Overview of the Heavy Equipment Industry
Heavy equipment includes vehicles used for construction purposes such as lifting, mining, material handling, and excavation. The global heavy equipment market is mainly driven by residential, commercial and industrial development, increasing public-private partnership, and global economic growth. Additionally, improved involvement in the private sector, improved economic conditions, tremendous growth in real estate sector, and residential and commercial infrastructure set-up in emerging economies are the key factors driving the market growth.
Although the heavy equipment industry is expected to exhibit substantial growth over the next couple of years, several factors may negatively influence the growth of the industry. These factors include:
- Reduced productivity and profitability: Currently, the barriers to entry in the heavy equipment industry are low, creating a saturated marketplace with heavy competition. This competition is shrinking profit margins and constraining the significant reinvestment in new technology and better business practices.
- Project performance: Opportunities in the heavy equipment industry are growing, but so is project With companies already operating under razor-thin profit margins, a single production surprise can wipe out profits for the whole company.
Many such factors are compelling firms in the heavy equipment industry to leverage the use of cost benefit analysis solutions.
The Business Challenge and Journey
The client, a leading company in the heavy equipment industry with business units spread across the globe, wanted to conduct a cost benefit analysis to evaluate their potential costs and revenues and gauge the impact of individual cost drivers on the overall cost. The principal concern of the client was to compare the cost of products and services with that of their competitors and accordingly allocate resources to meet the business requirements. Furthermore, the client wanted to identify the gaps that had to be bridged to improve their cost efficiency.
The cost benefit analysis experts at SpendEdge carried to a robust research methodology. The methodology included interviews and discussions with prominent stakeholders in the heavy equipment space to identify the best negotiation levers. The experts also compiled information from reliable sources such as trade shows, company presentations, and newsletters to help the client overcome their predicaments.
During the course of this cost benefit analysis engagement, the heavy equipment industry client was able to identify the direct and indirect costs, intangible costs, and the cost of potential risks across the supply chain. Furthermore, the client was able to develop a quantitative and scenario-based cost model to gain an understanding of the best negotiation levers.
Fundamental questions answered in this cost benefit analysis study include
With the help SpendEdge’s cost benefit analysis engagement, the heavy equipment industry client was able to perform a trend, challenge, and opportunity analysis to compare the cost of all elements and determine if the benefits outweigh the costs. This helped them develop a cost movement forecast for all elements to achieve better pricing results.