geesaman.d
Mechanical
- Nov 18, 2021
- 360
I'm going to try and keep this neutral. Full disclosure, I work for an equipment manufacturer that sells to chemical industry, mining, and oil/gas. It's not helpful for me to question the hand that "feeds" me. But I feel compelled to learn more about it.
We are struggling to provide our equipment when Engineering/Procurement Companies are representing the end user. For many customers, this is 100% of the time. Our usual order is maybe $200k-700k and a few units. The engineering company brings anywhere from a dozen to a hundred specification documents. These specs require clarifications and exceptions, and after reading them for five+ years now, I see very little in common that we could redesign our products to meet. The readers/responders of the clarifications and exceptions seem to know little about the equipment they're trying to buy, and in their defense, probably do not have the background to understand their own specs. But they are well-trained to enforce contractual deadlines and bring a team of dedicated expediters just for that. Frequently we find the quantity of specs increasing from budgetary bid to final bid and even more on award of PO. Dozens of documents; thousands of pages. Important requirements scattered among all of them. We expend dozens of hours to reach the PO, and it seems that a large chunk of the orders we do receive, come from customers who had so much paperwork that there was no other bidder. It's common for the spec requirements to double or triple the final price, yet, this seems to have no effect. In my professional opinion, the final supplied equipment is barely better than our base design at 1/3 the cost. The projects trudge along, and when they finally attempt to install and commission, the things that don't work get mired in finger-pointing. It's hard to not think about how much our customers would get for their money if it was a different system.
Perhaps this paperwork is the "cost of doing business". Perhaps this paperwork protects the end user. Perhaps my industry is a persistent wrinkle in a system that otherwise runs smoothly. Perhaps my company is outdated and approaching this the wrong way. I'm sure I don't see any of the advantages compared to the years prior when we sold directly to a corporate capital projects engineering team.
Looking at past orders within our company history, 30+ years ago, customer specs were one or a few documents total. They were written by a corporate engineering department, for the specific project, succinctly and to-the-point. You could actually have a conversation with the individual who wrote the document to confirm what is really meant and how they expect the supplier to provide it. We were able to build our business as a supplier to support those expectations, since there was some consistency order-to-order. We still have a few customers who work this way - and after winning the first couple orders, expectations, cost, lead time become well controlled.
There are folks here who have played all roles of both the past world of corporate engineering and the current world of EPCMs. How did we get to this point? When did corporate engineering die? How do end users justify paying the bill for all of this?
Suppliers: do you have any sensible filters to stop pursuing the ugly ones? How does a supplier exist in this environment without being destroyed by it?
We are struggling to provide our equipment when Engineering/Procurement Companies are representing the end user. For many customers, this is 100% of the time. Our usual order is maybe $200k-700k and a few units. The engineering company brings anywhere from a dozen to a hundred specification documents. These specs require clarifications and exceptions, and after reading them for five+ years now, I see very little in common that we could redesign our products to meet. The readers/responders of the clarifications and exceptions seem to know little about the equipment they're trying to buy, and in their defense, probably do not have the background to understand their own specs. But they are well-trained to enforce contractual deadlines and bring a team of dedicated expediters just for that. Frequently we find the quantity of specs increasing from budgetary bid to final bid and even more on award of PO. Dozens of documents; thousands of pages. Important requirements scattered among all of them. We expend dozens of hours to reach the PO, and it seems that a large chunk of the orders we do receive, come from customers who had so much paperwork that there was no other bidder. It's common for the spec requirements to double or triple the final price, yet, this seems to have no effect. In my professional opinion, the final supplied equipment is barely better than our base design at 1/3 the cost. The projects trudge along, and when they finally attempt to install and commission, the things that don't work get mired in finger-pointing. It's hard to not think about how much our customers would get for their money if it was a different system.
Perhaps this paperwork is the "cost of doing business". Perhaps this paperwork protects the end user. Perhaps my industry is a persistent wrinkle in a system that otherwise runs smoothly. Perhaps my company is outdated and approaching this the wrong way. I'm sure I don't see any of the advantages compared to the years prior when we sold directly to a corporate capital projects engineering team.
Looking at past orders within our company history, 30+ years ago, customer specs were one or a few documents total. They were written by a corporate engineering department, for the specific project, succinctly and to-the-point. You could actually have a conversation with the individual who wrote the document to confirm what is really meant and how they expect the supplier to provide it. We were able to build our business as a supplier to support those expectations, since there was some consistency order-to-order. We still have a few customers who work this way - and after winning the first couple orders, expectations, cost, lead time become well controlled.
There are folks here who have played all roles of both the past world of corporate engineering and the current world of EPCMs. How did we get to this point? When did corporate engineering die? How do end users justify paying the bill for all of this?
Suppliers: do you have any sensible filters to stop pursuing the ugly ones? How does a supplier exist in this environment without being destroyed by it?