A friend of mine was so happy when he was awarded a 4500-piece T8 LED tube light replacement project with a 35,000 hours warranty caveat. The turnkey project was to replace 32 W fluorescent tube, commission and perform monthly lux monitoring for 6 months.
The basic specs were 18 W, 110 lm/W, CRI >80, PF >0.98, 6000K, 500 Lux under the 2-tube troffer installed about 8 ft high. After 3 years he is still replacing the tubes.
How he won the bid?
His strategy was to go for the lowest price and do a back-to-back warranty with the factory. To maximize profitability, he flew to Shenzhen, China to negotiate for the best price. He visited the factory and saw a range of designs ranging from $2 to $20 per tube. He negotiated down to $2 per tube ex-factory. He paid 50% down payment. He arranged for door-to-door logistic including import duty, taxes at $1 per tube. All these took only 3 days. He left happy. The tube cost about $2 plus $1 logistic.
He quoted $5 and was happy with the 67% margin with no middle man. The factory Facility manager is his friend.
The 24 by 7 factory facility manager did a simple benchmark by comparing with another similar product with a different specification. The decision matrices for decision making were:
- Save Energy as compared to Fluorescent Tubes
- Shortest payback time and the best price
- Must have at least two quotations
Table 1 shows the comparison table and Proposal B won the deal. The justifications were:
- Proposal B saves $153,738 annually vs Fluorescent. Thus, Energy Savings
- Proposal B has shortest payback time at only 2 months vs 5 months for Option A
- Proposal B has a lower CAPEX at $31,500 vs $76,500 for Option A.
- Proposal B’s tube was 3 times cheaper than Proposal A. Saves $10 per tube.
Facility’s Key Performance Index (KPI) was to save energy with least capital. Purchasing’s KPI was to negotiate for the lowest cost and shortest payback period. Everybody met KPI.
Within 6 months, 100% of the Production area lights have to be replaced due serious light decay, high third harmonic distortion affecting the factory’s device high frequency testing. About 2000 tubes were affected. The China supplier has since shutdown and most emails have not responded. After 3 years, my friend is still replacing the lamps with a different supplier at higher cost.
- Production has to stop for each tube replacement. Thus, special arrangement with a hired crew to perform replacement in short period of time.
- In clean room operation, each change requires complete shutdown due to particle count stabilization issue. The decision was to replace with a more expensive industrial grade T8 to avoid another replacement scenario. This was done at my friend’s own expense.
- Some of the light decay is random. Some came after 3 months, some after 6 months. A lux measurement has to be taken as new standard operating procedure.
- High Frequency device testing yields dropped immediately after conversion. Took 3 months to find the root cause of the low yield. It was due to high THD from the tubes.
- As a supplier, he has other businesses with the factory; thus, following the 4-year contract diligently. The facility manager is his friend. Stuck between a rock and a hard place.
I had the opportunity to help perform the failure analysis trying to understand what went wrong. The tube topology was very similar to any standard tube. Visually, it was a nicely built product. All documentations showed proper CE, ROHS certifications, LM80 LED component from top tier supplier, 6000 hours light decay information and Integration Sphere data. The tube met all the customer’s paper requirement.
Is a $2 dollar T8 possible?
To my amazement, a $2 Build of Material (BOM) is possible with a margin.
The failure analysis results
Based on the serious light decay, I suspected serious thermal management issue. I did a complete tube tear-down to understand further by probing the LED junction temperature and understand how the heat was dissipated.
The tube tear-down key observations:
- The junction temperature of LED component was at above 85 degrees Celsius.
- The FR4 was glued to the glass body. Imagine gluing a flat PCB onto a glass with curvature. The center has more depth. No consistency through out the length of the tube.
- There is no thermal interface material for heat dissipation. Glass is a poor conductor. The generated heat is trapped inside.
- The glass feels ‘cold’ to touch. My friend was convinced the tube has best thermal management. A big mistake.
- The LED was driven by AC LED topology with no capacitor or driver. There were a few rectifiers to protect the LED. The LEDs were arranged in series/parallel topology to improve the power efficiency. The Power Factor was excellent at 0.98. The THD was more than 35%. THD and flicker were not part of the specifications.
- Most factories require <20% THD. The light flickers badly when observed with a mobile phone camera.
- The end cap when torched caught fire easily. Looks like the plastic is not UL94 fire retardant compliant.
- The paperwork shows 48 hours aging. It showed PASS with no total lumens information.
Key Learning from the Post Mortem
- For Lighting, the light decay L70 performance is critical as it could be easily detected by a lux meter or by human eyes.
- Initial Cost is important. However, reliability and the cost of replacement could be challenging if the wrong product is selected. There are many very reliable designs in the market; thus, it is a choice.
- Lighting has an initial purchase cost and running cost; thus, using payback time could lead to a wrong decision as payback time does not consider the overall energy savings.
- The shorter payback time could mean selecting a less reliable and a less efficient product. The real savings is the running cost savings after the payback period. In this case, payback period led to a compromise decision.
- A cheaper light does not mean a reliable light. Performance might deteriorate over time due to poor design. The manufacturer has to make money.
- Assuming the tube has good reliability; Table 1 shows that a long-term view by considering the Total cost of ownership is more beneficial. More savings; thus, lower over heads and cheaper production expenses.
- Proposal A has initial cost at five times more expensive than B; however, there is an additional $163K energy savings for a more efficient tube. Again, payback time only is not a good decision criterion.
- In this case, the factory was protected by the four-year warranty. In most purchase decision, the facility manager will be answerable. Saving $10 per tube created unpredictable lines down situation.
- The $2 case decision making process was straight forward. Paperwork shows compliance. Tube looks well built to a layman.
- The manufacturer has to make money. A low cost tube could mean cheap components used, poor design and some were customer’s return for stock clearance.
- It is a choice. My friend as a trader lost money in the deal due to the warranty period. Facility manager answerable to the line shutdown.
- Lowest cost tube will always have best payback time. Do not just make decision base on payback time. Consult an expert.
- Not all tubes are the same. You get what you pay for. Choose wisely.
- A wrong decision could lead to many repercussion for example, loss of production time, low yield and lower savings.
- Higher efficiency tubes yield more savings; thus, important for building owner or head of operations. More savings translate to low operating cost; thus, better margin. That is the bottom line.