Low cost alternate products could actually cost you a fortune

When you are looking to cut cost within the MRO category it can become easy to identify opportunities through purchasing lower cost alternate products. Let’s take a motor for example, the motor for your conveyor system just broke down and you need to order a new one. Your manager has put continuous pressure on you to reduce cost, specifically in replacement parts and related services. The cost for the OEM motor is high and will take a significant chunk of the current department maintenance budget to replace it. However, there is another option. Your distributor also has a motor that cost 35% less than the OEM. When reviewing the technical specifications it looks like it is an exact match and has all required critical attributes. The answer looks simple, almost too simple. Buy the alternate save 35% and leave some extra money in the department budget. Win all around. You place the order and go home with a smile on your face because you believe you’ve done a good job.

Three months later your line operator is banging on your door yelling that the no name motor you bought is already broken down and the lines out of commission. You bring in the service repairman and after taking it apart it needs several new parts to get the motor back in operation. That 35% savings you realized is already being eaten away; cost of the parts + cost of the service and repair, worst of all cost of the line being down. Now you’re frustrated you had thought that this motor was essentially the exact same product, but then again maybe if you had bought the OEM motor the same problems would have occurred. The only problem with that is the other lines are running off OEM motors….no issues. You cross your fingers and hope nothing else happens.

Six months later the motor breaks down again. This time it is deemed irreparable, motors completely shot and you’re really in a hole. You’re still operating on the same annual budget and now you have to buy another motor this time you are sucking it up and going OEM. Now all in the same year you bought one generic motor, one OEM motor, replacement parts, had the service/repairman out twice and worst of all the line down for a total of two days. This is why when buying a product especially an alternate component you really need to review total cost of ownership. There are ways that things like this can be avoided but it takes precaution and proper review. If you don’t have the opportunity to test the product you really need to do your research and not just the quick review of critical attributes. It’s important to understand service life, average repair cost, review the warranty and perform additional research on the brand and manufacturer. A little extra time can end up saving your company thousands of dollars. Total cost of ownership should always be reviewed but it is imperative when purchasing an alternate product or material - especially when those products or materials keep your plant running.