Procurement Challenges in Machinery & Automation: Effective Strategies for Success

Mar 24, 2023 | Procurement in manufacturing industries

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Mar 24, 20234 min

Procurement in the industrial machinery and automation sector come with a range of challenges, from supply chain complexity to price volatility. In order to tackle these challenges, companies need to counter price volatility, ensure quality control, and overcome talent shortages. Dive into the dynamic world of procurement in this evolving industry.

Procurement is a critical function in the industrial machinery and automation industry, where companies rely on a complex network of suppliers and partners to source high-quality materials, components, and equipment. However, this industry presents a range of unique procurement challenges, including managing supply chain disruptions, navigating complex regulatory requirements, and mitigating price volatility. To battle these challenges, companies must develop resilient procurement strategies that can help them address these challenges and maintain a competitive edge in the global market.

What are the procurement challenges & solutions in the Industrial Machinery and Automation Industry?

  • Supply Chain Complexity: The industrial machinery and automation industry relies on complex global supply chains with a large number of suppliers, making it challenging to manage supplier relationships and ensure timely delivery of materials.
    ⁠⁠Solution: Companies can address supply chain complexity challenges by implementing supplier relationship management programs, investing in technology to improve supply chain visibility, and conducting regular supplier audits.
    ⁠Example: In 2020, German engineering company Siemens announced that it had implemented a new supplier management system that enabled it to improve supplier performance and reduce supply chain risk. This system enabled Siemens to reduce supplier lead times by up to 50%, demonstrating the value of supplier relationship management in the industrial machinery and automation industry.

    ⁠FactWise offers a range of prescriptive and predictive analytics to help organizations be more strategic and fact-driven in their procurement processes, minimize risk, and maintain high quality standards. To increase supply chain visibility and traceability, FactWise offers a wide range of analytics into RfX, supplier performance, inventory status, and ESG metrics, and empowers teams to strengthen supplier relationships and supplier base via improved supplier management and increased supplier diversity.
  • Technological Innovation: The industrial machinery and automation industry is constantly evolving, with new technologies and products being introduced at a rapid pace. Procurement professionals must stay informed about these changes and ensure that their procurement strategies are aligned with the company's technological roadmap.
    ⁠Solution: Companies can address technological innovation challenges by investing in research and development, maintaining close relationships with suppliers to stay informed about new technologies, and partnering with innovative startups.
    ⁠⁠Example: In 2021, US-based industrial machinery manufacturer Caterpillar announced a new partnership with Israeli startup IntSite, which specializes in autonomous crane technology. This partnership enabled Caterpillar to improve the safety and efficiency of its industrial machinery products, demonstrating the value of partnering with innovative startups in the industrial machinery and automation industry.
  • Environmental Sustainability: The industrial machinery and automation industry is facing increasing pressure to adopt more environmentally sustainable practices and reduce its carbon footprint.
    ⁠Solution: Companies can address environmental sustainability challenges by implementing sustainable procurement programs, investing in renewable energy and other sustainable technologies, and working closely with suppliers to ensure sustainable sourcing and production practices.
    ⁠⁠Example: In 2020, Japanese industrial machinery manufacturer Komatsu announced that it had achieved its target of reducing greenhouse gas emissions from its operations by 30%, and had set a new target of achieving net-zero emissions by 2050. This achievement demonstrated Komatsu's commitment to environmental sustainability in its procurement processes.

    ⁠FactWise empowers procurement organizations to prioritize preferred vendors and discover new, pre-vetted, well-rated vendors that meet their quality and ESG requirements, and to define their item specifications and logistics/delivery requirements in detail on POs. At FactWise, we are committed to transforming the procurement journey and generating win-win solutions for buyers and suppliers globally.
  • Cybersecurity: The industrial machinery and automation industry is vulnerable to cybersecurity threats, including hacking, data breaches, and theft of intellectual property.
    ⁠Solution: Companies can address cybersecurity challenges by implementing robust cybersecurity systems, working closely with suppliers to ensure their systems are secure, and investing in technology to monitor and prevent cyber threats.
    ⁠Example: In 2020, US-based industrial machinery manufacturer Emerson announced a new cybersecurity program that focused on improving its cybersecurity defenses and working closely with suppliers to ensure their systems were secure. This program enabled Emerson to improve its cybersecurity posture and reduce the risk of cyber attacks.
  • Price Volatility: The industrial machinery and automation industry is subject to price volatility due to fluctuations in raw material prices and supply chain disruptions. This can make it difficult for procurement professionals to accurately forecast costs and manage supplier relationships.
    ⁠Solution: Companies can address price volatility challenges by implementing cost management strategies, such as hedging, purchasing contracts, and supplier collaboration. By working closely with suppliers and leveraging their expertise, companies can mitigate the impact of price volatility on their procurement processes.
    ⁠Example: In 2020, Swedish engineering company Sandvik announced that it had implemented a new cost management strategy that enabled it to reduce its material costs by 17%. This strategy involved collaborating closely with suppliers to optimize the sourcing of raw materials and implement purchasing contracts that reduced price volatility.
  • Quality Control: The industrial machinery and automation industry requires high-quality materials and components to ensure the safety and reliability of its products. Procurement professionals must therefore implement effective quality control processes to ensure that suppliers meet these standards.
    ⁠Solution: Companies can address quality control challenges by implementing supplier quality management programs, conducting regular supplier audits, and investing in technology to monitor product quality. By adopting these resilient procurement strategies, companies can ensure that their products meet the highest standards of quality.
    ⁠Example: In 2021, German engineering company Bosch announced that it had implemented a new supplier quality management program that enabled it to reduce defects in its products by 25%. This program involved working closely with suppliers to ensure that they met Bosch’s strict quality standards and conducting regular audits to ensure compliance.
  • Talent Shortages: The industrial machinery and automation industry is facing a shortage of skilled workers, including procurement professionals who have experience in the industry.
    ⁠Solution: Companies can address talent shortage challenges by investing in training and development programs for their procurement professionals, partnering with educational institutions to attract new talent, and leveraging technology to automate procurement processes. These resilient procurement strategies can help companies attract and retain top talent in a competitive market.
    ⁠Example: In 2020, US-based industrial machinery manufacturer Caterpillar announced that it had implemented a new training and development program for its procurement professionals. This program enabled Caterpillar to attract and retain top talent and ensure that its procurement processes were aligned with industry best practices.

The industrial machinery and automation industry is undergoing rapid transformation, driven by new technologies, changing customer demands, and global supply chain disruptions. Procurement professionals in this industry face a range of unique challenges, from managing supply chain risks to navigating complex regulatory requirements. However, by leveraging technology like FactWise Source-to-Pay, building strong supplier relationships, and investing in talent development, companies can overcome these challenges and position themselves for success in the global market. As the industry continues to evolve, effective resilient procurement strategies will be critical for driving innovation, reducing costs, and ensuring that companies can compete in a rapidly changing landscape.

About the Author

Stawan is the founder and CEO of FactWise. Before founding FactWise, Stawan was the NA TMT-Procurement Leader at McKinsey. Passionate about procurement, Stawan has 15 years’ experience in enabling clients of all sizes to achieve business impact via procurement.


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