Peer Perspectives: The Dilemma Of OEM Control Systems Cost Escalation
Water Online's Peer Perspectives article series provides unique insight into the issues facing water/wastewater professionals – and how to overcome them. We solicit and appreciate opinions from all perspectives, regardless of position or industry segment. The viewpoints expressed are not those of Water Online, but we do hope to generate thought and discussion around the topics covered. To share your perspective, email editor@wateronline.com.
The following was submitted by Leelon Scott II, director of OEM business development at Revere Control Systems, board member of the Water and Wastewater Equipment Manufacturers Association (WWEMA), and 40-year veteran of the control systems/municipal market.
-------------------------------------------------------------------
An under-utilized strength exists for manufacturers of performance-based equipment. This strength is controlling cost through the warranty/guarantee you, as the manufacturer, provide.
When you visit the automobile dealer to purchase a car, you buy the car based upon your personal needs, your research, value performance, etc. You negotiate the price, choose the options, and make your decision. A municipal OEM (original equipment manufacturer) is much the same as the automobile dealer. The consultant along with his customer, the owner, defines the requirements. They contact your representative and spell out the features and performance they want. Budget prices and cut sheets are sent, and sample specifications are issued in this beginning portion of design. At this early stage, very few engineering disciplines are involved. This is the key piece to understanding the core cost escalation issue at this stage. Rep wins preferred bid advantage, or the A-spot, and is ultimately sole-source for the project.
The rep and the municipal OEM think they have the projects in the bag. Sole sourced, A-spot, job well done. But wait! The order is not in hand! We have to be careful not to lose this job/project.
Reps watch the project develop. As these are developed, performances are adjusted. Budget prices and specs are rewritten. A phenomenon happens at this stage of the project. The sole source or A-spot is jeopardized due to the fact prices are or can be increased. Price increase justifications are required or requested to keep the trust of consulting engineers, owners or reps. All parties become very nervous. A hidden and often missed fact is lurking in the background — project development. The requirements have changed from the original. As the project develops, other engineering disciplines are brought into the project team, and they bring their expertise and specifications sections with them. That’s the hidden detail pertaining to cost escalation.
Most municipal OEM equipment manufacturers offer their standard products, which are essentially the lowest commercially competitive price available. These standards have been around for a very long time. Optional equipment is known and offered. However, municipal OEM manufacturers do not normally staff people with the necessary experience to address the disciplines of electrical issues. The electrical discipline in a typical wastewater treatment plant (WWTP) is covered in multiple sections of the specifications, such as equipment (11), electrical (16), instrumentation (13, 17), and control sections to name a few. As far as the plans are concerned, the mechanical, electrical, process diagrams, and SCADA networks are all now part of the OEM’s requirements. Cost on the electrical controls is driven out the roof. Retaining the A-spot/sole source is in question. This is not the position the municipal OEM wants to be in.
A simple solution to this issue exists. A proprietary, private-label product could be the answer.
Let me digress for a moment. In the purchase of your automobile, the thought never crossed your mind of getting a Chevrolet engine in your Ford car, right? Then why would you guarantee/warranty a control system that wasn’t your standard? Is your control system so inferior that you need to accept any other? Are you so uncomfortable with your tried, tested, and true product to allow changes down to the equipment level?
Therein lays the issue: fear of losing the sale or, worse yet, of the confidence and trust you’ve won getting the A-spot advantage. So okay, give them what they want and lower your margin, or go up on the price…and risk losing your advantage.
And herein lays the strength of the municipal OEM manufacturer: your performance guarantee. Warranty and performance include the controls just as much as the intellectual mechanical design. Would you change the core design of your product at the request of your client if it changes your performance, even if it means walking away from the order or adamantly arguing to the contrary? Then why is your control system any different? Municipal OEM manufacturer have spent years perfecting and innovating their product. Why not look at your control system as you do your mechanical design? Its design ensures your product performs to your requirements and is familiar to your field service reps for repair. The Municipal OEM has the ability to stand up for his equipment design. Why not the same for his controls design?
I am in the controls business serving the municipal OEM in the market. It amazes me how many projects start out as a standard design and the cost balloons to staggering levels. Don’t get me wrong; I love it when the costs go up through the development. Where does this start? Three little letters: PLC – programmable logic controller. This product has revolutionized the controls industry from relays and timers to near plug-in lay applications.
To accommodate this market trend, most OEMs have adopted PLCs as part of their product offering. OEMs provide training and product literature to their rep network, but they tend to exclude or limit information on their control systems in their literature. However, the OEM will provide controls information in the consulting engineer division 11000 insert. In this insert, the three letters PLC are written. Broken down, the letters PLC imply that it is programmable. As the OEM, you are unknowingly opening the door for cost escalation. Do you as the manufacturer program your mechanical product or offer a pen and paper to others to modify your product as desired? If the warranty and/or performance guarantee are your responsibility and your product doesn’t perform, you have to make it perform at your expense. Then why are your controls any different? Change your specification! Replace the PLC with your controller. Rethink how you market your product! Most OEMs I’ve had the pleasure to work with believe standardization of control products in the answer. Most do not realize product development is so expensive and do not invest the money necessary to develop their controller; thus, we’re back to the same old grind of cost escalation. A simple solution would be to private-label the controller to bear your product name and provide connectivity to SCADA via communications or hardwire.
Let me digress again. If your car manufacturer offers options for the automobile you’re purchasing, you can add the options your budget can afford, right? Then consider the controls for your OEM equipment.