We seek guarantee from the manufacturer for breakdown attendance and for the availability of the machine for operation, says BB Mishra, Head - Procurement TIIC, L&T Construction.
Could you elaborate on the decision making process for equipment procurement in your company?
The procurement of capital item is centralised. The ICs (self-contained verticals) give their requirements which is processed by a centralised cell. Depending upon the duration and value of the equipment decision is taken either to go for hiring, outright purchase, buyback arrangements or rate contract.
Acquisition cost of equipment is a prime factor considered by procurement.What are the parameters for which you are willing a higher price? If so, to what extent?
Acquisition cost is one of the prime factors influencing procurement decision. However, the performance of the equipment, presence of after sales service and more importantly our experience with the brand plays a vital role in procurement decision making.
We pay higher price for equipment purely based on our judgment on the performance of the equipment over a period of time and the support of the equipment manufacturers for after sales service, availability of spares, etc.
The extent to which we are willing to pay higher price depending upon the availability of alternatives and will vary from equipment to equipment.
Do you seek guarantee for after sales maintenance, retrofit repairs and consumables?
For initial two years, we take performance guarantee backed by BG against any manufacturing defect and agreed output/productivity. After this period, based on the criticality, we may go far AMC/RC for spares and consumables.
What about operational consumables, like ground engaging tools, drill rods, drill bits and such other items?
Consumable and other tools are either covered by a rate contract or purchased like any other revenue item.
Do you seek comprehensive after sales maintenance contracts from the suppliers? Are these on sites or are they centrally governed?
As we have an experienced and adequate plant and machinery workforce, we have not gone for many comprehensive after sales contracts.
Do your purchase decisions get impacted by the available finance arrangements by various financiers who only finance to specific brands?
We have not opted for any financing mode for procurement of capital items.
Do you procure equipment on operating lease?
We have not opted for operating lease.
What are the non-negotiable terms of your purchase agreement?
Performance bank guarantee and liquidated damages are the non-negotiable terms.
What are the key challenges of procurement? How do you overcome this?
Some of the MNCs have insufficient Indian presence in terms of after sales service workforce and availability of critical spares. We tried to restrict the breakdown time to minimum by taking a guarantee from the OEM.