Is IT Ready for Reshoring?

Calling all manufacturers—don’t head home without a clear understanding of the operational impact on your network


Paying above fair market value: The average manufacturer pays 10 to 40 percent above fair market pricing for 65 percent of their IT purchases in a typical year. In an industry that made a science out of cost cutting, this is staggering. At the root of this problem is the lack of transparency in IT vendor pricing and terms. What a vendor charges one company can easily be 20, 30 or 50 percent higher than what they charge the next company for the same products and services. Because major IT purchases occur only once every one to three years, in-house IT and sourcing executives lack the data points to determine if pricing is fair and competitive. Benchmarking pricing and discounts against market data is one of the simplest ways to protect against overspending.

BYOD cost risks: The proliferation of mobile devices within the manufacturing sector continues to grow, extending from traveling executives to field and production floor personnel. And while BYOD delivers many benefits, it is not without cost. Some manufacturers lose valuable wireless carrier discounts as corporate device users move to individual-owned devices and plans. These companies should incent users to sign up under corporate rate plans so the business can continue to receive discounts and credits. Manufacturers must also understand the impact that early termination fees have on the migration of corporate users to individual plans.

Decentralization of IT purchasing: IT purchasing in many manufacturing organizations is fragmented, losing powerful leverage with vendors. For example, one division of a large manufacturing operation may purchase a new workforce management system, while another division unknowingly purchases a TMS from the same vendor. In this case, the business didn’t leverage its purchasing volume and significant pricing discounts were sacrificed. Because the purchases weren’t vetted by IT, one department soon found that the company’s current technology infrastructure was incompatible with the new solution. Failing to maintain internal alignment opens the doors to unanticipated costs, sacrificed leverage at the negotiation table and problematic implementations.

Scope-down of licensing rights: IT vendor sales channels are well trained at eroding customers’ licensing rights during new purchase and renewal negotiations. These “subtle” licensing constraints may seem innocuous at first (if noticeable at all), but they’re designed with one goal in mind: to create increased customer spending over the term of the contract. Manufacturers must gain absolute clarity on not only basic licensing definitions and policies, but also questions such as: Can the license be deployed on different platforms? What constitutes third-party access/indirect access?

A platform for business advantage

Manufacturing IT has a unique opportunity to contribute to reshoring’s efficacy on a financial, production, innovation and collaboration front. Manufacturers must understand and mitigate IT overspending risks to achieve maximum business value from every reshoring dollar spent –helping to contribute to successful initiatives that bring manufacturing jobs back to America.

 

Jon Winsett is Chief Executive Officer of NPI, Atlanta, http://www.npifinancial.com.

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