Buying cheap may prove expensive
January 1st 2009

Adopting a 'best practice'approach to maintenance strategy can enhance efficiency and deliver the business performance improvements and operational cost savings crucial to maintaining competitiveness in today's challenging business environment, says Ian Ritchie,MD of Brammer UK

The current economic situation may lead companies to focus on efforts to reduce their maintenance-related purchasing costs and make decisions based solely on unit price. However, buying cheapest is rarely the best policy for engineering components.

In fact, in almost all cases the total cost of ownership is at least as important as the initial purchase price. Greater cost savings and improved production efficiency can often be achieved by focusing on performance factors such as the production downtime and people costs associated with product exchange, product reliability, service life and ongoing maintenance requirements, rather than initial purchase price.

The drive to reduce costs may also tempt some companies into shopping around for the lowest unit cost, an approach which could result in choosing an unauthorised distributor to supply their requirements.

This introduces risk into the supply chain as products from an unauthorised source are often not to the latest specification, may have been incorrectly stored and handled, and may even be counterfeit.

The most immediate risk is component failure – potentially causing costly production downtime, possible machinery damage and expensive repairs.

Health and safety can also be compromised – and anyone who has bought counterfeit products can expect no redress from manufacturers for costs, liability or claims.

Sourcing exclusively from a trusted authorised distributor guarantees quality assurance, consistent part numbering, instant confirmation of availability, total product traceability, and full manufacturer's warranty. Any company that cares about consistent product quality, production line integrity and continuity of supply should buy genuine, fully branded products from an authorised source. The financial and operational risks of not doing so can be punishing in this critical area of manufacturing.

There are further business issues created by continually shopping around for the lowest unit price on an item.While a few small savings on the product cost might be achieved, business process costs are substantially increased by introducing additional suppliers for similar products and this approach also introduces the risk of inventory build-up, tying up valuable working capital. To really achieve the best value, buyers should seek to minimise suppliers of similar products and services.

Reducing supplier numbers streamlines business processes, consolidates expenditure, and eliminates expensive duplicated administration costs.

Suppliers providing a comprehensive range of components and services will therefore be attractive to manufacturers seeking to rationalise a supply base to bring economies of scale and consistency of service.

Furthermore, working in a collaborative relationship with a proactive supply partner in areas such as Maintenance, Repair and Overhaul (MRO) inventory profiling can also deliver significant business improvement and tangible cost savings. The process will help identify the essential MRO products needed in stock to ensure continuity of production, while ensuring access to nonessential parts on a next day basis – enhancing stock management efficiency and freeing up cashflow.

It's also important to maintain the balance between seeking to maximise cashflow and sustaining crucial maintenance schedules. Suppliers such as Brammer offer the option to set up a part-time or permanent facility at a customer's premises to manage parts inventories, standardise and rationalise MRO products, and provide technical support to in-house maintenance teams – all of which can add significant value to the bottom line.

Best practice maintenance strategies build a streamlined supply chain around an authorised distributor of MRO products and services. This ensures continuity of supply, eliminates the risks associated with nonauthorised providers, and reduces administration. It also provides a relationship where both customer and supplier can engage, collaborating on project work that will add real value to the manufacturing process.

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