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.