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Why Price Isn't Always Everything

 

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There's an old saying, Price, Quality, Speed: you can have two. If you want the best price and best quality, it will take longer. If you want the best quality and you want it fast, expect to pay a premium. And if you want the best price delivered fast, expect quality to suffer. Here's a look at these three common situations.

Best Price, Best Quality - Speed isn't everything

This situation is typical for mature production items procured at lead time. In most OEM environments, a typical product will eventually enter this phase of procurement.

Best Price, Best Speed - Quality isn't everyting
 
In this situation quality is a nuanced term.  No one wants product that doesn't work. But quality also refers to the depth of process control and workmanship standards. Does a $2 consumer item need the quality process control associated with space qualified material? In situations with low value product and high variability in demand, it is advisable to reduce the level of process control and workmanship in order to maximize speed without adding the cost.
 
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Best Quality, Best Speed - Price isn't everything

The most common situation is a high value or critical product in a variable demand environment. For example, if you have a $500 PCB assembly gating delivery of a $100,000 piece of equipment to your customer who needs it now or you lose the business, do you really care if you pay a 10% or more premium? Almost always this situation is driven by an inability to adequately forecast critical material, which in turn can be caused by lack of internal control or simply be the nature of your end market.