The signs are clear. As the economy slows down, pressure to reduce costs goes up. Whether it's the finance department cutting budgets or consultants promising 10-15 percent cost reductions, distributors around the country are being forced to reduce "first cost" to customers. In an industry where margins are already squeezed and the fat is gone, that means finding another source. Lost in this furor are the focus on quality and, more importantly, the understanding that quality is about lower life-cycle costs.

Quality is increasingly perceived as a "nice to have." In its place, people are looking for the "good enough" lower cost source. That approach saves you money today, and may help make this quarter's earnings, but the total system cost of that decision far outweighs the immediate savings.

For example, a customer insisted on using 150# stainless cast unions versus the more expensive 1000# stainless bar-stock unions. A few months later that union sprung a leak on a weekend. The maintenance worker got another 150# cast union from stock. In tightening the union, he stripped the threads on the thinner wall of the cast product. Four unions and 1-1/2 hours later, they had the line back up.

Let's do the math. If four replacements cost $10 each, plus a labor rate of $40/hour, that makes $100 in direct costs — not to mention the lost production. Bar-stock unions cost approximately $30 — this customer spent $100 to save $20. I wonder how the finance department liked that?

Why should this matter to me, you might ask? Shouldn't I prefer to sell 5 units instead of just one? It matters because it makes good business sense for me as well. I want my customers to succeed as much as they do. As a distributor, I'm not looking to be a short-term vendor — we haven't been in business 80 years by doing that. I want to be a long-term partner in my customers' success, and that means offering the best solution.

Don't get me wrong — there are opportunities for cost take out in both up and down markets. Product standardization, improved inventory management and even product substitution reduce costs — but let's not get a quick hit by price shopping and sacrificing lifecycle cost for a short-term price reduction.

What, then, are a customer and distributor to do? They must work together to choose quality appropriate to the severity of the application. We owe it to our customers to explain the differences between products — to demonstrate where a viable, lower price option exists and, in other cases, where the money is worth investing.

We must also work with purchasing to help make this case to their spreadsheet-focused finance departments. Finance may worry about quarterly performance, but they also speak the language of net present value. We can help purchasing demonstrate the lifecycle costs of a product and what that is worth today.

Every company needs to focus on margins these days, but let's not cut off our nose to spite our face. When talking about cutting costs, higher quality product is not the problem; it's often the solution.