I was remiss in the beginning of the year in putting down our observations of the latest in material master trends. It is not that we have been particularly distracted – simply that the manufacturing and natural resources markets have been dynamic to say the least.
How to seriously rebalance the costs of imports 101…
The Swiss single handedly shifted total landed costs in Europe thanks to the delinking of the Franc which instantly and dramatically rebalanced US / Euro Zone ratios.
The immediate impact on lean supply chains was to trigger exchange rate clauses in price agreements and long term contracts on durable goods seemed to go into a state of reevaluation, however out customers seemed relatively unaffected and major indices have indicated only minor adjustments.
Downward pressure on oil prices continues to be a mixed blessing.
For industries where oil contracts are a material cost, and certainly for those consumer driven industries where the lower weekly costs at the pump drive increases in disposable income, prices hovering between $60 and $50 are good things.
Oil Field Services companies have either used the market compression or conveniently timed merger and acquisition activity in the last three months.
Certainly a more competitive landscape for cost effective services due to the lower per barrel prices was expected. What surprised many was how effective this industry had become in extracting marginal profits.
We have seen our customers in exploration / production as well as those in oil field services adjust their demand forecasts for this coming year, and many are viewing this period as a chance to optimize operations.
Others seemingly have been anticipating an “acquisitive buffet”.
Public acquisitions – Baker Hughes – Halliburton, Dresser Rand – Siemens … point to economic synergies highlighted by squeezing profits from lower margins.
While additional acquisitions stand poised for execution.
We here at Verdantis know first hand the pressure placed on the C-Suite for driving costs out of acquisitions and look forward to additional success stories for asset consolidation, ERP/EAM system harmonization, and operational rationalization activities as a result of healthy M & A activities in 2015.
Further Reading:
Blog: Leveraging Item masters in Procurement
White Paper – Material Data Quality Project Handbook – Avoiding Pitfalls
Case Study – Material Master Data Management for a leading Oil and Gas Company
Arthur Raguette
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