Penny Wise, Pound Foolish

>> Wednesday, June 30, 2010

Dell's woes are in the news, how they had potentially millions of business/education computers with faulty motherboards.

There's quite a story there. Apparently, there was a family of electrolytic aluminum capacitors manufactured in Taiwan that became very popular even though they were only a fraction less expensive than the Japanese parts. Millions were used only to find that they were counterfeit, using an flawed formula that caused failure, often within six months.

Dell, of course, was not the only victim of these counterfeit parts. Many were duped (estimated cost of this specific set of faulty capacitors was estimated at $100 million (though I'm not sure that tally's done). Many no doubt had to replace equipment as a result. Dell's reaction stands out because of the denial of problems and replacing defective parts with more defective parts. You know, sharing the pain.

But the part that gets me is that the thinking that allows a counterfeit part to get into critical equipment, the thinking that saving a penny today without understanding the repercussions is fine. It's behind the BP fiasco. It's behind many so many companies being taken in by counterfeiters, too. They don't take the trouble - after all, many times, the consumer will be the one to suffer if the parts fail earlier than intended with minimal repercussions on their own.

But, as BP and Dell both know now, that thinking can backfire, rather dramatically.

We need to be thinking of this kind of thing as we make decisions today. I understand how tempting it can be to save a penny here and there today and figure that will do. But, in the long run, doing it right the first time always costs less than redoing it, particularly after it's been put into use, put into space, put in a critical component.

Often much much more.


  • Roy

    I absolutely agree. It may cost me a little more, but I often choose the more costly item over the cheap version because I want things to work and last a while.

    Oh, and one more product to add to your list - the cheap drywall from China that ended up smelling terrible because of high sulfur content that only showed up after it had been up for a couple of months. It flooded lumberyards and home improvement places (Home Depot, Lowe's) throughout the South, and a lot was used in the Katrina aftermath, much to the dismay of people trying to get their homes back up.

  • Boris Legradic

    I think this kind of thing happens more easily in big companies. Procurement will happily buy a cheaper component (and a few pennies mount up quickly if you are talking the kind of output Dell has), maybe without doing the kind of testing they should. Why? Because if the component doesn't meet specs, Dell can always sue the furnisher, right? That's what the legal department is for.

    Nobody thinks about the big picture, because nobody has an incentive to do so - you worry about your departments budget, not about the company as a whole. It's an intrinsic problem of big companies, and I don't think there is an easy solution to it - if there is a solution at all...

  • Stephanie Barr

    Of course there is. Set standards, require traceabiliyt, test your equipment, refuse what fails to pass muster. People who say they can't do so don't want to take the trouble to do it right.

    Once piece parts are incorporated into a computer, a $.50 capacitor failure can cost hundreds of dollars. Multiply that by millions of units and you'll never recover those from a manufacturer (more so, of course, by counterfeit parts). From what I heard, the x on the end of the capacitor (etched in to allow leak, not burst) was silkscreened on some - explosions are dangerous. There's no excuse to ever let capacitors like that populate a motherboard.

    And you sure as heck should know your equipment is good when you replace the original faulty part.

    History is replete with manufacturers who dragged their feet and fought tooth and nail against having a safety or reliability feature included in their process - only to find out it saved them money in the long run. It's this "profit today - screw the future" thinking that does so many in.

  • The Mother

    My dad was recruited to General Dynamics in the early 70s to tell them why their F111s kept falling out of the sky.

    After a year of testing, he narrowed it down to a fracture critical part which was being manufactured by a subcontractor, who was using faulty methods.

    They weren't a fly-by-night company. They just had a couple of supervisors who didn't understand how critical one juncture was to the process.

    The point?

    These things happen in manufacturing. And when they do, you better hope there's only one or two guys on the plane (and they have parachutes).

    And one more from the metallurgy trenches: the TItanic went down because of substandard rolled steel that was used to build the hull. Apparently, the glancing blow they took to the iceberg should have just dented it.

  • Shakespeare

    We see it on a big scale, yes, but our little choices make a difference, too. It's our little choices that add up in our own lives as well...

    Every little choice matters.

  • Stephanie Barr

    They happen at NASA, WHEN people waive the requirements or fudge the testing. All the money "saved" by these "cost-cutting" methods added up over the life of the space program wouldn't add up to the cost of transporting and installing a single repair on orbit. And there are dozens of examples.

    Sometimes it's a design problem - that happens, sneak circuits and bulkheads that don't reach the top of the ship (which also might have saved the Titanic or given them more time, at least).

    My understanding was that the steel was actually high quality steel for the time; however, the impurities gained by milling in Glasgow contributed. The metal was certainly substandard compared to modern steels, but was considered among the best at the time. I suspect they didn't appreciate the effects of cold (the impurities change the ductile to brittle transition). Additionally, they didn't use the best rivets, another potential factor. Good info here.

    Using the "for want of a nail" analogy, Titanic actually was short quite a few nails.

  • Stephanie Barr

    Agreed, Shakespeare.

  • Jeff King

    Amen... I try and take this approach with everything. Buy quality and it will pay for itself, buy cheap, expect to buy another.

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