Richard Lundin

Problems that stem from using a single-source supply chain combined with the lack of Intellectual Property (IP) ownership were recurring themes during my visit to a U.S. Military depot last month. During a half hour briefing I attended, the brass made two things clear to department heads and visiting suppliers. First and foremost was a clear directive to buy the IP rights when paying for development of an engineered product or a weapons system. The second was to obtain more than one source for a service or part.

Sole sourcing without purchasing the IP saved money for the military in the late 20th century. But the decision has come back to haunt them. They are paying millions for reverse engineering because they don’t have access to the IP, or the production files of aging devices and systems that they still need.

Private industry could take a lesson from this U.S. government epiphany; get a second source for those parts before you need them, and make sure you own the IP. Although you will probably source a low volume part through a single supplier, identifying and qualifying an alternative manufacturing chain could save your business in the long run.

I have talked with a number of private companies over the last few years that, for one reason or another, have added a third variable to the single sourcing dilemma. These not-so-small companies have single-sourced their product engineering and production management to companies that are actually just one or two people working part time out of a garage. I’ve also learned that the decision to use a mom & pop shop is generally driven by cost. While this may save money initially, and let me lean heavily on the may, it also leaves your company vulnerable from a product availability standpoint. How long can your company do business without the product you now source from those nice folks: a month, a quarter, or a year?

If you own the production files and IP, you can begin manufacturing with a new resource fairly rapidly depending on parts availability and the complexity of the printed circuit board. Yes, you will pay more for a professional engineering group, their expertise, and resources. The IP rights will cost as well, but in the long term your company will have the flexibility to manage your critical supply chain and meet your customers’ needs.