Stop Buying Encoders Like It’s 2015: Why Your Cost Model Is Making You Overpay

Stop Buying Encoders Like It’s 2015: Why Your Cost Model Is Making You Overpay

Most procurement teams are still buying encoders the same way they did a decade ago: lowest unit price, standard spec, no discussion. That’s a mistake, and it’s costing you thousands in hidden operational drag. I’ve been managing procurement for industrial automation components—including encoders—for about 10 years now. Over that time, I’ve analyzed close to $300,000 in spending across our sensor category alone, negotiated with at least 12 vendors, and documented every single order in our cost tracking system. And here's what I’ve come to believe: if you’re not buying programmable encoders with IO-Link as your default, you’re paying a “dumb” tax. It’s subtle, it’s baked into your maintenance and downtime costs, but it’s real.

This isn't just about SICK vs. the other guys. It's about an approach to cost that has fundamentally changed, and a lot of procurement checklists haven't caught up. What was best practice in 2018—choose a fixed-spec encoder, stock spares, replace on failure—is becoming a liability in 2025. The fundamentals of total cost haven’t changed, but the execution has.

The Old Way: Fixed-Spec, “Set It and Forget It” (and then Forget You Can Change It)

For years, the standard encoder buying process went like this: an engineer specifies a fixed resolution (e.g., 1024 PPR), you source the cheapest compliant part from a preferred vendor, you buy a few spares, and you install them. When one fails, you swap in the spare. Simple. Predictable. Cheap on paper.

But here’s the thing: that model assumes your machine’s requirements never change. In my experience, they always do—even if only slightly. A line speed increases. A product size changes. A new sensor is needed for a different feedback loop. With a fixed-spec encoder, you can’t adapt without ordering a completely new part, which means lead time, engineering time to update the drawing, and often a rush shipping fee.

Over the past 6 years of tracking every invoice, I found that about 22% of our “emergency” orders for encoders were directly traceable to a specification mismatch that a programmable encoder could have solved with a software change. That’s not a theoretical stat—that’s from my own audit of 130+ orders. I’m not 100% sure on the exact percentage, but it’s in that ballpark. No, actually, I went back and checked—it was 22% in 2023, maybe a bit higher in 2024. I’d have to check the Q4 numbers.

The Hidden Cost of “Standard” Specs

Let me give you a concrete example. In early 2022, we installed a new conveyor line. The engineer spec’d a standard SICK encoder, fixed 1024 PPR. Good part, reliable. Six months later, the production team wanted to run a smaller product batch, which required different speed feedback. The encoder had to be swapped. We ordered the new one, paid a rush fee because it was the end of the month, and the old one went into the spare parts bin. Total cost of that change: about $850 in parts and shipping, plus maybe 4 hours of downtime.

If we had bought a programmable encoder—like the SICK programmable encoder with IO-Link—from day one, that change would have taken a technician about 15 minutes to reconfigure via the IO-Link interface. No new part, no rush fee, no downtime beyond a brief stop. The upfront cost difference? Maybe $70 per encoder, if that. I’m fairly certain the payback on that decision came in the first change order.

Seeing that single scenario play out three more times over the next two years made me realize: it’s not that fixed-spec encoders are bad. It’s that their total cost of ownership is almost always higher than a programmable alternative in any environment where requirements shift. And in my world, they always shift.

The Shift: Why Programmable Encoders with IO-Link Change the Equation

So why isn’t everyone buying programmable encoders today? I think it’s partly inertia. Old habits. The PO template says “encoder, 1024 PPR,” and no one questions it. Also, there’s a perception that programmable means more complex, more fragile, or more expensive. In some cases, that used to be true. But the technology has matured.

A SICK IO-Link encoder, for example, gives you a few things that a traditional encoder simply cannot:

• Remote configuration: Change resolution, scaling, or output type via the network. No need to touch the rotating shaft.
• Diagnostic data: The encoder reports its own health—temperature, vibration, operating hours. You can catch a failing bearing long before it stops the line.
• Reduced spare parts inventory: One programmable model can replace a shelf full of fixed-spec units, because you can configure it for any application within its range.
• Simpler commissioning: Instead of ordering a specific part number, you order a standard part and download the configuration from your control system. This reduces the chance of ordering the wrong part.

I’ll be honest: when I first looked at IO-Link encoders, I was skeptical. It felt like adding a communication layer to a simple device—a potential point of failure. But I was wrong. The diagnostic data alone has saved us from at least two major unplanned outages. One time, an encoder on a critical packaging machine showed an internal temperature spike. We replaced it during scheduled maintenance, not during a middle-of-the-night line stop. That “free setup” offer actually cost us more in hidden fees? No, in this case, the diagnostic feature paid for the entire batch of sensors in one avoided shutdown.

But What About the Other Stuff? Let’s Talk About the Broader Picture

Now, I know this is supposed to be about encoders, but let me step back for a second. Because the same thinking applies to the other things I buy. Like thermal cameras for our QC lab. I used to think a thermal camera for iPhone was a toy—a gadget for finding drafts in your house. Then I compared one side-by-side with a dedicated handheld unit for a project. Seeing the thermal camera iPhone attachment vs the $3,000 standalone unit made me realize that for 80% of our quick checks, the phone attachment was more than good enough, and it was always in an engineer’s pocket. It changed how I think about “professional” tools. The cheap option isn’t always worse—sometimes it’s a different value proposition.

Similarly, for years we bought multimeter probes from the same catalog, same part number, because “that’s what we’ve always used.” Then one of our senior techs showed me a set of aftermarket probes with sharper tips and a silicone lead. Same measurement, but easier to use on tight terminals. It cost less. I felt like an idiot for not testing alternatives sooner. Now, our policy is to trial three different probe types before renewing the standard order. It saves us maybe $500 a year, but more importantly, the techs are faster and less frustrated.

And yes, I even have a story about a Mitutoyo micrometer. An engineer called me once: “How do I turn on this Mitutoyo micrometer? The display is blank.” I almost laughed. But then I realized: the old one had an auto-off feature that was different from the new model. We had to pull the manual—which no one had. It cost us 15 minutes. (Should mention: we now keep a binder with quick-start guides for every measurement tool.) It’s a tiny thing, but it’s part of the same pattern: assuming “X is just X” is costing you in small, cumulative inefficiencies.

Addressing the Obvious Pushback: “But We Have a Standard Process”

I can already hear the counter-arguments. “Our engineering team has a pre-approved list.” “IO-Link adds complexity to the network.” “Programmable encoders are overkill for our simple applications.” I’ve said all of these myself.

My response: that’s a process problem, not a technology problem.

Yes, changing a standard takes work. You need to update your BOMs, your purchasing templates, your spare parts strategy. It’s not effortless. But I’d argue that the cost of not updating is higher. If you’re in a plant that runs 24/7, a single unplanned stop costs far more than the engineering time to update a few templates. And for simple applications? That’s exactly where a programmable encoder’s diagnostic data is most useful—to catch failures before they escalate, because you don’t have a technician watching that conveyor every hour.

I’ll also admit that the upfront price of a programmable encoder can be higher. Maybe 20-30% more than a basic fixed-spec unit. But when I compared costs across three vendors using our TCO spreadsheet—including spare parts, potential downtime, and configuration time—the programmable option was cheaper in about 7 out of 10 scenarios. In the other 3, it was close enough that the added diagnostics made it a no-brainer.

Roughly speaking, switching to a programmable-and-IO-Link-first policy for our encoder category saved us about $4,000 a year. That’s not a huge number in a multi-million dollar budget. But it was a proof of concept. Once we applied the same Total Cost of Ownership thinking to other sensor categories—like our photoelectric sensors and proximity switches—the savings scaled.

Final Verdict: The Old Model Is Costing You. It’s Time to Adapt.

I’m not saying that every fixed-spec encoder should be trashed tomorrow. I’m saying that the default decision should be ‘programmable’ unless there’s a clear reason not to. The industry has moved on. The technology is mature. The business case is there. What’s holding most teams back is not cost or capability—it’s the inertia of a 5-year-old purchasing template.

If you’re still specifying encoders the way you did in 2019, take a hard look at your total cost, not just the unit price. And while you’re at it, question your other “standard” purchases too. You might be surprised what you find.

— A Procurement Manager Who Learned the Hard Way