Have you ever heard of the 18th century King of Prussia Frederick William I?
He was a wealthy man who tried to save a small amount of money each year by insisting that his family eat only cabbages.
This terrible diet made his children ill. He then had to pay for expensive medical care for them which cost him a small fortune.
For this reason, Frederick William I is often held up by economists as the literal textbook example of a ‘false economy’. This is to say when savings sought in one area result in higher unanticipated costs later.
This is a lesson that UK manufacturing businesses can definitely learn from. When it comes to your manufacturing business, the savings of today should not become the costs of tomorrow.
Does Cutting Costs Always Save Money?
At ENL Group we understand that it is always important to find ways to drive value through your supply chains. We also know that when businesses are producing at scale, a small cost saving in one area can lead to significant savings over all.
However, the key question that your business needs to ask itself should be “is this cost saving a real one?”
In order to answer that question it is essential to look beyond the ticket price and to take a wider view of the actual and potential costs that cheaper components can generate.
The Importance of Quality
The first issue to consider is quality. As with everything in life, there is often a direct relationship between the price you pay and the quality of the goods that you receive.
Firstly, if components or products fail then customers are unhappy. No business wants unhappy customers. Warrantied products will have to be replaced and repaired, time will have to be spent in meetings trying to resolve the problems created. All of this creates costs for your business.
More than that though, the biggest potential cost will be to your company’s reputation. A reputation for high quality can take years to patiently build, but can be lost very easily and very quickly.
Offshore Supply Chains
This is particularly a challenge if you have offshored your supply chain. There are some very good overseas component makers, but the fact remains that it is difficult to oversee the quality of parts being manufactured 6000 miles away. For one thing products will often not be manufactured to the same industry standards that apply within your market.
Whether you source components from ourselves or elsewhere, we would always recommend that you look for companies that hold the relevant industry certifications. This will give you the reassurance that the components you receive are made to the most stringent standards.
For instance, our own certifications include ISO 9001:2015, the aerospace equivalent, AS9100D and the Automotive QA System IATF 16949. At ENL, we are particularly proud of holding all 3 certifications across the group. There are only a handful of Europeans companies that have also been awarded all 3 certifications. We are also an approved PlastikCity Partner. It is independent indicators of quality such as these which can give you confidence that components purchased from reputable suppliers such as ourselves will always meet the standards you require.
Logistical Costs
The other potential costs which can stack up when sourcing components from overseas are logistical. The ticket price may be lower, but remember to factor in shipping, customs costs, and the costs of building and maintaining a relationship with a distant supplier.
It is also the case that any savings that you do make buying cheaper components will quickly be swallowed up if parts are then delayed by shipping or customs, causing a pause in your manufacturing process. If that happens, then that marginal cost saving suddenly does not look like the value you might initially have imagined.
Additionally, if parts are received that are not of the required quality, then returning them to be replaced can be time-consuming and expensive. It is not as simple as picking up the phone and speaking to a supplier who is a motorway journey away.
Safeguarding Your IP
Remember too, that for some high-end products you may be putting your Intellectual Property at risk when you outsource production to distant and unregulated suppliers. If your product has unique features then you might want to consider keeping your suppliers closer to home where there is more recourse to prevent IP infringement from occurring.
Saving Money Through Quality Parts
At ENL Group, we completely understand the need that businesses have to save money. In many cases, however, cheaper components could end up costing your business more in a range of different ways.
It may turn out that, in the long term, paying slightly more for better quality components at the start is the best money saving strategy for your business.
About ENL Group
ENL Group is based in Portsmouth, UK and Veľké Kostoľany, Slovakia. Established in 1958, we have been servicing UK-based and European companies for decades. Working with a secure supply chain, ENL provides quality components for quality-driven customers – with full certification for all of our products and quality checking at every stage.
Operating 24/7, we design, manufacture and deliver critical components for our customers across the UK and Europe.
Contact Us for more information about ENL and how we can help you ensure your own supply chain is as reliable as it can be.
