Sourcing & Supply Chain Management 4th. Edition ( Complete )

Sourcing & Supply Chain Management 4th. Edition (...

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INTEGRATING GLOBAL ENGINEERING AND PROCUREMENT AT AIR PRODUCTS Air Products, an industrial chemical producer headquartered in the U.S., designs, builds, and operates air separation facilities worldwide. Unfortunately, industrial buyers increasingly view the company’s primary products as commodity items, which, along with intense global competition, have created extensive downward price pressures. Product prices in real terms are equivalent to levels not seen since the early1980s. This has created the primary challenge that Air Products faces—margins are declining yet the company has made strong performance commitments to investors and financial analysts. Executive management has concluded that the company must lower facility-related costs by 30% to meet financial and operating targets. Air Products has historically operated as an engineer-to-order company, which implies a great deal of design work customized to each new project. New facilities have largely been engineered without considering previous designs or leveraging commonality across the company’s two major design and procurement centers. The company’s objective has now shifted to entering the global marketplace as a single integrated company. Pursuing this objective resulted in the development of an integrated engineering and procurement process involving U.S. and European centers. Even if the U.S. and Europe required a similar or same item (which was often the case) or designed the same facility in terms of process technology, each would have separate material specifications and contracts developed by engineers and procurement specialists who did not coordinate their efforts. During the latter part of 1999 Air Products introduced a global process that proactively integrates and coordinates common items, processes, designs, technologies, and suppliers across two worldwide buying and engineering centers (North America and Europe). This case reports on the efforts of Air Products to pursue a globally integrated approach to engineering and procurement. 1
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Development of the Air Products Global Engineering and Procurement Process The primary driver behind Air Products global engineering and procurement process is the need for cost reduction. This process evolved as senior engineering managers expressed a desire to gain advantages from “globalization” but were not sure what this meant or required. The vice president of engineering believed that the potential benefit of standardizing component designs and then using the procurement process to realize performance gains through leveraged sourcing with global suppliers could be significant. Recognizing the important linkage between engineering and procurement resulted in the development of the Air Products global engineering and procurement process. Responding to the call to “globalize” engineering and procurement, a director of global
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This note was uploaded on 04/21/2011 for the course MGT 01 taught by Professor Gad during the Spring '11 term at Tanta University.

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Sourcing & Supply Chain Management 4th. Edition (...

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