seriously seeking to achieve cost Manchester Business School (MBS) is the UK’s
savings and efficiency gains in its MRO operations largest campus based business and management
must consider using Big Data to inform and improve school. The school is ranked first in the UK for
its decision-making through fact-based analysis. business research and their original thinking
The use of analysis in informing business decisions is applied across business and management,
is proven to improve productivity and profitability. government and communities worldwide.
Accepting that the organisation itself may not be
capable of capturing the necessary consumption In a broad-ranging project, RS Components has
profiling data, or of analysing it effectively to worked with MBS to identify and evaluate industry
create informed insights into potential change and best practices in realising generic cost savings
improvement strategies, organisations should seek strategies. The project also had an objective of
to work with supply partners with the experience determining the cost-drivers associated with
and capability to perform these tasks. MRO procurement in companies, with the goal of
identifying the percentage of processing costs to
‘The importance of the database cannot be product costs within total product procurement
overstated. To embark on a successful journey to costs.
MRO cost reduction, the database becomes your
map, flight plan, compass, radar and landing lights The project methodology included primary and
rolled into one.’4 secondary research Interviews with Academics from
the University of Manchester and industry Subject
Matter Experts (SMEs) related to MRO procurement
and also a web survey formed part of the primary
research. The secondary research phase involved
studying materials related to the project in the
form of white papers, published papers, articles,
other professional publications, the MBS library
databases, internet sources and information shared
by RS during client meetings.

RS Components are committed to developing

procurement strategies to help businesses save costs,
improve efficiency and effectiveness. Our experience and
global scale position us as an industry leading provider.
For more information contact your RS Account Manager
or email connectedthinking@rs-components.com.

No part of this publication can be reproduced wholly or in

part without the express written permission of
RS Components Ltd.

RS Components Ltd. Birchington Road,

Corby, Northants NN17 9RS, UK
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