You do get what you pay for…

Published:  09 November, 2013

The climate in most industries at the moment is focused towards cost reduction to protect margins. While this is to be commended, and can offer real benefits to a business and its customers, it is important that when it comes to procurement the Total Cost of Ownership (TCO) is considered over initial cost savings. While some components may seem like the cheapest solution in the short term, they can quickly prove expensive if regular maintenance, repair and replacement work becomes necessary.

The key to real world cost savings can lie in an extended, low maintenance, operating cycle. All too often when we hear about a business cutting its costs we learn that the cuts have been achieved by sourcing cheaper components during procurement. While these savings may look appealing in the short term, the only real way to gauge success is to look at the total cost of the product throughout its life. Cost of installation, maintenance requirements, downtime caused by early failure and replacement are all hidden costs which can add up when a budget component is specified.

Power transmission chain in particular is an area where many procurement managers may feel they can reduce costs by specifying budget chains. Because the technology is apparently so simple, and there are few outward differences in appearance between brands, it is often easy to assume that this is an area where budget components may be justified. However the truth is very different; a chain which has been properly specified and well produced, using high quality materials, can often earn its initial procurement cost back many times over when compared with cheap chain.

Derek Mack, sales director for Tsubaki UK, comments: “Initial procurement is just one cost that needs to be considered when determining the TCO of power transmission chain. After procurement there is installation time, which can vary greatly between products, as well as the necessary maintenance requirements – such as lubrication or removing links due to elongation. Then of course there is the cost of replacement. A chain with a shorter life will need replacing which not only causes down time but also introduces a further round of procurement into the equation. When all of these hidden costs are taken into consideration it is easy to see how budget chain can quickly become a false economy.”

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