The Acquisition of Modern Aluminum Extrusion Systems
Part 5: Selection
Definition: The act of choosing
Key Words: Measurement, cost-benefit analysis
by Roger A.P. Fielding, BENCHMARKS
The last article discussed evaluating
the various suppliers’ proposals to ensure that the equipment
which was being offered would in fact deliver the desired performance.
It suggested that the teaching provided by each potential supplier
in their product literature should educate the user about the key
features which are included in the offer; for only then can the user
set out to properly evaluate the alternative proposals. The article
suggested the following approach to evaluation:
1) Listing the suppliers’ claims against the performance specification:
safety, lead time, conversion cost, reliability, productivity, yield.
2) Through correspondence, meetings and discussions with potential
suppliers, the user brings each offer into line, so that it will deliver
the specified performance.
3) If any suppliers will not, or cannot, meet the specification, the
user must reject their bid or allow for increased operating costs
or reduced profits through the life of the project.
4) The user can only compare the prices submitted by potential suppliers
when all offer comparable performance and after-sales support.
Using one of the many available computerized spreadsheet programs,
it’s easy to prepare a matrix comparing, in words and numbers,
the performance offered by each of the potential suppliers, and to
show the cost of changing any (or all) suppliers’ offers to
meet performance specification. The comparison will take account of
the respective delivery dates, and account for major differences in
promised deliveries by adding appropriate costs for "lost opportunities".
The matrix of words and numbers will show the relative cost of acquiring
modern aluminum extrusion systems from a number of alternative potential
suppliers. However, after all the numerical comparisons have been
made, and the aspects of maintenance, the availability of spare parts
and the after-sales support have been dealt with, there will still
be a number of intangible items to be considered. The intangibles:
How hard will the supplier work for me? What happens when I get a
breakdown? etc., are all answered by the goodwill the supplier enjoys
in the marketplace and the testimonials of recent customers.
The selection of a new aluminum extrusion system depends on rigorous
Measurements, which are used to compare the proposals
of a number of systems suppliers. Additions (or deletions) are made
to each supplier’s proposal to bring all the suppliers’
offers into line.
The selection process depends on Cost-benefit Analysis
to understand what they (the extrusion systems, the equipment and
any changes to the equipment) do to the performance of the extrusion
business in terms of performance and cost.
Selection is dependent on getting the correct measure of each supplier’s
goodwill.
The Last Word on Prices:
"It’s unwise to pay too much, but it’s worse
to pay too little. When you pay too much, you lose a little money
–– that is all. When you pay too little, you sometimes
lose everything, because the thing you bought was incapable of doing
the thing it was bought to do. The common law of business balance
prohibits paying a little and getting a lot –– it can’t
be done. If you deal with the lowest bidder, it is well to add something
for the risk you run, and if you do that, you will have enough to
pay for something better."
John Ruskin,
author and social reformer
(1819-1900)
The Acquisition of Modern Aluminum Extrusion
Systems - Part 6
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