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Multi-channel supply - who picks up the pieces when things go wrong?

Friday, 02 October 2015 10:03
By Jonathan Smith, Balmoral Tanks By Jonathan Smith, Balmoral Tanks

There is an old adage in the construction industry; ’expensive today, cheap tomorrow’. With the stakes being so high on product performance within the anaerobic digestion (AD) market, it is time for end users to seriously consider their project liability portfolios, particularly when there is more than one supplier on a single project.

The operating parameters for mechanical and other equipment within the AD sector are demanding. More often than not, clients are looking for a process solution bespoke to their own technologies. Balmoral Tanks believes versatility, forward thinking and innovation is vital in meeting those demands while remaining relevant and competitive in the marketplace.

With so much work going into the front end of projects, has the industry started to take its eye off the ball with regards to the end product? After all, it is the end product that will be put under the microscope when the switch is turned on and it is the end product that actually forms the product liability portfolio.

With good practice and thorough review, in this era of quality assurance and product compliance, products leaving the factory gates should be of good quality, suitably tested and ready to go. Balmoral encourages clients to witness the moment their products come off the manufacturing line so they can see the factory testing first hand and take that confidence away with them. Quality is a minimum expectation nowadays, not a differentiator.

No company operates in a perfect world and product issues do occur; these should always be dealt with in a timely, professional and customer friendly manner. That said, the most important factor for clients is that they know Balmoral can and will deal with any issues – it is recognised as the company’s responsibility. This sentiment, and the security it provides, is something the industry needs to focus on, particularly when the manufactured product arrives on site to be built or used.

This is where the market has seen significant and recent issues at national and international levels. Products purchased via a multi-channel supply chain are manufactured by one company, can be delivered by another company and frequently installed by yet another organisation. With so many points of responsibility it could be very difficult to know who to call if that dreaded issue arises during installation or, even worse, when the tanks are full and in operation. Who is actually accountable for the end product and who is liable for the warranty certificate if procurement is carried out through a multi-channel system?

With international markets opening up for AD, Balmoral is experiencing an increase in the request for supervision-based installation input only which is usually either resource or budget driven. Once again, people are looking at pre-install factors and not paying enough attention to post-install implications.

Yes, it may be more costly for clients to employ a direct installation crew from the source manufacturer. However, based on a hypothetical project cost of £1m for an AD tank farm, it is reasonable to consider the average increased spend for a direct installation crew versus a third party supervisor would be £50,000. Is it worth putting the project warranty into the hands of a multi-channel supply chain for the sake of a 5% saving?

Does it make good business sense to consider an additional 5% as a burden on the projected budget, or is that 5% actually a blessing in disguise, given it brings absolute clarity on the issue of warranty and project portfolio liability?

Looking at this objectively, and thinking of the worst case scenario, how much might it cost to decommission a digester tank? What is the potential loss of revenue? How much could the repair costs amount to and who is picking up the bills? The solution to those problems is surely to remove the potential for them happening in the first place?

When working with manufacturers that provide an ‘end to end’ service that includes installation there has to be huge value in procuring a turnkey package. Put simply, a single source supplier results in one point of contact when product performance and warranty issues may need to be considered.

The influence of economics and budgets will always be present when procurement of materials and equipment is taking place. To the same end, if product is being purchased from one company with another undertaking delivery, and yet another supervising the installation, then the importance of being clear on who is responsible should the product underperform can be critical.

Clients must have clarity on who is responsible for each part of a multi-channel supply chain and, more importantly, how it affects product performance and warranty when the project is operational. In the absence of clarity then, in reality, the responsibility will revert to the client. That 5% saving then becomes very insignificant - wouldn’t you agree?

Notes to editor

Balmoral Tanks is a leading European tank design and manufacturing company. A division of Balmoral Group Holdings Ltd the company produces what is believed to be the most comprehensive range of tank products available from a single source in Europe.

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Steve Gibb
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