Over recent years, there have been various industry developments that served as or caused trends in procurement. These procurement trends include technology changes, novel strategic approaches, new processes, and necessary adaptations to change. As supply chains become increasingly complex, procurement has become highly crucial and influential in the production process and continues to grow.
Industrial and Manufacturing
Industrial procurement services offered by SpendEdge can help you strategically manage energy costs and improve your sourcing expenditures forecasting.
Industrial and Manufacturing Industry Overview
Procurement professionals in the industrial and manufacturing sector are faced with the need to forecast sourcing expenditures for the long-term, in addition to sourcing commodities and raw material ingredients from several different suppliers across the world. As energy costs and prices in manufacturing procurement grow increasingly volatile, it becomes more challenging to forecast the procurement budget for any commodity. SpendEdge brings together a team of experienced category and commodity experts who combine industrial expertise with advanced tools in procurement in manufacturing industry and procurement intelligence. With this team, we help businesses identify opportunities to reduce their supplier management costs and make better purchasing decisions.
With several end-user segments and the availability of suppliers across various geographies, industrial equipment manufacturers have a number of opportunities to increase their profit margins and achieve improved cost savings through optimized procurement in manufacturing industry. However, with industries increasingly adopting the trend to automate their processes and sourcing intelligence, procurement professionals in the manufacturing industry are frequently faced with purchase requests for new equipment to meet consumer demand and differentiate products from competition. Identifying key pricing elements and the pricing model followed by various suppliers, SpendEdge’s procurement market intelligence experts offer pricing & procurement market intelligence solutions that will help business manage procurement risks across various business units.
Construction and Building
Though players in the construction and building industrial sector focus on forming strategic partnerships with suppliers, these relationships often remain cost-driven. Helping sourcing specialists make better procurement decisions, we at SpendEdge provide real-time supplier information and procurement market intelligence solutions that cover aspects such as a suppliers’ financial announcements, new products or services launched by suppliers, the impact of M&As and JVs announced by suppliers, new clients they acquire, and their pricing models. This provides opportunities to effectively manage the supply chain, procurement in manufacturing industry, and the associated risks through sourcing intelligence to help buyers make improved procurement decisions in the manufacturing industry.
Automation and Controls
With innovative technologies easing industrial processes, vendors in the automation and controls manufacturing industry have the constant need to adopt advanced technologies to meet consumer demand. Identifying efficient suppliers is a major challenge for procurement decision makers in the manufacturing industry. With commodity prices becoming increasingly volatile, without the right sourcing intelligence it becomes increasingly difficult to pick buyers without a standardized cost-model analysis. Developing cost scenarios based on alternate sourcing locations and price fluctuations and even suggesting alternate production processes, SpendEdge’s procurement market intelligence solutions help clients develop robust strategies and procure the right products and services through accurate procurement market intelligence insights.
Direct and Indirect Spend Categories
Direct Materials and Equipment
- Castings and forgings
- Fabricated products
- Heavy equipment (haul truck, drills, shovels, excavators, and underground mining equipment)
- Pressure vessels
- Conveyors belts
- Stackers and reclaimers
- Sheet metal components
- Process chemicals and solvents
- Turbines, pumps, and compressors
Packaging Materials and Equipment
- Reactors and pressure vessels
- Electronic components
- Electrical components
- Material handling equipment
- Energy (electricity, oil, and gases)
- Capital machinery and equipment
- Process automation and control equipment
- Construction and building materials
- Packaging materials
- Heat exchangers, boilers, and cooling towers
- Waste management
- Motors and drives
- Packaging materials
- Facility management services
- Facility equipment and supplies
- Corporate services
- Professional services
- Travel and entertainment
- Telecom and networking
- IT services
- Office supplies and equipment
- Computers and peripherals
- Logistics and transportation
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COVID-19 Impact on the Industrial and Manufacturing Industry
The global industrial and manufacturing industry is bearing the direct brunt of economic uncertainties, marked by stressed supply chains, massive delays in incoming and outgoing deliveries, and an increase in raw material costs. The exponential rise of COVID-19 cases will result in serious supply bottlenecks which could lead to a very weak growth scenario for industrial products.
The novel coronavirus impact is driving changes to the global economy so quickly as to put it in a state of complete uncertainty. The pandemic has exposed the vulnerabilities within global supply chains irrespective of industry, even as companies continue testing the resilience of their supply chains against the coronavirus impact on the industrial and manufacturing industry.
The global industrial and manufacturing industry is facing substantial economic uncertainties, marked by stressed supply chains, massive delays in incoming and outgoing deliveries, and increases in raw material costs.
Procurement and Supply chain disruptions?
The distinct sub-segments of the industrial ecosystem will go through critical changes and disruptions in the short term because of the deepening coronavirus impact. SpendEdge presents a quick dashboard that summarizes the impact on the industrial and manufacturing industry so far and what to expect in the global industrial ecosystem for the next 2-3 months.
Industrial and Manufacturing Impact Analysis: Key Insights
The next few weeks are crucial for the demand curve as the coronavirus impact on the industrial and manufacturing industry becomes more evident. The exponential rise of COVID-19 cases will result in serious supply bottlenecks, which could lead to a very weak growth scenario for industrial products.
- The unprecedented spike in COVID-19 infections has led to a global shutdown scenario, creating disruptions in the distribution chain.
- Industrial and manufacturing suppliers around the world are facing an acute shortage of human resources and supplies.
- The slowdown/halt in production in Chinese manufacturing hubs has led to supply bottlenecks as the globe battles the coronavirus impact on the industrial and manufacturing industry.
- With social distancing measures at their peak, major and critical industrial functions are expected to be automated, leading to increased demand for the automation and controls category.
Industrial and Manufacturing Demand-Supply Trends
Falling oil prices are expected to put a stop to big-ticket capex investments in the oil and gas sector, thereby impacting industrial products demand from the segment. There is a clear bottleneck with respect to the supply of industrial equipment and construction materials. Suppliers are facing acute manpower shortage and restrictions on cross-border movement, which has further enhanced supply-based bottlenecks.
Demand for healthcare infrastructure construction is increasing in Western Europe but supply of materials remains a challenge as the coronavirus impact on the industrial and manufacturing industry becomes more evident.
Industrial Equipment Sector
- Manufacturing sectors of key economies are going into a tailspin as capex in several user industries (most noticeably oil and gas) is kept on hold and purchasing within the consumer segment is restricted to sanitization and grocery.
- As a result of the deepening coronavirus impact on the industrial scenario, falling crude prices will reduce investments in the oil and gas sector, causing demand for pipes and industrial equipment to take a hit. However, lower crude prices could also result in lower cost of energy and some of the key inputs used in production.
- Industrial equipment buyers will unleash all possible means to speed up ongoing procurement processes. Steps from digitalization of the source to pay process to automation of compliance functions will be taken by industrial equipment buyers to improve the lead time of the procurement process.
Construction and Building Sector
- There has been healthy demand for healthcare related construction activity as countries try to prepare for worst-case scenarios of the coronavirus impact. All other construction and related activities have come almost to a halt and are not likely to resume a normal growth curve before the last quarter of the year.
- Distribution-related bottlenecks are causing stress in the supply of construction materials as a result of the worsening coronavirus impact on the industrial and manufacturing industry. The issue is quite visible in several European regions that are upgrading or expanding their physical healthcare infrastructure.
- Commercial construction activity has come to a partial or complete shutdown in nearly 100 countries due to the COVID-19 crisis. Consequently, construction services suppliers across major countries may shift their focus to delivery of alternative/similar service lines such as facilities management to improve their revenue streams.
- Construction suppliers are also faced with a stiff challenge of completing existing projects through minimal cost escalations. To complete existing projects, the majority of suppliers are focused on procuring vital raw materials from quarantine-free areas, preferably within close vicinity.
Automation and Controls Sector
- With social distancing norms in place, demand for automated systems and robotics is increasing in a healthy manner.
- There is also an increase in demand for disinfection robots, especially from healthcare institutions such as hospitals, as they seek to reduce the spread of the COVID-19 infection and other diseases. Moreover, usage of disinfection robots has led to a reduction in procurement costs (this cost is inclusive of recruitment-related costs) by 5%-10% for buyers.
- To boost the supply of automated systems, R&D work has increased across supplier production centers. However, increased supply of such systems will be visible only after about 4 months.
- Suppliers are also a witnessing delay in the delivery of essential R&D items due to distribution-related bottlenecks across the globe. This is leading to increased lead time with respect to R&D related work.
Risk Mitigation Activities to Address the Coronavirus Impact on the Industrial and Manufacturing Industry
Uncertainties loom large and the industry will swing between extremes as the coronavirus impact makes its presence felt in the global economy. Executives around the world are examining their supply chains with a microscope to find risk elements. Companies that can proactively identify or anticipate the bottlenecks in their supply chains will be closer to finding solutions for supply chain risk mitigation.
These solutions will have to be extremely customized for the sector, location, and government responses and it is impossible to develop a “one-size-fits-all” solution. Still, there are elements which are common to any resilient risk mitigation plan. We recommend a few of these below for immediate results.
Develop relationship with vendors from countries that have a lower count of COVID-related cases or are still working in a relatively normal environment. However, buyers must also be aware of increased prices in these geographical regions due to the increase in demand for industrial items.
Holistic Risk Mitigation Plan
It is not enough to only look at production centers: industrial buyers must evaluate logistics-related risks associated with delivery of essentials and develop a procurement strategy accordingly.
Local Sourcing Strategy
For buyer organizations, it would be beneficial to create a localized procurement strategy to minimize any transportation-related bottlenecks that are caused due to the coronavirus impact. Such a step is also recommended keeping in perspective the global lockdown scenario.
Buyers need to be up to date on global developments as well as country-specific trends. Lockdown situations can change suddenly in locations that are of importance from a supply chain perspective. Buyers also need to monitor emerging success case studies and learn from them.
Revisiting Contract Terms
Global commodity and energy prices are expected to behave in a very volatile manner for some time. Companies that spend significantly on commodities and energy items as key inputs need to re-engage their suppliers and explore mechanisms to safeguard against increases in pricing. It is advisable to fix the short-term procurement price or at least keep a maximum limit on upward price movements.
Ensuring Shipment Visibility
Supply chain disruptions have created logjams at cargo hubs and warehouse facilities. It is expected that shipments will remain stuck at various places for an unknown duration and massive delays will occur in the entire supply chain. It is imperative that software solutions being used for supply chain management, inventory, warehousing, shipment tracking, and more are updated regularly. Complete visibility and accurate communication throughout the supply chain are important for drawing alternative plans and minimizing the loss of shipments in transit.
Getting Down To Business
Lean on a team of 500+ experienced category and commodity experts who combine industrial expertise with advanced tools in manufacturing and industrial procurement services, to help businesses make better purchasing decisions.