Current Automation Purchasing Strategies Fall Short
End users today have a paradoxical relationship with their suppliers. Primary
business drivers in today’s environment include maximizing asset
utilization, enhancing plant performance, and reducing capital, maintenance,
and operational expenditures, but many manufacturers employ
purchasing strategies and supplier relationship management strategies developed
during the heyday of the 1980s. Rather than
focusing on achievement of today’s objectives, the
current environment is characterized by an approach
that relies primarily on initial cost, driving discounts
off list price, and failure to employ a lifecycle costing
perspective.
Current Automation Purchasing Strategies Fall Short
1. THOUGHT LEADERS FOR MANUFACTURING & SUPPLY CHAIN
ARC INSIGHTS
By Larry O’Brien
Many end users today employ
purchasing strategies that fail to
enhance plant performance, optimize
asset utilization, or achieve real
business value.
INSIGHT# 2003-18M
APRIL 16, 2003
Current Automation Purchasing Strategies
Fall Short
Keywords
Automation Systems, Purchasing Strategies, Supplier Relationships,
Collaborative Partnerships, Real-time Performance Management
Summary
End users today have a paradoxical relationship with their suppliers. Pri-
mary business drivers in today’s environment include maximizing asset
utilization, enhancing plant performance, and reducing capital, mainte-
nance, and operational expenditures, but many manufacturers employ
purchasing strategies and supplier relationship management strategies de-
veloped during the heyday of the 1980s. Rather than
focusing on achievement of today’s objectives, the
current environment is characterized by an approach
that relies primarily on initial cost, driving discounts
off list price, and failure to employ a lifecycle costing
perspective.
Analysis
Based on the results of a recent survey conducted by ARC, many end users
today employ purchasing strategies that were conceived in the 1980s and
fall short of achieving real business value in areas such as enhanced plant
performance, and optimized asset utilization. In many cases, these strate-
gies impede business goals and fall short of providing real, substantial
business value in today’s business climate.
Current Supplier Agreements Rely on Old Business Models
Most of the end users we spoke with feel satisfied with their supplier rela-
tionships, but almost all feel that they are not getting the most they can out
of them. Most have supplier relationships that do not maximize potential
or provide real business value. Most of the users surveyed stated that they
had formal agreements with one or two suppliers that they use exclusively.
Many of these agreements typically last for several years and provide users
with discounts on the purchase of hardware, software, and services. Al-