Critical Issues

Our company recently celebrated its 150-year anniversary, and we have to ask ourselves everyday how to position the company to be ready for the next 150 years.

The demand for chemical pumps in special materials increases at a rate of approximately 4.2 percent per year. Studies* show that this growth will continue at least through 2012. How can we participate in this market as a German-based, medium-sized manufacturer of highly specialized engineered products in a rapidly changing global arena?

Fast growing local competition in countries like India and China is one of the critical issues where we have to find solutions to stay competitive.

Also, exchange rates between the U.S. dollar and the Euro present challenges that could affect our business in countries where we have to compete against American manufacturers.

Availability and price issues within the raw materials market complicate manufacturing schedules for pump companies. As a company that manufactures pumps in very special materials (e.g. nickel, titanium, special high alloyed cast steels, etc.), we face two problems at the moment: the dramatic price increase for some of these materials and the availability. For some materials delivery time used to be three months. Today many of these materials are quoted with nine month deliveries. These conditions require a very specific purchasing strategy with reliable partners.

Current Trends

Our business has been moving from end-user specified business to more project-related business with multiple engineering companies involved. This means complicated specifications with high demand for tests and paperwork (e.g., certificates and data books). The resources that are required in-house to handle these kinds of projects are another challenge. Project managers are now required to coordinate all involved departments, and staff in the documentation department has to be increased.

In a plant environment, pumps are often some of the most critical pieces of equipment, and in the past, an installed standby unit backed up each pump. Lately the trend has been moving toward the elimination of installed standby pumps. This means that the reliability of the equipment becomes more important. Special service agreements with 12-hour response times and the availability of critical spare parts become part of these projects.

Not only is the price of the pump the basis for a purchasing decision, but also Life Cycle Cost (LCC) and Mean Time Between Failure (MTBF) values are becoming important sales criteria.

Single sourcing the pumps for a new plant from one manufacturer is often viewed as advantageous. One supplier means lean order management on the buyer side and less paperwork, saving time and money. The stocking of spare parts is also reduced.

In the past, large chemical corporations had their own service departments and pump specialists. Today, we observe these departments are increasingly being reduced. The outsourcing of service was only the first step; leasing of pumps inclusive of service and spare parts will be the future.

Technologies Offering the Most Competitive Impact

Much discussion about energy saving concepts is going on at the moment. How can we operate pumps with the best possible efficiency for all required duty points? How can we make operation more flexible? Variable speed drives in combination with intelligent control systems offer possible solutions.  

Also, the market for consulting with end-users will grow in the coming years. Whoever is ready and has the know-how to provide these services will have a strong additional sales argument. It is not enough just to have "pump specialists." Pump manufacturers will need staffs that understand the pumping systems and the interaction of involved components within the plant environment.  

Additional Insights

Moving manufacturing to a low-wage country seems to be one solution to staying competitive. However, when you are designing and manufacturing highly engineered products, it is not so easy. In addition to opening a plant, consideration should be given to moving a lot of product know-how and how to keep proprietary know-how under control. This challenge is formidable given what I have seen to date in several joint ventures in other countries.

Local competition in countries such as China and India is growing dramatically. What can pump suppliers do to remain competitive 10 years from now? We made a first step and started assembling pumps and complete units in Shanghai. This could be a good solution to keep the proprietary components "Made in Germany" and have the balance of the parts (motor, base plate, some cast components, etc.) sourced locally. This approach allows you to achieve a lower unit price.

Additionally, we have seen an increase in contracts that require a percentage of the final product to be sourced locally. Our ongoing commitment to the implementation of this concept in the U.S. market will enable our company to offset the disparity between the Euro and the U.S. dollar in the North American market.  

Pumps & Systems, January 2008

*European Industrial Forecasting Ltd. 2007 - The World Pump Market 2007 to 2012