Material procurement represents a large portion of the total cost to develop and operate an industrial facility. For over 160 years, Honiron Manufacturing has helped owners and operators maximize the value of their purchases by providing strategic material procurement services to processing facilities around the globe. Over that time period, we’ve developed a deep understanding of what does and doesn’t work when it comes to procurement. Here are three best practice guidelines you can follow to ensure project success.
1. Collaborate with Suppliers – Engaging early and often with suppliers is essential to cutting costs and maximizing equipment efficiency. Industrial facilities are complex networks of interconnected components and systems whose performance is often impacted by one another. Additionally, many systems consist of pieces of equipment that must be sourced individually from separate suppliers. By breaking down silos between OEMs, owners, and EPCs, and promoting collaboration, opportunities for optimization can be identified and all involved parties can work to minimize each other’s costs.
2. Stay Flexible – Market conditions are constantly changing. As they do, different material procurement strategies are needed to remain profitable. For instance, when market activity is high, having the ability to secure materials and equipment rapidly is essential. During these times, owners and operators may need to engage with additional suppliers to meet demand. In downturns, on the other hand, it may be beneficial to alter/increase material order volumes in order to obtain discounts. In both cases, developing a strategy ahead of time and adopting a “hope for the best, but plan for the worst” mindset will ensure profitability through market cycles.
3. Look at Capital Costs AND Return on Investment – In recent years, many owners and operators have increasingly focused on capital costs when making purchasing decisions. However, focusing solely on up-front costs when evaluating equipment options may be disadvantageous, as it does not always take into account return on investment (ROI). When looking at equipment options, operators should weigh capital expenses against the benefits generated by the solution over the course of its lifetime. These can come in a variety of forms, such as reduced O&M costs, decreased emissions, increased reliability or enhanced process control.
Stay on the lookout for the third blog in this series — Honiron Manufacturing: Project Success Series – Fabrication.