Folks,
Real story: Recently a US consumer electronics company asked us to identify sources of 150 watt power supplies. They were experiencing poor quality and reliability problems with their current supplier’s product.
Our electronics team took a look at the power supply technical requirements and SWAGed a price of $28.00 – $32.00. Our client was paying $18.00
Client: “We have to pay less than we’re paying now! Go find us some lower priced sources.”
Jack: A power supply like this should cost around thirty bucks. We can find some for less, but you won’t like them.
Client: “Well do the best you can. We need a better power supply for less than $18.00.”
Jack: We’ll try to hit your price target, but you’re going to get some low end mongrel power supply.”
I informed the sourcing team of their mission and we presented five candidate vendors. Their quotes ranged from a low of $13.95 to a high of $40.08. Our client instructed us to purchase samples from the two lowest price suppliers.
The samples shiped and our phone rang soon after.
Client: “Your Power Supplies Suck! They’re poorly made, run hot and have terrible cosmetics. They’re no better than what we’re getting now. We want really good power supplies for less than we’re paying now.”
So… Once I calmed him down, I reacquainted him with the “Good/Fast/Cheap” equation. These three elements form the sides of the “Unattainable Product Equilateral Triangle.” It’s almost impossible to get all three properties in equal measure. You ratchet down on price, the quality leg of the triangle gets much smaller. Your demand world class quality, the price leg grows and you pay for the privilege. You need it yesterday, you’ll pay for it on the price or quality front… Something is going to slip.
This client distorted the triangle before the process started. He weighted cheap, we warned him off. He got cheap. And a dirt cheap price equaled bottom-of-the-barrel quality.
You can place any product name you want into this story. Insert the words: needle bearings; magnesium alloy castings; stepper motors; or molded plastic enclosures. The equation is the same.
When developing new suppliers, don’t ask for the unattainable – Remember the Triangle!
Cheers,
Jack Daniels
+1.617.285.2486
