Custom Sourcing Case Study
Problem: Discontinued Electronic Components for an Elevator Manufacturer
As for most manufacturers, increasing market share usually requires the constant introduction of new technology and improvements in design. The resulting variations in product line offerings spark a need for many similar components that differ in performance by model. However, designers build in planned obsolescence to ensure future business, and eventually manufacturers and suppliers stop making repair components-especially electronic parts and sub-components.
A large elevator manufacturer, with a central service and component re-conditioning plant in Northern Ohio, approached us with a significant problem: Components used in their older elevator models were no longer available, making elevator repair difficult and expensive. Because of high replacement costs, our client's end-users sought to keep their elevators running well beyond what the manufacturer expected. A very large number of our client's elevators sold in the U.S. have remained in service for over 30 years.
Impact on Business
Once the electronic control board and other sub-component manufacturers discontinued such parts, this customer was faced with either finding more parts or re-designing and retrofitting existing elevators, which would have significantly increased cost for the customer and end-user. The cost associated with contracting the original components manufacturer to re-tool and make more parts in small quantities would have been cost prohibitive.
Having researched this problem for other companies in need of similarly discontinued repair parts, PenCo's buyers discovered that electronic part surplus inventories and manufacturing overruns are routinely purchased by a network of global salvagers and brokers, at pennies on the dollar-and are held for future sale. Viewing this discovery as an opportunity to better serve a wide range of customers, PenCo accessed a network of overseas brokers to obtain such parts.
Custom Sourcing Results: Major Cost Savings
In response to our customer's requests, we have successfully sourced and supplied more than 11 major components, in quantities large enough to serve them for several years. This custom sourcing solution represents a mid six-figure cost avoidance associated with retrofitting older elevators with newly designed components.
To learn more about this project and our other custom sourcing solutions, please contact PenCo today.