INDUSTRIAL EQUIPMENT and our (not so) grand obsession with PRICE

We are obsessed with price.  Whether it is for products or services, price seems to have become the single most important determinant in most purchases.  Retailers offer to match each others’ price in a rush to the bottom, with one preaching that a lower price results in a better life; but, is it true?

In the business-to-business marketplace too, price has assumed an all-important position.  Given the realities of global competition, an emphasis on price at all levels of the business cycle is not only understandable, it is essential.  However, have we followed the historic human tendency and ‘carried it too far’?  How important is price; really?

Let’s admit right up front that price is important.  It is a vital element of consideration when we compare the value of competing proposals.  However, it certainly does not stand alone.  In fact, when price becomes detached from the overall value proposition, when it becomes the overwhelmingly predominant or even singular focus, it is a dangerously incomplete and unreliable measure.  Price is an honest measurement only when balanced against other factors.  A ‘price only’ or ‘price-above-all’ approach to purchasing excuses us from learning the essentials, from actually thinking about what we are doing.  However, we use the excuse at substantial risk.

What are these other factors that we must take into account during the purchasing decision?  At a minimum they include providing answers to three basic questions:

  1. What Are we Buying?  Do we thoroughly understand what we are purchasing and how it fits into our business?  In the final analysis, we are buying goods or services that will allow us to provide recognizable value to our customer (and to the ultimate consumer if they are not the same entity) and do it in a manner that allows us to receive value from the transaction too.
  2. Who Are we Buying For?  This question has a number of sub-questions but two are particularly important: 1) do I understand how they will use what I am purchasing, and 2) do I understand what will be their challenges in its use?  For example, perhaps our purchase is custom automated machinery to be used by the production division of our organization, a pressure cooker of dates, budgets and stringent quality controls.  Will minimizing the initial capital expenditure adversely affect subsequent expenditures on maintenance, labour requirements, our ability to sustain production requirements, quality of our products or services, our ability to respond quickly to changing market requirements (in other words, lifetime costs and capabilities)?  In the end, we are all dependent on our corporate ability to do our part in providing sustained satisfaction to the ultimate consumer.
  3. Who Are we Buying From?  Continuing with our production machinery example, we will need to ask ourselves: Do they truly understand our operating environment and where their product or service fits into our ability to provide value to our customer?  Will they not only support their product but support our production personnel; or, are they responding to our price-only purchasing approach by being a price-only supplier and providing minimal support?  Are they an ethical company; do they have a transparent approach to doing business; do their employees, suppliers and customers speak highly of them?

We all know that there are substantial benefits to price competition.  Price competition drives efficiency.  Price competition drives innovation.  But does price justify our obsession with it?  A less than thoughtful response will cost us in the long run.

How Automation is Aiding North American Manufacturing

The manufacturing renaissance is a hot topic these days within our industry, and automation is playing a hand in the process. The use of automated systems and robotics are allowing companies to bring production back to North America for a lower cost than the already inexpensive overseas labor. New advancements in three-dimensional vision, offline programming, and force-sensing technology are making newer robotic animation systems capable of performing more complex tasks according to Design World.

PIC013It’s not just a matter of cost when it comes to automation in the manufacturing industry. Robotics could be the answer to issues manufacturers were previously having with quality of the products they were putting out. Senior applications engineer at Bastian Solutions, Steve Kruse spoke to Design World about new automation quality. “Some of the quality issues have left a sour taste,” Kruse said. “Manufacturers are looking towards automation to bring products back, get the quality up, and still maintain a competitive price in the global market.” But what about the jobs of the North American workers that used to perform those tasks?  This is where the debate heats up.

At first glance it is easy to assume that automation could kill off many manufacturing jobs, but that simply is not the case. The business that automation would be taking is from other countries that are offering cheap labor, so automation may actually be able to bring more manufacturing back to North America that had migrated overseas. While this may not create large numbers of traditional manufacturing jobs, the machines will need skilled personnel for repair, upkeep, and operational overseers, as well as company administrative employees, and many other opportunities for good positions.PIC040