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Expanding Choices for Automation Buying

To buy online, or to use a distributor? That is the question.

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Procurement poses problems for every company from time to time, and it was one of those times for Samuel Jackson Inc., of Lubbock, Texas. Nestled in the heart of the largest cotton patch in the world, the builder of cotton-gin equipment learned that its programmable logic controller (PLC) of choice had become obsolete and would no longer be available. Its engineering staff would have to find a new one that made sense for its dryers, heaters and other moisture-control equipment.

It was then that the staff came across an advertisement for a brand of PLC that was much cheaper than the one its distributor was offering. The downside was that these controllers were available by mail order over the Internet from AutomationDirect, a supplier halfway across the country in Cumming, Ga. So, besides wondering about the reliability of a controller unknown to them, the engineers also wondered whether a faraway company would be able to stand by its products and provide technical support when they needed it.

These are the typical concerns that arise whenever users consider buying automation from the relatively new class of online suppliers that have adopted an business model. Making the decision even more difficult is the fact that many of these suppliers disappeared when the dot-com bubble burst earlier in the decade, and many of the survivors have been seeing only slow growth since then. So, the natural question is, why should an end-user give up its relationship with its local distributor?

Five to one

For Jackson, the initial answer was price. “We could buy five of the PLCs for the cost of one of the ones that we had been using,” explains Mark Gentry, a controls specialist at Jackson. “We decided that, even if the product was not reliable, we could replace it a few times before we would spend as much money.” He and his colleagues decided to give the Koyo PLC from AutomationDirect a try, and developed a new heater based on it.

They discovered that their initial fears were unfounded. Not only was the product reliable, but so was the technical support. In addition to providing tutorials and documentation online, AutomationDirect runs a phone-support hotline that usually connects callers to “hands-on” technicians within three minutes. “The technicians on our staff have live equipment in their offices,” explains Gary Marchuk, the supplier’s director of business development. “So, if someone is calling about a PLC programming question, our technician is looking at the same software, live, with the caller.”

This service is important to Jackson because its engineers do their own programming in order to reap the greatest return from the company’s investment in both the PLC and its designs. “We buy a fairly inexpensive PLC and pack it with 36 analog inputs that we update every 50 milliseconds,” says Gentry. “In the past, we learned any PLC that we’ve used better than the local distributor did.”

In the company’s heaters, for example, a PLC modulates the gas valves directly, rather than overseeing a prepackaged combustion controller from one of the big automation manufacturers. So the engineering staff writes and optimizes its own combustion-control logic for the burners that it has designed for drying cotton.

They also program the PLCs to extract diagnostics and provide the necessary safety interlocks. “A cotton gin is a fairly unique environment because it runs 24-seven for about three months of the year,” says Gentry. “Then, it is shut down, the doors are locked and nobody looks at it again until the next year.”

He reports that he has not been able to stump AutomationDirect’s technicians nearly as often as he used to stump his old distributors’. The reason is that these technicians have an advantage: They are supporting the PLCs and human-machine interfaces (HMIs) made by their employer’s parent company. The technicians, therefore, have access to more resources and tend to know more about their own company’s products than most distributors would.

In the few cases in which Gentry did stump technical support, the technician was able to contact the design engineers in Japan and have an answer for him the next day. In a couple of cases, the solution involved new firmware. “When you attempt to do that through a distributor, it can take two weeks before you even get to the right person to ask the question,” says Gentry.

Is it in stock?

Another kind of reliability that he likes is availability: AutomationDirect almost always has what he needs on the shelf when he needs it, and ships 99 percent of orders received by six o’clock on the same day. The ability to receive PLCs within a few days is important because Jackson’s business has a seasonal component to it. Cotton-gin operators typically wait until they can see how good the harvest is going to be before they embark upon any capital-improvement projects. This usually leaves Jackson four to six weeks to finish building its products and ship them. “Having a reliable supply gives us the flexibility of being able to order the most expensive part of our products at the last minute,” says Gentry.

Online suppliers find that they can afford to stock more of the products that they carry because they serve the entire country, and so, have a larger market. “Because of the cash-flow realities associated with serving a smaller group of customers, many local distributors don’t stock as many products,” says Marchuk at AutomationDirect. “They are probably carrying products from as many as 20 different suppliers, if not more. So, it’s harder for them to keep every item in their catalog in stock.”

These larger service areas are possible partly because of the maturation of shipping companies such as Federal Express and United Parcel Service. When coupled with the explosion of Internet technology, quick and reliable delivery allows online companies to improve their service.

An example is the way that Automation Service Interconnect Inc. (ASI) of Mechanicsburg, Pa., was able to accommodate a customer that ordered 12 of an obscure special power supply late one Thursday afternoon. “We had only three in stock,” recalls Howard Minnick, president. Nevertheless, “they all arrived on his dock on Monday, even though nine of them came from Milan, Italy.”

Besides selling automation components online, ASI also finds that it can offer custom products through various relationships that it has developed with suppliers. “The Internet has certainly helped with the ability to communicate quickly, accurately and with all levels of material, ranging from data sheets to drawings and specifications,” says Minnick. He reports that a custom interface module designed by his engineering staff over the phone and Internet saved one West Coast customer $30,000 a year. Since then, ASI has designed and built four more for this customer.

Distribution pros

Although the Internet and overnight delivery services have allowed direct marketers like ASI and AutomationDirect to carve a niche for themselves, there is still a need for local distributors. Manufacturers of automation cultivate relationships with these distributors to provide various services that streamline the sales of their products. These services can range from support and service to putting complementary technologies from various vendors together into kits or even pre-assembled units.

Some products really cannot be sold without such services near the point of use. An example is the Lego-like aluminum structural framing system from Bosch Rexroth Corp., of Hoffman Estates, Ill. “Most end-users don’t want to buy sticks of aluminum and hardware and build whatever structures they need themselves,” says Kevin Gingerich, director of marketing for Bosch’s linear motion and assembly technology group. “They would rather pay a few extra dollars for the local distributor to design a structure, cut and machine the extrusions, and either package the pieces of hardware into a kit or deliver the completed assembly.”

In some regions of the country, some distributors do more than provide kits and assemblies. They actually provide some systems integration. “Most of our customers are leaner than they used to be and don’t have as many engineers and maintenance technicians on staff as they used to,” explains Clifton Vann, president of Livingston and Haven Inc. (LHI), a distributor headquartered in Charlotte, N.C. Consequently, they are looking for more support from LHI in the form of installation knowledge and sometimes even labor.

Because LHI’s expertise lies in motion control, it offers engineering and integration services, in addition to operating its industrial outlets for hydraulic and automation components throughout the Southeast. In one project, its staff designed and built racecar-suspension testers for a few Ford National Association for Stock Car Auto Racing, or NASCAR, racing teams in the area. “You can buy all of these products cheaper from somebody else,” notes Vann. “If your business is building race cars, though, you’re probably not an expert at building such devices.”

Although LHI isn’t either, it is expert at synchronizing cylinders and measuring loads. In the end, the tester is not much more than an up-acting, four-post press that requires a certain level of positioning accuracy and takes force measurements. As a distributor for Bosch Rexroth, the engineering staff was able to exploit its experience with the design efficiencies built into the product line.

Bosch’s linear motion and assembly technology group has designed its products to plug into its modular structural framing system. “The window for designing, purchasing, building and delivering automation to the end-user has shrunk considerably, so most manufacturers of automation try to make their products modular,” explains Gingerich at Bosch.

After the sale

No matter how much or how little work that a distributor might do for a user up front, most users rely on the distributor for after-sale service. When taking on a product line, especially technical products, distributors send their technicians to the manufacturer for training, and often can provide routine maintenance and make repairs.

Some manufacturers even extend warranties if the distributor installs the equipment. “If one of our certified distributors starts up one of our drives, then we extend the warranty,” says Jim King, director of strategic channel development for Siemens Energy and Automation Inc., in Alpharetta, Ga.

Integrated supply management is another service being offered by a growing number of distributors over the last six years. In these arrangements, the distributor assumes responsibility for the end-user’s maintenance, repair and operations (MRO) purchasing, which includes everything from safety gloves to PLCs. Although the details usually depend on the size of the company, these agreements typically have the distributor manage the stores of these items on consignment.

Part of the rationale is that the user need not tie up capital in a pallet full of supplies that it might not consume for months. Another part is that the distributor is in a better position to negotiate deals with the manufacturers on these items because it buys them in much larger quantities than an individual plant does. Yet another rationale is that outsourcing the MRO purchasing function reduces transaction costs. “Even if it’s a Visa card purchase over the Internet, there is still a significant transaction cost for the end-user to cut a purchase order each time that it buys a small component individually,” notes King.

In these cases, buying online would be just a convenient way of overcoming those occasional procurement problems that pop up from time to time. And the distributor would be the primary way of buying automation.
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