Price undercutting, poor staff communication and lack of strategic planning troubling suppliers and service providers to resources and construction

MEDIA RELEASE – 8 NOVEMBER 2013: Price undercutting from competitors, poor staff communication, discounting and a lack of strategic planning are the biggest challenges facing suppliers and service providers to the resources and construction sectors in Australia.

A recent survey of industrial suppliers and service providers on people, processes and profits by online lead generation service provider Projectory revealed that price undercutting was the biggest immediate challenge to sales, profits and growth, according to more than 55% of respondents.

The next biggest issue was fewer tenders, bids and proposals being won (33.7%), followed by a lack of face-to-face contact with prospects and customers (32.6%).

Other key challenges and pressures of concern in order of priority were local competition (29.2%), less customer loyalty (28.1%), difficulty getting through to key decision makers (27%), global competition (25.8%), a fall in leads to opportunities (22.5%), longer sales cycles (21.3%) and achieving differentiation from competitors (18%).

Projectory publisher and editor-in-chief and Wade Business Media director Jamie Wade said competitive pressures were compounding the challenges to suppliers from a downturn in major project activity – particularly suppliers to the mining sector.

“Suppliers and service providers whose core customers are in mining are feeling the pinch as the mining economy shifts gears from a capital investment phase to a production phase,” he said.

“Mining companies and EPCs [Engineering Procurement and Construction contractors] are taking a much more disciplined, prudent – and perhaps shrewd – approach to expenditure. The survey results appear to indicate that price is currently the main factor in purchasing decisions.

“Anecdotal feedback from some suppliers and service providers is that some mining companies are now more inclined to dictate what they’ll pay for equipment and services rather than negotiating; when it comes to price, suppliers are told to ‘take it or leave it’.

“The challenge to suppliers is to overcome price objections by highlighting and promoting genuinely unique points of difference that are of benefit to end users.”

People problems

A surprising finding from the survey was the high number of suppliers and service providers (31%) that identified poor communication as the biggest people problem at their company constraining sales, profits and growth.

Recruiting top talent was the second biggest people problem facing companies with 28% of respondents identifying it as a key challenge.

The third biggest people problem identified by nearly 20% of respondents was complacency.

“In the current business climate responsive suppliers and service providers will be increasing sales activity and thoroughly reviewing their tendering, bidding and proposal practices to improve their success rate,” Mr Wade said.

Other people problems included staff utilisation (18.6%); retaining top talent (16.3%); teamwork (16.3%); and coaching (15.1%).  A lack of recognition and reward, leadership and succession planning were of equal concern at 12.8%.

Process problems

Thirty per cent of respondents in Projectory’s survey revealed that a lack of strategic planning was the biggest process or operations issue constraining sales, profits and growth.

Insufficient or ineffective marketing and poor sales technique ranked equally at 22% as the second biggest challenges. Delivery problems ranked third (14.5%) followed by problems in innovation and R&D (13.3% respectively), finance and information systems (10.8% respectively), product development (9.6%) and contracting (8.4%).

“Companies responsive to these issues will be developing clear, coherent and consistent strategies that have genuine buy-in, acknowledgement and commitment to action from staff at all levels,” Mr Wade said.

Profit problems

Discounting, limited markets and a lack of cross selling were the top three obstacles to profits, according to Projectory’s survey.

Just over a quarter of respondents (25.9%) said selling below full price was the biggest obstacle constraining profits at their company; nearly the same number of respondents (24.7%) said excessive discounting and limited markets were a big issue constraining profits respectively.

Other issues identified by respondents as constraining profits were not selling more (19.8%) and not selling more often (17.3%).

An equal number of respondents (14.8%) said being too slow to market and a lack of up selling was impacting profits. A total of 12.3% of respondents said high per-unit costs were constraining profits.

“Competition and the downturn in the mining sector appears to be forcing many companies to discount – and in many cases excessively discount,” Mr Wade said.

About the survey

Projectory’s survey of People, Processes and Profits canvassed in October 2013 the views of nearly 100 individuals in the industrial supply and service community. This included non-engineering service providers (26.6%), engineering service providers (23.4%), manufacturers (23.4%), consultants (14.9%) distributors (10.6%) and Government (1.1%).

Respondents mainly serviced the resources sector (mining – 80.6%, oil and gas – 72%) in Australia followed by construction (non-residential – 62.4%, residential – 31.2%), infrastructure (65.6%), manufacturing (37.6%), defence (32.3%) and process and control engineering (31.2%).

A total of 32% per cent of respondents were from Western Australia, followed by Queensland (25.8%), New South Wales (23.7), Victoria (11.8%), South Australia (5.4%) and Outside Australia (1.1%).

Most respondents had a company head office in Western Australia (74.2%), followed by Queensland (73%), New South Wales (61.3%), Victoria (54.8%), South Australia (40.9%), Northern Territory (30.1%), Tasmania (18.3%) and ACT (14%).

Respondents to the survey by job type included: marketing or sales (41.9%), senior manager (39.8%), owner/operator (12.9%), product or technical (3.2%), and administration (2.2%).

Most respondents (17.8%) were from companies employing six to 25 staff and most respondents (32%) had six to 25 part-time staff or contractors.

Nearly half (48.3%) of respondents where from companies with an annual turnover of more than $50 million, 18% – $10m to $50m, 12.4% – $5m to $10m, 9% – $2m to $5m, 6.7% – up to $1m, and 5.6% – $1m to $2m.

About Projectory

Established in 2010, Projectory is an online lead generation service for suppliers and service providers seeking business opportunities with major projects in Australia.

Projectory provides leads and news on the planning and development of major resource, construction, energy, infrastructure and defence projects in Australia typically worth more than $AUD30million. Wade Business Media Pty Ltd publishes Projectory.

For more information, contact:

Jamie Wade
Publisher & Editor-in-Chief, Projectory
Director, Wade Business Media Pty Ltd
Mob: 0435 945 868

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