Demanding more from the multisite facilities supply chain.
By Shaila Wunderlich
It’s hard to believe; as recently as four years ago, multisite facilities managers (FMs) could order replacement equipment parts on an as-needed basis, purchase them for reasonable market value, and receive them in a matter of days. The new norm, as documented by supply-chain expert SDI, is one of 15% price hikes and 30-to-50% longer lead times. And it is upending the facilities space at an unprecedented level.
From poor visibility to fragmented sourcing to lack of data, COVID19 exposed fundamental flaws in the multisite facilities supply chain — some detrimental enough to shut down businesses for good. The question moving forward, as posed by Jim Owens, Chief Growth Officer for SDI, is, “Will FMs adjust their strategies to a more holistic, risk-management approach?”
The Issue: Zero Visibility
Catherine Barnes felt the pandemic’s first wave of supply-chain shocks in the winter and spring of 2021. Collecting construction bids for her Chicago-area non-profit healthcare employer, the facilities professional watched as materials costs doubled — then tripled — faster than she could respond. “We had one remodel bid that jumped more than 30% in six months,” she said.
In September 2021, Barnes took a new job as Vice President of Facilities and Energy Management at Rite Aid, where she traded in sky-high labor and materials costs for a new foe: vanishing parts and equipment — especially in HVAC. The following summer, at the height of extreme heat waves on both coasts, approximately 200 of the drug store’s 2,300 locations had unfulfilled HVAC work orders due to a global dearth of parts and equipment. “Full replacements were pushed out a year-and-a-half, leaving all clients vying for the same parts to repair units they would otherwise replace,” Barnes said. “Parts that usually take two to three days to get in were taking six to eight weeks.”
Barnes’ HVAC problem, rampant among facilities nationwide, represents one of the biggest fault lines in modern supply-chain management. “Most FMs today have zero visibility as to how many parts they have in stock, where they come from, and what they cost,” Owens said. “They have no clue that any given unit of equipment is likely comprised of dozens of separate parts that come from dozens of different suppliers across multiple different continents.”
Nor did they realize the same applied to HVACs. “These units aren’t mass-produced on single assembly lines,” Barnes said. “Their parts are manufactured around the globe, and only when all parts are in is a unit assembled.”
During the pandemic, this chronically poor visibility inflicted massive damages to facilities operations, customer experience and corporate profits. “One part could cause a complete shut down of revenue-generating assets,” said Owens, whose company estimates an average 26% loss in savings from murky supply chain visibility.
Barnes responded to the parts-shortage with a work-around of mobile spot coolers. Other multisites surrendered to costlier alternatives, ranging from temporary shut-downs to premature capital replacements. “We’re seeing restaurants and convenience stores purchase entire new equipment units rather than wait any longer for a repair part,” Owens said.
The solution. Owens suggests a more proactive response to supply shortages. “Identify your critical assets and essential materials by manufacturer and manufacturer part-number,” he said. “What are the things you can’t live without? Identify not just main suppliers but secondary and tertiary ones as well.”
With inventory management tools and supply-chain software, companies like ServiceChannel, Emcor and Owens’ own SDI can help with audits like this.
Once critical assets are identified, FMs can begin building a safety stock. Launched at the onset of the pandemic, ServiceChannel’s Provider Search assists in this task by corralling hundreds of thousands of suppliers according to category and location. Its release was in response to an increasing number of FMs engaging multiple suppliers to negotiate the direct purchase of huge parts-quantities.
Barnes relies on a more low-tech strategy for securing supply sightlines. “I look to my vendors and contractor partners,” she said. “It’s a constant attention on those relationships – taking regular meetings, checking in, making sure we are on the top of their lists to receive those parts the minute they come in.”
The Issue: Fragmentation
Deeply embedded in both the supply chain and facilities operations overall, fragmentation is rife throughout the multisite space. It presents most prominently in the categories of procurement and organizational structure — the latter of which Owens describes as “functional silos.” “Your typical FM might say, ‘I want as many parts as possible, so we don’t run out.’ Meanwhile, the CFO says, ‘No, we don’t want money in inventory that could become obsolete or inoperable.’ Now procurement chimes in, saying, ‘I want parts with the lowest cost.’ And engineering says, ‘No, I want the highest quality piece, so it doesn’t fail.’”
This siloed approach not only obstructs from a company’s established mission; it tends to bring a bigger price tag, too. “Spreading the procurement decisions out to different teams opens the door to different histories, relationships and preferences to dilute forecasted spend figures,” said George Reimann, Senior Procurement Manager of Materials at Emcor Facilities Services.
More fragmented than facilities’ organizations is the procurement of their parts and supplies. Thanks in large part to the poor sourcing-visibility mentioned earlier, FMs struggle to source suppliers when they can’t conclusively identify parts. While technicians have better knowledge of parts, their approach to sourcing is informal and inefficient. “The way it’s worked up to now, technicians waste a ton of time driving around looking for parts when they should be turning a wrench and fixing assets on the spot,” Owens said.
The solution. For organizational fragmentation, Owens recommends a single point-person be assigned to all supply chain matters. The role can be filled within an organization or by contracted specialists. “There should be one owner — preferably someone with a holistic view of the enterprise and its maintenance operations — who is responsible for harmonizing all the different interests,” he said.
For procurement fragmentations, Owens envisions a B2C “Amazon-like experience,” where technicians can use tools like I-PM, (SDI’s mobile supply-chain app), to search for parts, parts locations and prices. Customized integration is key to this solution, as it allows FMs to plug in the apps to their specific workflows. “You don’t want users to have to work in multiple systems, awkwardly swiveling back and forth,” Owens said. “That costs money and time.”
The Issue: No Data
“Data is the foundation for everything,” Owens said. “Without good data you can’t really do any of this.” Unfortunately, whether it’s parts numbers, equipment histories or tech repair notes, facilities data is at best, scrambled and at worst, non-existent. “Our supply-chain data is limited to what our vendors share with us,” Reimann said. “Some vendors are very detailed, but other vendors’ information and reports may be missing details that we have to go back and request. In the end, each vendor has their own version of data and reports that don’t always align with each other because there is no industry standard.”
The solution. Centrally aggregated data on everything from inventories to repairs to spending, which can then be analyzed and operationalized. Facilitated by technology, aggregated data provides valuable analytics for better understanding which assets are consuming which parts, and where money is being spent. “We have AI-enabled inventory forecasting tech that analyzes historic consumption patterns and comes back with an evidence-based magic number for your safety stock,” Owens said. “It operates dynamically, meaning it continues to evaluate and make adjustments according to seasonality, price, function, etc.”
What’s Next
Facing another potential summer of HVAC challenges like the ones preceding her, Barnes scheduled a conference call with all of Rite Aid’s suppliers. “I didn’t care if there were competitors on the same line; I wanted a single forum for establishing expectations,” she said. “I said replacing units is not an option, so I need you guys to focus on keeping us up and running.”
Looking ahead, Owens sees more FMs following Barnes’ lead — abandoning the just-in-time supply chain model of old in favor of a proactive, risk-managed approach. “There’s an opportunity here to pause and put together a better business model, and evidence suggests multi-sites are doing just that,” he said. “Many of the FMs I talk to are utilizing technology, identifying back-up suppliers, and building (or considering building) warehouses for spares.”