Part five – A new reality and the way forward
Ours has been a long journey, starting with a melting pot of equipment manufacturers and cement producers who had close ties, progressing through a period of globalization. We watched the Chinese enter the market and examined the response. Today we close our story by taking a final look at the realities of the current market and describing a way forward.
As the hangover from the go-go boom period of the last several years settles in for a nice long stay, where are we? What is the status of he relationships between producers and suppliers? How do cement producers choose partners for strategic projects from among the surviving suppliers? How do the equipment suppliers define the value they provide to their customers?
Here are the facts:
First, the majority of the equipment from any supplier is manufactured in China, India or other low cost country. This new reality makes differentiation based on expected quality of delivered equipment a matter of fantasy, supported only by the perception that the higher level of expertise in the traditional OEM’s results in improved specifications and greater quality control, which leads to…
Second, the ties between the engineers and factory floors are, if not lost completely, tenuous at best. The sole exception to this might be, ironically, the Chinese suppliers who maintain their “own” manufacturing capability. In the high stakes world of cost containment and control, it is far too commercially dangerous to allow engineers to interact directly with the “vendor” (even the term is somewhat derogatory). And besides…
Third, as the western OEM’s have increased capability overseas, they have shed experience and neglected succession in their centers of experience. This is especially true in this time of contraction where cuts have been so deep in North America and Europe that it is an exercise in imagination to believe that core competencies have not been lost. While R&D may still (for now) remain the domain of western engineers, the detailed design and project engineering is widely outsourced. The people performing the bulk of the work have no relationships to the customer in general or the plant personnel in particular. Many of them will never see the plant they helped design. It is difficult to make a distinction in real terms between this situation and working with a Chinese supplier.
Cement producers tomorrow will be working with an equipment supplier who, for all intents and purposes, doesn’t know them. Their engineers have not, except in rare cases, shared a country, let alone an office building. They will be purchasing equipment that is manufactured for the lowest possible cost, by people who have never seen the drawings before and will never speak to the engineer who designed the part. These manufacturers do not know the engineer’s intent, nor do they have any real concept of the duty the part will be asked to perform. Cement producers will sit in project meetings across from smiling faces who, while perhaps knowledgeable and experienced, actually have very little control over the work being performed on the project.
Given this new reality, large cement producers will increasingly take their decision on the basis of cost. They can now feel even more confident in their believe that they have more expertise than the suppliers (they have believed this for a long time anyway). Small and independent producers have a more difficult decision. They do not have all the required expertise and need to rely on a network of suppliers and designers that they can trust to serve their needs. While they may be enticed by the lure of low prices, they may not be comfortable with the responsibility that comes along with the decision to work with a Chinese supplier.
There is a place for a new project partner in this new reality. An independent party with technical breadth and depth in cement process and equipment design, knowledge of the local market and competitive environment, the ability to navigate the regulatory maze, a focus on quality as a process, not an afterthought, and most importantly a desire to create win-win relationships for everyone involved in a project. BridgeGap Engineering is an organization of cement professionals from across the matrix of producers, suppliers and manufacturers, with relationships across companies and across continents. We’re here to bridge the communication gaps, translate expectations into reality, and treat your project as a partnership instead of a pricetag. We’re here to provide cement engineering solutions for the Americas from arround the globe.