Bypassing Proven Supply Sources Invites Unacceptable Risk

Sept. 15, 2010
Do you really want purchasing to buy the cheapest product or should the department instead base sourcing decisions on plant productivity and reliability?

With the downturn well into its third year and the C-suite pressuring the enterprise for ever greater fiscal efficiency, relentless cost-cutting has become business-as-usual. Perhaps nowhere has this been more evident than in purchasing departments, where managers often respond by seeking "lowest cost" options in favor of long-established "fair price, high support" industrial suppliers and quality branded components.

The phenomenon exists across industry, but appears especially prevalent in the equipment-heavy chemical, paper, steel, mining and food processing sectors, where machine components routinely require replacement due to both natural and preventable wear.

Indeed, there are savings to be had by seeking discount components or sourcing from off-track options, such as Internet suppliers, catalog houses and other third-tier venues. But with these savings comes the unacceptable risk of undermining your trusted supply chain and lowering your plant's production reliability. Beyond that, opting for lowest cost sources raises challenging questions. For example: How confident are you about getting quality product and not counterfeit or previously returned components? Will the low cost sourcing strategy incur expensive equipment downtime associated with lower quality parts? Do you really want purchasing to buy the cheapest product or should the department instead base sourcing decisions on plant productivity and reliability?

Ultimately, the better strategy is to maintain a close business relationship with your existing supply specialist and to specify quality components that come with engineering support from their manufacturers.

Supply Chain Dividends

At your company, chances are good that a carefully cultivated supply chain has long been in place, one that has proven its value time and again, perhaps over decades. It likely includes an authorized distributor of branded, quality products whose agents have deep knowledge about your business and deliver a host of valuable services. These might include monitoring your usage of components, such as bearings, seals, lubricants and shafts, and establishing contingencies for delivering product in emergency situations. Your supplier is probably also storing critical backup components, providing warehousing services and maybe even offering discounted bulk shipping rates. More, most specialists' representatives have developed strong business relationships with plant operations managers, calling or visiting on a regular basis and keeping close tabs on your plant's component supply needs.

Established authorized distributors can also deliver the expert engineering services of their component-manufacturer suppliers -- usually free of charge -- to address critical reliability issues, such as costly recurring equipment failure. In an era where industrial processors have experienced a "brain drain" due to forced layoffs, early retirement programs and overall downsizing, access to outside engineering services takes on added importance. Such services are available from branded component manufacturers, however, only to businesses that purchase the manufacturer's products. When you purchase off-track brands, you lose access to top tier brands' expert engineering assistance.

In the field of rotating equipment technology, advanced engineering services include Root Cause Failure Analysis (RCFA), shaft alignment testing... and much more. RCFA is an especially significant service because it identifies the underlying cause of equipment failure rather than just correcting the symptoms. A recent paper mill example concerns recurring felt roll bearing failure. Here, an analysis conducted by a bearing manufacturer spotted an inadequate flow of lubricating oil to the bearings. A lube system review determined that adequate oil flow capacity existed, but that the flow meters were improperly set. The bearing company's engineers worked with mill personnel to make the necessary oil flow adjustments.

Exact figures do not exist for how much the papermaker saved by eliminating the recurring felt roll problem, but paper machine downtime cost is valued at tens of thousands of dollars per hour. The savings, made possible by the type of services available through a high-value supply chain, far outclass any possible savings associated with sourcing cheap bearings. In fact, there is virtually no reasonable comparison between saving X percent on component cost versus the greater equipment uptime you can expect with quality components backed by expert engineering assistance.

A Quarterly Meeting

Your plant operations and engineering managers are well positioned to see the value of advanced engineering services and of the reliability associated with top-quality components. Perhaps they have even documented cost savings associated with expert engineering procedures. By sharing their thoughts with the purchasing department, your operations and engineering team can help purchasing managers justify tapping existing supply sources and specifying quality branded components. A quarterly meeting among purchasing, operations and engineering personnel, perhaps with a C-suite representative in attendance, can help ensure that your supply chain continues to deliver high-productivity solutions, rather than just temporary "savings" from lowest-cost pieces and parts.

Bill Moore is Senior VP Channel Management for SKF Service Division. SKF is a global supplier in the areas of bearings, seals, mechatronics, services and lubrication systems.

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