Hydraulic Equipment Sourcing Report

Hydraulic equipment is a machine that depends on the effective conversion of hydraulic energy into mechanical energy. Over the past years, Hydraulic equipment has evolved over the past decades to being able to complete tasks with limited input force. Commonly classified according to function, Hydraulic Cylinders used industrial styles like welded body, tie rod, telescopic, differential, plunger, re-phasing, single as well as double-acting hydraulic cylinders. These cylinders are usually made of stroke lengths and fixed bore sizes (Okegbile, Hassan, Mohammed&Onekutu, 2014). For example, for effective movement at any angle and direction, Double Acting Cylinders requires pressure from hydraulic fluid. Examples of Double acting cylinders include; double rod cylinders, telescopic cylinders, differential cylinders, rapid traverse cylinders and tandem cylinders.

Companies must have strategic fit for them to be successful; therefore they must align their supply chain strategy with competitive strategy. Competitive strategies are developed with core objective of meeting the needs and priorities of certain customer segments. Competitive strategy also includes competitive edge in comparison to competitors’ products or service. Competitive strategy can only be successful if it fully supported by supply chain capabilities. Following demand being uncertain, companies need to understand their customer segment need and priorities.  Therefore, the companies need to consider factors that influences demand for example, price, size of the product, convenience of purchase, urgency of the product and lead-time. Usually customers in one segment tend to have similar demand pattern, however, a company may encounter uncertain demand, which will prompt the company to develop supply chain strategy so as to satisfy these uncertain demand. The uncertain demand for target segment is commonly referred as “Implied Demand Uncertainty” while “Demand Uncertainty” reflecting the overall product demand uncertainty (Wagner, Grosse-Ruyken&Erhun, 2012).

Companiestherefore have to develop supply chain competencies of efficiency and responsiveness to manage the implied demand uncertainty. This implies that company must be strategic fit in order to develop supply chain strategies, which address the customer demand and uncertainty. For example develop a supply chain, which can supply products with; shortest lead-time, big quantities, large portfolios and providing better services. These competences constitute a responsive supply chain, which usually comes at a price. For example, for a company to effectively respond to a large product portfolio, a storage and production capacity will be required which will consequently increase the overall cost. The increased cost will lead to inverse effect on the supply chain efficiency. Therefore, company strategic decision on increasing responsiveness will result in lower efficiency due to additional cost thus a trade-off between efficiency and responsiveness. Companies, which are more responsive, will tend to have less efficient supply chain while those with more efficient supply chain operating at lower level of responsiveness (Wagner, Grosse-Ruyken&Erhun, 2012). Companies are required to enhance their process and technologies so as to be strategically fit both in term of responsiveness and efficiency.

To formalize and improve the procurement process, I would recommend that the company develops and implements standard sourcing procedures, nominate and train a sourcing and commodity team, and leverage commercial sourcing management software.

Hydraulic Cylinder Milestone

The Hydraulic Cylinders global market has experienced many changes over the years, which is mainly attributed to the drop in industries in which hydraulic cylinders are afundamental part. The hydraulic cylinder is divided into that of single acting hydraulic cylinders and the other one for double acting hydraulic cylinders. The cylinders to be procured are known as single acting hydraulic cylinders as they apply hydraulic force in one direction. Single acting hydraulic cylinders are expendedin different industries including construction, marine, mining, oil and gas, aerospace and defense industries. Generally, hydraulic cylinders’ demand is determined by the demand.

Recently, the demand for hydraulic cylinders has been increasing steadily due to a rise in the number of emerging economies. Although the western markets, America and Europe, remain to be the largest markets for hydraulic cylinders, other markets, such as Asia-Pacific market, are expected to grow exponentially over the next decade. It is projected that the worldwide market for hydraulic cylinders will experience a 4.4% compound annual growth rate between 2013 and 2018.In 2012, North America was the leading market for hydraulic cylinders accounting for approximately $2.9 billion and the market is expected to grow to $3.8 billion by 2018 while the European market is expected to grow from $2.9 billion to $3.5 billion within the same period (Deutsche Messe, n.d.).

The growth of emerging economies and the recovering global economy has increased demand for hydraulic cylinders significantly over the past decade. The Asia-Pacific is increasingly becoming the hub for western buyers to outsource their hydraulic cylinders (Deutsche Messe, n.d.). This coupled with increasing raw material prices has led to the increase in the prices of the hydraulic cylinders and the prices are expected to remain high over the coming years.

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