Turning Supply Chains Into Supply Circles
Turning Supply Chains Into Supply Circles
By Joe Bush
At a time when manufacturers are still experiencing supply chain challenges, Ben Findlay, CEO and Co-founder of Machine Compare, speaks to The Manufacturer about an untapped resource that could also be good for the planet. Across manufacturing supply chains it is estimated that there is currently around €10bn of spare parts that will never be put to use; there is little to no cost in owning these parts and so the world’s industrial businesses are sitting on mountains of surplus mechanical and electrical inventory – many of which are destined for landfill. A small to mid-sized facility will typically hold inventory with a value of around €250,000 and scrap around €100,000 worth per year.
In addition, all over the world there are shortages, issues within global supply chains, increased costs and market demands, to say nothing of the impact of the war in Ukraine. Therefore, lead times are getting longer and it is becoming more difficult to source parts quickly (just ask the automotive companies trying to track down semiconductors). This has seen major organisations dipping below critical stock levels, leaving them vulnerable to downtime and disruption to supply chains. The aforementioned semiconductor shortage has been impacting the electronics sector for over two years, and is showing no signs of slowing.
While it may be tricky to convince a manufacturer to relinquish inventory in the current climate, these challenges could be turned into an opportunity if these unused electrical and mechanical spare parts could be recirculated and put back into the market. This would not only create an additional source of revenue for the manufacturer (by turning unused stock into capital), it would help others improve their supply chain resilience. It would also help create a circular economy by reducing the need for parts to be created, thus lowering emissions, reshaping the way the world trades in industrial machinery and spares, and promoting the principles of reuse, repair and recycle within manufacturing supply chains.
With a background in the paper machinery sector, this was an issue that Machine Compare Co-founder Ben Findlay came across on a regular basis. “Spares would traditionally sit on a shelf, and if they weren’t used they would get scrapped to make way for new parts,” Ben comments. “I have never been to a store that’s empty. Engineers generally don’t like to throw stock away, so over time, a culture of accumulation has developed. Overstock has always been seen as a good thing with engineering, because if the asset goes down it still needs to keep running.”
Furthermore, spares have traditionally been challenging to regulate as it is only since the introduction of ERP systems in the last decade or so that stock management has really been able to give companies (certainly large groups), an accurate overview of everything in stock and enable them to use that data intelligently within their supply chains.
Cleaning dirty data
Recognising this issue Ben approached one company he dealt with in his particular sector, making them aware of the unused spare parts within the group. “They said they didn’t have the time to solve this issue because spare parts didn’t hold any value, and were just a depreciating asset”, Ben adds. “However, they told me that if I could sell them, they would give me the order”.
That initial foray resulted in the discovery of €100m worth of spare parts within the group’s 350 plus sites around the world. While unexpected, this served to highlight not only the scale of the problem, but the size of the opportunity which the vast majority of manufacturers were completely unaware of. As a result, in January 2020, the company received £1m investment to scale and build a platform for industrial spare parts.
However, a major hurdle to achieving this was not locating the spare parts themselves, but rather the quality of the data within the lists of parts they were receiving. Ben adds: “For us to be successful, we needed good quality data. The equation is very simple; good quality data sells, bad quality data doesn’t. Customers need to know what they are buying. If I was trying to sell shoes, and simply advertised that I had a shoe for sale, no one would buy it. There’s a whole raft of further information that a prospective customer would need to make an informed purchase decision; industrial parts are no different”.
Machine Compare launched in July last year with a clean data pool of around 125,000 products available on the platform. However, Ben realised quickly that this volume was woefully inadequate and was not enough to see meaningful change happen. “That’s a real objective of ours,” he adds “It’s about changing culture, sustainability, avoiding waste to landfill, and trying to have a positive impact on the planet and industry”.
Therefore, despite having myriad spare parts that the company could sell, Ben realised that wouldn’t be possible without the clean data to back it up. And so, the company embarked on a programme to build its own data pool. “We built it from the ground up, and we’ve now got five million products on the platform, many of which are sector specific. We’ve worked very closely with certain manufacturers in different sectors to get that data, and it’s clear that industry is really committed to solving this problem”.
The acceleration towards digitalisation has certainly helped and this data led approach means that we now have the right product at the right time. The technology for harmonising and cleaning the data didn’t exist two or three years ago, so certain elements of what we’re doing have only been made possible recently.”
Machine Compare’s data solution provides information on part name, MPN number, OEM and brand, while users also have the option to set up stock notifications. The platform is able to quickly enrich previously poor data, removing duplicates, adding attributes, validating products and enhancing traceability, thus helping to facilitate circular trade across industrial sectors, and offering platform users rapid access to parts when and where they need them. From the perspective of the buyer, for every unused part that is purchased it means one less part has to be produced and one less part will be scrapped.
A weight off the shoulders of industrial supply chains
Machine Compare features over 50 multinational groups on the platform, including the likes of Nestlé, InBev, DS Smith and Del Monte. “In terms of stock level, the 2.5 million products on the site equates to 1,489 tonnes, which is equivalent to the weight of 30 space shuttles,” adds Ben.
However, a key part of the message behind the issue of spare parts is the impact on a company’s sustainability that recirculating these products will achieve within their own organisation and their broader supply chains. “We’re avoiding waste to landfill, so it’s a really positive message and something that’s really tangible for industry,” Ben continues. “When we talk about circular economy, a lot of companies fail at the economy aspect. With our products, however, we reward people for buying sustainably, which means they’re cheaper. But of course, we’re also solving problems with lead times and alleviating pressure for those working directly on the tools day-today.”
Of course, an obvious question for any potential buyer would be why not use any other well-known online buying platform? As mentioned previously the data associated with each part listed on Machine Compare has undergone extensive cleaning through the company’s dedicated platform, a challenging task for any manufacturer wanting to sell their spare parts themselves.
In addition, a large multinational would be unable to source product from a standard platform. They need to be purchasing from verified companies. “To sell to large groups you have to be an approved supplier, and there’s many hoops to jump through in order to be able to do that,” Ben adds. “So even if you’ve got parts that they need, they can’t necessarily buy them, unless you’ve gone through the correct compliance procedures.
“In addition, there’s also the mechanism of shipping parts after purchase. It’s not like buying a pair of trainers; if a part is crossing borders, the right certification has to be in place, you need to know the commodity codes, and understand the tariffs. It’s a complex process moving things from one place to another. Fundamentally, we try and take all of that complexity out of the process.”
Unused, not used
Ben highlighted that it is important to remember that because a product is unused, it does not mean it is inferior, damaged, unreliable or incomplete. Crucially, nor does it mean that it has been used already. He adds: “That’s why we’re trying to reframe everything to be ‘green parts’. We found that the word ‘unused’ resonated quite negatively with users. However, they’re not buying used products. We deal with enterprise customers; groups that do not buy inferior parts. They buy top level, don’t cut corners on maintenance and engineering, and purchase in quantities that often result in a surplus.”
Following the launch of Machine Compare, users certainly perceived an element of risk with purchasing ‘unused’ products and the company had a battle to win hearts and minds and to communicate the benefits. However, while few good things emerged from the pandemic, the resultant supply chain disruption has meant there is now a far greater emphasis on having parts available when they are required. Thus, manufacturers are more open to the possibility of alternative sources that they may not have considered previously.
“We do have a challenge in educating the market because we’re a new entrant,” Ben concludes. “However, we’re trying to communicate that in lots of different ways. So, we hope that the message gets out to as many people as possible, which will give buyers that reassurance.”