The transformation of South African industry, due to more open global markets, is far from over. Manufacturers are still adjusting to cope with low or no duty imports, and to export successfully to raise volumes and to lower unit costs.
This then puts pressure on their suppliers, including the instrumentation and control companies. Buyers are often placed in a position of having little choice but to buy mainly on price. Our I&C market is changing faster than ever before, even without e-commerce, due to this continuing restructuring in our industrial marketplace. Some recent examples illustrate this:
* This year one well-known instrument supplier reported that he is losing sales of less complex instrumentation to global catalogue sellers, whose selling prices are barely above his cost price.
* With the local supplier's costs of importation, stock, sales and back-up service, he cannot match the price of high volume internationals.
* Another dealer is losing sales to a fly-by-night. The dealer, experienced in technical matters and application, has spent days working on a solution and specification with the customer, at no charge, as is typical in SA. You guessed it, the buyer accepts the lower price, saving virtually nothing, and orders from the fly-by-night.
* A plant, which for years has recognised the value given by the local supplier, has begun to import instrumentation items directly from overseas probably due to changes in personnel and pressure on costs. They now get a marginally better price. But is this really a cost saving in the long term?
Buying on price alone as above pushes the market in the direction as follows:
* Some of the above suppliers will downsize or go out of business. If the purchaser does not really need local service and back-up, then that is a business reality. But if he does find he needs local support, and it is no longer available, there will be high cost in rebuilding that support.
* Technical cooperation and partnership between buyer and seller will become disrupted and more costly; suppliers will not be able to afford to give technical advice and back-up either free or included in product price.
* Local investment by suppliers in service expertise and in carrying stock could decline.
The real situation will probably be less extreme and will settle out with market forces and common sense. Our market is relatively sophisticated and is developing further through concepts like total cost of ownership (TCO), bringing a broader perspective to the situation.
In the meantime the system is highly dynamic and care is needed not to 'overshoot' in adjusting to meet new conditions.
Electrex 2002
Electrex 2002 planning is well under way. The prospects are excellent with signs of a wide range of exhibitors, plenty of technology, plus fresh concepts which visitors will find valuable. The SAIMC is working with the organisers to make this the best show yet, and to this end we are always pleased to receive suggestions from our patron members, our individual members and from non-members.
Richard Teagle (President)
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