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Reducing a Design’s Total Cost of Ownership

Self-service tools or Google-type search engines are often the only choice for small manufacturers looking for new technologies or components. There are other options, however.

Consider the following scenario: A tier 2 or tier 3 manufacturer has core expertise in its existing product but does not have the R&D budget to add a differentiating feature. Let's assume this manufacturer wants to add wireless machine-to-machine (M2M) IP connectivity to an existing industrial machine. How can this manufacturer become a wireless expert? Its volumes might be too low to attract support from a tier-1 distributor, supplier, or rep. A small, specialty distributor could be a viable option.

The niche distribution model is scaled to support all volumes. Typically, a specialized distributor has a few high-end lines and a concentrated customer base. Its infrastructure is lean enough for a single person to follow up on customer requests. A small distributor may also offer a flexible service approach, such as a “loaner” program for evaluation kits.

In the above example, a distributor focused on wireless technology can introduce solutions that small and midsized manufacturers may not be aware of.

In order to compete in the channel, specialists must have a high level of expertise and support. Niche distributors work closely with a limited number of suppliers to fully understand their products. In turn, suppliers are motivated to fully understand the customer's application. Customers are able to brainstorm, share ideas, and even influence the supplier's product. In the above example, the supplier developed ad-hoc firmware changes to fit the customer-usage profile.

Products with a high level of differentiation generally have a longer lifespan than commodities. Therefore, suppliers have a reasonable expectation that an extra effort, such as the one described above, will pay off in the form of a long-term relationship with a customer — and a distributor.

A specialized distributor essentially acts as a design consultant and can reduce a customer's overall cost of design. Components on a per-unit basis might cost a nickel more, but buying through a franchised specialist ensures that suppliers' warrantees are honored and the product is genuine; this is particularly important in mission-critical applications.

When factoring in a high level of pre- and post-sales support, the total cost of ownership in engaging with a specialist is less than an R&D budget or hiring an outside consultant.

2 comments on “Reducing a Design’s Total Cost of Ownership

  1. prabhakar_deosthali
    July 18, 2012

    What has been proposed for the small but specialized equipment manufacturers is a good alternative to an expensive in house R & D. But on the other hand the  Solution provider must have a close understanding of the specialized equipment  to be able offer the right interface -hardware and software to be able offer an add-on generic value adding feature.

     

    Many times the free lance consultants who understand both sides may be a median between in-house R & D and a distributor, in my opinion.

  2. PeterC1
    July 25, 2012

    Prabhakar, we agree with your statements. As a specialized distributor we are able to work closely with the hard- and software team of the supplier themselves. And, if a new design is too complex, we welcome working with a freelance consultant to find a solution for the customer. 

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