September/October 2012
Talk to Me

Single source or ignoring possibilities?

By Bill Lydon, InTech, Chief Editor

There can be a great attractiveness to standardize on a single vendor for automation systems and services, but is this always the best decision for manufacturers to be competitive?

A single source is one specifically selected amongst others due to specific reasons that can include capabilities, minimizing replacement parts, quality, service, and support. Many purchasing people like the idea of vendor reduction to streamline purchasing costs. Vendors cost money to do business with since each new vendor must go through an evaluation, commercial negotiation, and be set up in the purchasers accounting system. This line of thinking solely focuses on procurement efficiencies with less vendors equating to less cost for procurement administration, spare parts, training, and engineering. Vendor reduction programs have been very successful when used for commodity purchases.

Certainly having a request for proposal and a detailed evaluation of multiple vendors before standardizing on sole sources will provide confidence that the correct choices are being made. This process leads to long-term contracts with a single or limited number of vendors based on business and technical analysis to select a supplier.

One-vendor deals are difficult to keep vibrant without competition, and vendors, at some point, are likely to take advantage as the management and their corporate fortunes change. Over time, vendor reduction can take on the characteristic of the law of unintended consequences. Reducing costs by consolidating from 17 copier paper suppliers to one seems like a good idea, but trying to do the same with automation systems can have short-term administrative cost benefits but result in longer-term negative competitive implications. At the end of the day, a big part of the value are the relationships with the supplier's.

Standardizing on single system architecture does simplify automation systems engineering, implementation, and training. With the technology diversity and rapid innovation that is accelerating, how long is it reasonable for a user to lock into a single vendor? There is a potential for innovations in automation and control from other vendors to be used by your competitors to give them an advantage. Fortunately, in this era of open architecture standards, multiple vendor equipment can work together with each delivering an optimized functionality. Most new ideas come from innovative smaller companies focused on a narrow area of expertise. Open architecture enables users to pick best of breed to most effectively meet their organizations goal to compete in their industry.

Early in my automation career, I went with an engineer, who recently defected from a communist country, to a large trade show exhibiting a diverse array of vendors and equipment. He shared with me an interesting perspective on having limited diversity to meet engineering challenges. He is a mechanical engineer and was like a child in a candy store looking at booth after booth showing various types of fasteners, including nuts, bolts, rivets, pop rivets, and novel products. Finally, I asked him why this was so interesting. He explained that in a planned economy, committees decided what was going to be manufactured for "the greatest good and efficiency." This included defining the handful of fasteners that would be made in the country. As an engineer, this severely limited his choices when designing and ultimately limited the ability to create superior products. This is analogous to a company selecting a single automation supplier, which may ultimately limit the ability of the user's company to be a competitive manufacturer.

Companies should thoughtfully appreciate the benefits and the challenges of using a sole source supplier. It is prudent to have a contingency plan if something goes wrong with a sole supplier arrangement. Specifying open architecture standards may be the most effective way to ensure the flexibility to use alternatives.