The High Cost Of Buying Cheap

A few weeks ago, I talked about the pride some of our customers have in buying the cheapest products available on the market today.  About how for some reason, some companies feel that they can buy the cheapest parts they can get their hands on and then turn around and tell their customers that their products are the best in the world.

Now we all know how impossible that is, no matter how much you try, no matter how much hype you try to give it, you just can’t make filet mignon out of chuck steak.

Anyway you cut it, cheap is cheap, and cheap is inferior and no amount of spin is going to change that.

With that in mind I thought it would be interesting as well as informative to remind you what you get when you go cheap, when good enough is good enough. I thought it would be beneficial to describe the true costs of buying cheap. So I have listed below the true costs that occurs when a board is late; or when it is rejected and returned to you by the customer; or what it costs to remake a board or worst of all, the true costs of a field failure.

For those of you who like to bury your head in the sand when buying as cheap as possible I would warn you to turn away, this is not going to be pretty.

What does a late board cost?

Customers who buy PCB’s need their boards on time. If a board is late to the customer:

  1. The customer’s schedule is also late
  2. He misses his date to his customer
  3. He can miss his revenue projections
  4. He can spend more money on overtime to get the boards assembled on the weekend
  5. She has to make other plans and pay twice for the boards
  6. She could miss product introduction
  7. He could miss having the product at a trade show
  8. She could miss time to market and lose out to her competitors
  9. He can hold up a million dollar shipment for few thousand dollar circuit boards on which he saved a few hundred dollars…was it worth it?
  10. The buyer loses credibility with his team
  11. The customer loses credibility with their customer

If a board is rejected by and returned by the customer…

All of the above issues apply, but on steroids. Everything is worse.

  1. It takes additional time to get deposition. That’s why getting CARS in time is so important
  2. You lose all the time to make new boards
  3. You customer Increases chances of missing time to market goals
  4. There are increased problems for you as well. You lose credibility
  5. You have to replace the boards faster than ever and for free
  6. You have increased chances of screwing them up again because you are building them under duress
  7. It hurts your reputation
  8. It hurts your chances of getting more business from that customer.
  9. It hurts your customers chances of getting more business

What does a remake cost?

If you think about the repercussions of losing a part number and having to rebuild it the cost can be exponential. Think about it:

  1. The cost of that lot to begin with. The materials, labor and time
  2. The cost of the rebuild, the materials, labor and time
  3. The opportunity costs. This remake is taking up a slot that could have been used for another customer.
  4. If the boards are late or you can’t build them in time to meet the delivery date then:
  5. There is loss of premium dollars.
  6. You’ll be paying more for shipping the late boards
  7. You’ll lose the customers good will and possibly lose the customer
  8. The loss of your reputation as a great PCB company which can be discouraging to your associates.
  9. The loss of the ability of your sales people to get more business from that customer.
  10. The loss of customer confidence in us
  11. Then there is the customer, what is the loss to him for us not giving him his product on time. His loss can be huge:
  12. Loss of revenue because the customer cannot ship then end product which is often worth thousands of dollars more than our boards
  13. The possible loss of premium dollars he paid to get components and other commodities in quickly to make deadline
  14. The loss of labor time as he brings in people to work on the PCBs which are not there.
  15. The loss of his reputation
  16. The loss of time to market which is so important in new product development
  17. The possible loss of marketing expenses. Marketing that claimed that his product would be delivered on a set date.

To miss a delivery date is a very big deal at any price.

What do field failures cost?

  1. All of the above on double steroids
  2. Extremely high visibility.
  3. Lives possibly lost. It can be life or death literally!
  4. Medical? Think about it do you want field failures of medical devices
  5. Can literally destroy your company’s reputation and put you out of business

So think about these things the next time you are tempted by price, the next time you feel that buying that cheap board from Asia, you know the one, the one built buy the cheapest labor money can buy and still not be slavery and ask yourself if this is really the only price you’ll be paying; or if you’ll be paying a much higher price in the end. And then ask yourself if you’re really proud that you were able to use the cheapest parts that money can buy to put into your great product. Are you really proud of that?

It’s only common sense

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