Manufacturing sector found to be paying up to six times too much for IT purchases
Now in its fourth year, the study shows that the practice of charging excessive margins by suppliers is still commonplace across the manufacturing sector.
The study suggests that awareness of the high mark-ups charged by some suppliers may have begun to filter through. The average margin paid across the manufacturing sector was actually found to have halved from 24 percent in 2014 to 12 percent in 2015.
This also compares favourably with the average margin paid across the board by buyers, which currently sits at 17.6 percent.
Al Nagar, Head of Benchmarking at KnowledgeBus, said: “Organisations are getting better at scrutinising purchases and negotiating better deals with suppliers. But the analysis shows the many purchases are far in excess of industry best practice.
“The most extreme example of excessive margins are regularly found on those lower volume, spontaneous, ‘as and when’ purchases. These are typically unplanned purchases consisting of items such as memory sticks, power adapters and cables.
“All procurement officers need to be aware of this trend. Although this type of purchase may be perceived to be of a lesser value, compared to major pieces of IT infrastructure, they can make up a good 25 percent of the IT budget. By the end of the year, this can easily add up to a six figure difference to the overall IT budget.
‘‘Today’s procurement managers don’t have endless amounts of time to talk to multiple suppliers to find the best price. What they need is for there to be greater transparency between suppliers and customers. With the right tools organisations can gain that transparency and bring those margins down to 3 percent.’’
For organisations looking to achieve best practice levels on IT product purchasing, Nagar offers three key tips:
Organisations can empower their negotiators, and speed up the IT procurement process, by deploying benchmarking tools. This provides IT buyers with access to up-to-date and validated trade level information that will identify the exact margins suppliers are charging.
2. Agree ‘cost plus’ contracts
Companies can agree ‘cost plus’ contracts with their suppliers to ensure no IT product purchased exceeds an agreed maximum margin level. Procurement teams can use their benchmarking tools to police these contracts.
3. Monitor price trends
By analysing historic or seasonal trade price trends, IT buyers can identify the best times to buy. When trade prices fall to their lowest, suppliers often try to maximise margins achieved, but by monitoring the market, companies can counter this practice.
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Ultium Cells LLC/Li-Cycle: Sustainable Battery Manufacturing
Ultium Cells LLC - a joint venture between General Motors and LG Energy Solutions - has announced its latest collaboration with Li-Cycle. Joining forces the two have set ambitions to expand recycling in North America, recycling up to 100% of the scrap materials in battery cell manufacturing
What is Ultium Cells LLC?
Announcing their partnership in December 2019, General Motors (GM) and LG Energy Solutions established Ultium Cells LLC with a mission to “ensure excellence of Battery Cell Manufacturing through implementation of best practices from each company to contribute [to the] expansion of a Zero Emission propulsion on a global scale.”
Who is Li-Cycle?
Founded in 2016, Li-Cycle leverages innovative solutions to address emerging and urgent challenges around the world.
As the use of Lithium-ion rechargeable batteries in automotive, industrial energy storage, and consumer electronic applications rises, Li-Cycle believes that “the world needs improved technology and supply chain innovations to better recycle these batteries, while also meeting the rapidly growing demand for critical and scarce battery-grade materials.”
Why are Ultium Cells LLC and Li-Cycle join forces?
By joining forces to expand the recycling of scrap materials in battery cell manufacturing in North America, the new recycling process will allow Ultium Cells LLC to recycle cobalt, nickel, lithium, graphite, copper, manganese and aluminum.
“95% of these materials can be used in the production of new batteries or for adjacent industries,” says GM, who explains that the new hydrometallurgical process emits 30% less greenhouse gases (GHGs) than traditional processes, minimising the environmental impact. Use of this process will begin later in the year (2021).
"Our combined efforts with Ultium Cells will be instrumental in redirecting battery manufacturing scrap from landfills and returning a substantial amount of valuable battery-grade materials back into the battery supply chain. This partnership is a critical step forward in advancing our proven lithium-ion resource recovery technology as a more sustainable alternative to mining, " said Ajay Kochhar, President, CEO and co-founder of Li-Cycle.
"GM's zero-waste initiative aims to divert more than 90% of its manufacturing waste from landfills and incineration globally by 2025. Now, we're going to work closely with Ultium Cells and Li-Cycle to help the industry get even better use out of the materials,” added Ken Morris, Vice President of Electric and Autonomous Vehicles, GM.
Since 2013, GM has recycled or reused 100% of the battery packs it has received from customers, with most current GM EVs repaired with refurbished packs.
"We strive to make more with less waste and energy expended. This is a crucial step in improving the sustainability of our components and manufacturing processes,” concluded Thomas Gallagher, Chief Operating Officer, Ultium Cells LLC.