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Understanding Alternate Sourcing, Part 1

Parts listed in the components Item Master list should have multiple sources for as many parts as possible. (See: Top 15 Component Qualification Questions.) By sources, I mean manufacturers and suppliers. The danger is obvious: If one manufacturer is temporarily unable to ship product for any reason, then the problem is passed on to the end user in the form of unavailable inventory.

Conditions that may prevent a manufacturer from shipping are varied and include natural disasters, over-allocation, scarcity of raw materials, business failure, work-stoppage, and process problems, to name a few. It only takes one missing part to stop the production of a finished product. For this reason, the component engineer should be constantly watching the Item Master part listings for components with only one qualified manufacturer's part number. When a sole sourced part is submitted for addition to the Item Master, the design engineer should be informed immediately and strongly prompted to try to identify and use a part with a second or alternate source.

By definition, a sole-source part implies that there is only one person or company that can provide the part, effectively disallowing for competitive bids while opening the door to part cost escalation, because the provider knows you have no other option but to buy from it.

Another term often confused with sole source is “single source.” This does not necessarily mean that the part cannot be purchased from many suppliers, but it may apply to contracts formulated around an agreement to buy all of the parts needed from the same supplier for every purchase requirement. This may be a way of obtaining better pricing, contingent on designated volume purchases over a stated period of time. Another condition is that the supplier might agree to hold reserve inventory (or bonded inventory) at its cost in order to guarantee the part will be available for immediate delivery.

All sole-sourced parts generally cannot be eliminated from the Item Master, as many designs using cutting-edge technology depend on uniquely featured parts that do a much better job than their technology alternatives. For this condition, the component engineer may be asked to initiate a “risk analysis” study to determine if the company should do a “risk buy” in order to guarantee part availability in case of an unforeseeable event leading to a supplier's inability to deliver. The risk buy meeting usually involves purchasing and finance departments, because the larger the buy, the more the company's cashflow is hit.

The component engineering request form, along with the CER/AVL change procedure and the part qualification procedure, are available for download at www.componentsengineering.com. The documents reference the particular steps to conduct an alternate part search and qualification.

The request for an alternate source may be internally generated by the component engineering department or any other department hit by the loss of the primary source of supply. When another department has initiated the search, it is usually already a crisis incident, and the component engineer needs to respond very quickly. A “line down” situation is often the result of a critical component missing.

In the concluding part of this blog, I will discuss the basic requirements, procedures, and steps to take when searching for an alternate part.

13 comments on “Understanding Alternate Sourcing, Part 1

  1. _hm
    December 6, 2011

    Another aspect is to employ industry standard components in your design to extend the life of product. Industry standard means the parts used by many many designers and is easily available from many vendors. It is art of designing complex circuit with conventionalm less expensive more popular parts.

     

  2. dalexander
    December 6, 2011

    _hm,

    You will want to read Part 2 of this post as your comment is completely correct. I have a list of 8 key steps for identifying an alternate source. I will send you the PDF now if you want to give me your email.

  3. Barbara Jorgensen
    December 7, 2011

    Great practical advice, as always! Having covered distribution for the better part of my career, I'm wondering if using a channel partner may also help in the selection of an alternative vendor/source. You may be covering that in Part 2, but I'd be remiss not to mention it 🙂

    The other thing that occurs to me is distribution may be the alternative source if a company buys direct from a component supplier.

  4. arenasolutions
    December 7, 2011

    Thanks for pointing out the difference between sole source and single source, I tend to use them interchangably. Whether due to an agreement or just lack of availability, it is scary when you know a critical component depends on the availability and reliability of one source. There have been too many natural disasters in the last few years for me to feel comfortable with that, but sometimes it's the only option. I read that in a recent Manufacturing Trends Survey 2/3 of manufacturers said they used single source components for critical parts of their product, so I guess in spite of the risks, it's something most people still find themselves doing. 

  5. Brian775137
    December 7, 2011

    Without a Component Engineer (CE) being involved BEFORE the channel partner gets involved, there is a danger that the part received, might not be the exact part needed. Getting the CE involved early in the supply chain is better than going directly to the channel partner, because it is part of the CE's job to find and specify EXACTLY, in conjunction with the Design Engineer (DE), what the DE needs for the product to be produced.

    This means that the CE should have produced a specification for the part, with all the required parameters defined.  This specification will be the controlling document to assure obtaining the “correct part”, and should be what Procurement sends to the channel partner upon which to quote.

    The CE should also, as part of doing his/her job, recommend alternate sources of procurement within the body of the specification, unless there is a specific reason why the part is to sole sourced.  If the part is to be sole sourced, then the specific reason for the sole source of the part should have a “sole source justification” which should be included as part of the procurement package so Procurement knows who will be able to supply the exact part needed and why an alternate cannot be used.

    The military covers part procurement with a series of standardized component specifications (MIL SPECs), but even these sometimes need to be modified by writing a Specification Controlled Document (SCD) which includes the requirements of the MIL spec, but with exceptions or additions added, based upon the DE's specific needs.

    Thus, the need for purchasing an adequate amounts of the part to support future builds of the product can be identified, and a decision can be made as to whether a redesign of the product is needed, using “newer” or “better” parts.  This decision should not be made when the amounts of the parts available in the company's stockroom is almost or completely depleted.  Reordering parts should be based upon the projected lifetime of the product, factoring in parts for repairs as well as for current and future production.

    While channel partners have a lot of knowledge about the parts which they sell, they may not know about parts with specific design parameters required, and thus the need for the CE, in conjunction with the DE , to define exactly what is needed.  They may, however, be a good source of information about when a part is going to be discontinued by a part manufacturer (i.e. the part's End of Life (EOL)) (see also the paragraph above)

    Lastly, if a specification is written and a reputable supplier is chosen, then the likelyhood of obtaining a counterfeit part is significantly reduced, but not completely eliminated.

  6. dalexander
    December 7, 2011

    Brian, Good points. I really like the next to last paragraph reminding us that the DE may have specific needs not known by the channel partner when suggesting an alternative. One thing I think of immediately, is the key role the SRF specification, (self resonating frequency) for inductors has in an RF circuit where the circuit frequency, if close to the inductor's SRF, could render the inductor useless. Thanks Brian for a very salient comment.

  7. dalexander
    December 7, 2011

    Barbara, More often than not, a direct componet manufacturer will not sell diresct to a company without achieving a very high volume commitment. They can justify this position by stating that they do not want to undermine their own channels, either Rep firms or Distributors. So your point is very well taken. A sole source may indeed have a distribution channel, but if the sole OEM dries up, everyone goes down eventually. There is one strong argument for bonded inventory. When I was buying ASICs, I worked my way all the way back to the foundry and bonded at the wafer level with contractual agreements that I could drop in with 24 hour notice to verify the the agreed upon wafer inventory was on the shelf ready for packaging. And as this was also a custom BGA, I had the package house guarantee bonded inventory as well. I actually advise this precaution for all in house ASIC product where the foundry is off-site. Also, it is a good idea to track wafer production by lot numbers and process traveler progress to anticipate and react to ramp-up requirements. The less that is left to chance where a sole source is involved, the more assured the timely supply.

  8. _hm
    December 7, 2011

    @Barbara: Regular email with parts update from channel partner is very good. To talk to them for looking for your part is good. Talking to many of them is better. However, sometime looking for simple connector takes whole week! No one elese other then DE or CE will place so much effort for it. System design or module design has so much resposibility and fun attached to it.

    One seceret of searching novel parts is that you are looking solution for one problem – and you find resolution for your past problem or future need. I love this work.

     

  9. Brian775137
    December 7, 2011

    @_hym:  I hope that you have now read my most recent comment.  Relying, solely, on channel partners (distributors) puts you in perilous waters.  You have to assume that they know EVERYTHING about the EXACT part you wish to use.  If they do not, you may end up with a part which looks and is specified as the part you want, but it may not wprk in your design.  If the CE and DE get together and come up with exactly what the DE needs, then a specification control drawing (SCD) is written and used to procure the part, if you have a situation where the part doesn't work properly you do have recourse.  You can  send the parts back to the supplier and either get them to send you replacement parts which comply FULLY with the requirements of your SCD, or you can get your money back and go to another (better) distributer for the part.

    This is another reason why you should not wait until you run out of the part before ordering more.  If the part doesn't work properly in your circuit and you have to send it back, then if you order from another supplier, you have lost a lot of lead time.  This could have disasterous consequences.

    This is why having a CE and a DE get together to come up with the exact requirements of the part and creating an SCD for it, is not necessarily a bad thing – more likely if it is a critical part, you could, possibly save a lot of money by using an SCD.  (Nail it down so that there is no question about the required parameters.)(better safe than sorry)

    By the way, I'm not saying all this just to tout myself, I have over 35 years of CE experience from which to draw.  I've seen it all!

    Regards

  10. _hm
    December 8, 2011

    @Brian: I am more concerened about off-the-self low cost parts. Not the high cost custom parts. So SCD may not be that relelvant. I want to use something is available in market. For example, goto Yokowo Japan web page and look for spring connectors. They have wonderful spring loaded connectors I may like to use in my application. It does not cost much. If I write SCD and ask for component and price for similar product, it may be too high.

    So basically one has to do intense search on internet to get appropriate part. Assumptioin is that, someone else has already solved problem before you and part is available from them as standard part.

  11. Brian775137
    December 8, 2011

    @_hm

    I fully agree with you that a controlling document is usually unnecessary for mechanical parts, since there is not much which can change or affect your designed product, however the same is not true for electronic parts.  However, subtle difference in one (or more) paramer(s) can have a huge impact.  It is where these subtle differences occur, that you might need to use an SCD.

    You might need to write an SCD for a connector, though, if there is something about it which is citical for your product.  It is when there is a possibility of some parameter which is critical to your design, where an SCD may control the critical variables within the device and save you from problems.  There are so many different variables for connectors that you should look very carefully at them to assure that any particular connector will give you the reliability and exact function for which you are looking.

    I know that within the aerospace community, connectors are one of the devices which cause the most headaches.  I'm just urging you to make sure that you have considered all of the possible parameters of a device to assure that it will what you want it to do, with minimal problems.  If there are are essentially loose parameter requirements to your part, an SCD most likely would not be required.

    Do not shy away from the possibility of writing anSCD.  The added cost which it may generate, may actually save you in the long run since it will assist in reducing problems later on.

    Regards 

  12. _hm
    December 8, 2011

    @Brian: I agree with you, that is requirement for aerospace, military and some other industry. But in that case I prefer QPL parts. But many times, SCD are just copy of manufacturer's datasheet and other documents. DE and CE just add vendor name and theri part number to it.

    In fast moving other industrial environment, for most parts, this may not be practical.

     

  13. Brian775137
    December 9, 2011

    @_hm

    Yes, in most cases, the QPL part will work, but if there is 1 or more  parameters which need to be tightly controlled, an SCD is the only way.

    I'm just trying to point out that there may be times when an SCD might be the answer if there is early failures in the product, even if you are using QPL parts.  It's some thing to keeo in mind and can be the difference between the cost of fixing early returns and wriitiing an SCD and purchasing the part to it.  Obviously, it's a cost/delivery item trade-off.  Once again,you'll also need to find out if there is also an EOL issue to consider,

    Regards (Think outside the box)

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