When sourcing electronic components the price on a purchase order is just one element of the total cost considerations. The procurement cost is important but it is one figure in a larger lifecycle cost calculation, therefore focusing on it can lead to decisions that cost more in the long term.
Here at Princeps we work with procurement teams, engineers and supply chain managers who need genuine, globally sourced components. We see the pressure on buyers to reduce procurement costs but the reality of what a component actually costs is over its lifespan.
What Is The Lifecycle Cost?
The lifecycle cost is the total expenditure related to a component which starts at the point of purchase, all the way through to the end of its life. It covers more than the first invoice price. For electronic components, costs tend to include:
- Purchase price
- Inspection, testing & qualification costs
- Cost of installation or integration
- Failure rates & downtime
- Warranty claims & replacements
- Disposal or removal
When you add these numbers up, a component that may have been cheaper at the point of purchase can end up being more expensive than a higher priced better quality alternative.
Why Procurement Cost Leads & Why It's An Issue
Procurement costs are a visible, immediate and measurable number. The figure will be visible on a quote, on your budget and is easy to compare with other suppliers. Lifecycle cost, however requires more data, modelling and a longer time to fully understand.
This ultimately can push buyers towards decisions made for short term cost savings. A counterfeit or substandard component sourced via an unauthorised distributor may offer an attractive price. But if the part fails prematurely, creates a product recall or causes damage to integrated systems, the costs can become larger than the original savings. This is very relevant in sectors such as medical, aerospace and defence, where component failure carries serious consequences.
How Genuine Components Change End Calculations
Sourcing genuine parts from an authorised or traceable supply chain reduces many of the cost variables that increase the total lifecycle expenditure. Genuine components:
- Perform to manufacturer's specification - reducing failure rates
- Carry valid warranties - limiting risk of replacements
- Have accurate documentation - reducing qualification time
- Meet regulatory compliance - avoiding audit risks & penalties
At Princeps our global sourcing network is made around traceability and authenticity. Every component we supply goes through rigorous verification and inspection so that the parts delivered to your production line are exactly what they are meant to be.
Consider The Total Cost Of Ownership
The most effective procurement decisions take into account the total cost of ownership as the main point of measurement rather than the initial unit price. That means asking suppliers the right questions, for example:
- Where does this component originate from?
- What documentation supports & proves its origin?
- What failure data is there?
Asking these questions may take more time during the buying process but they will help in preventing higher costs in the future. If you are looking for support in sourcing genuine electronic components, our specialist team are able to assist. Get in touch with us to find out more about our services.
