Eskom Procurement Book 2015

PROCUREMENT AS A SUPPORT AND STRATEGIC FUNCTION WITHIN COMPANIES

The operations and technical representatives are co-located with the marketing groups. The procurement director converses weekly with the operations and technical people, who report to the same vice-president. These discussions provide early insight into new products that might affect the development of strategic sourcing plans.

4.7.1.3 Case Study: Putting the Pieces Together at Air Products

Air Products, a successful industrial gas producer headquartered in the eastern US, operates air separation facilities worldwide. Over the past 15 years, industrial buyers have increasingly viewed industrial gases as commodity items, which, along with intense global competition, have created extensive downward price pressures. It is only recently that industrial gas prices, like most other commodities, have firmed up worldwide. The need to manage costs, however, is a continuous requirement. Air Products has operated historically as an engineer-to-order company, which resulted in a great deal of engineering and design work customised for each new air separation project. New production facilities designed and constructed by the company have largely been engineered without considering previous designs or leveraging commonality across design and procurement centres in the eastern US and the UK. Historically, even if the US and Europe required a similar or same item (which was often the case) or designed the same facility in terms of its physical process and technology, each would have components and equipment developed separately by engineers and procurement staff that did not co-ordinate their efforts. As a result, design specifications differed unnecessarily across regions. Duplicate engineering and sourcing drives up costs with no corresponding benefits. From a technical perspective air separation is technically a comparable process around the world. Executive management concluded that the company must pursue standard design and off-the-shelf product-based thinking on a worldwide basis. The company’s objective was now to enter the global marketplace as a single integrated company. A major action taken to support this was the internal development of an integrated global sourcing process, which the company refers to as its Global Engineering and Procurement process (GEP). Global engineering and procurement focuses on specific global applications as identified by an executive steering committee. Each new production facility (built as a stand-alone plant or built onsite to feed a customer’s plant with industrial gases) now involves an extensive analysis between US and UK design centres to identify areas of commonality, standardisation, and synergy in procurement and design. Cross-functional teams, with representatives from the US and Europe working jointly, develop common specifications and contracts that satisfy each centre’s needs while supporting future replacement and maintenance requirements [11].

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