|Blogger: Pete Ulintz|
Technical Director, Precision Metalforming Association
Outsourcing may be the required due to excessively high workloads in the tool room or short delivery requirements from the customer. For some companies, outsourcing may be part of an emerging or existing business strategy. Sometimes, it is simply be a better economic choice.
When considering to outsource any tooling, either domestically or internationally, you should first conduct a “make-or-buy” study first. A high-quality make-or-buy study ought to include a thorough evaluation of the following:
Design and Engineering Capability: Does the project require you to have die designers and engineers on staff with varied experiences? Does the project require unique processes engineering skills that your company does not possess? Does your engineering department have the full range of capabilities and design tools (CAD, CAM and CAE) needed for the project being considered? Will the project require extensive communications with internal management, manufacturing, engineering and quality disciplines? Do you have experienced project managers that can effectively communicate with internal and external customers and tool sources?
Cost, Price and Delivery: Are your fully allocated internal fixed and variable costs higher than outside supplier costs? Would your internal marginal costs be lower or higher using an outside supplier? Are the overhead costs associated with your in-house processes higher or lower? Are your internal labor rates lower? Can you purchase raw materials at a lower cost than your supplier due to economies of scale? Is your in-house operation competitive in delivery, service quality and price?
Other Considerations: Airfare, car rentals, hotel bills and meals can add up quickly, especially if the project develops problems. Depending on your supplier's location, in-bound freight, taxes and duties can offset any perceived savings, not to mention transportation time.
You may have projects that would not be advisable to outsource. Products or processes that are part of a core business activity and those based on intellectual property would be two examples. Customers that require you to have in-house capability and capacity would be another.
A qualified supply base should consist of no more than three or four suppliers. When your suppliers know they only have two or three competitors they can to do a better job for you. Each company has a 25-33% chance of winning your business. If there are five or six other competitors bidding the same job, each has roughly a 15% chance of earning the business. When a supplier’s proposal department becomes very busy, attention will likely be devoted to the piece of business with a 33% opportunity rather than one offering 15% or less.
Don't rely on suppliers to do your estimating: The chances of receiving accurate quotes diminish dramatically for jobs you have not been awarded. It is not uncommon to see pricing vary by 50%, 100% or even 200% between suppliers.
The reason for this disparity is quite simple: If your company is bidding a job against four other competitors, the likelihood of you winning that business is one-in-five, or 20%. Your four tooling suppliers each have a one-in-four chance to win the business from you. But, it is a one-in-four chance at your 20% opportunity. The bottom line for your tool suppliers is a meager 5% chance at the business. Tooling suppliers that realize they are acting as your estimating department may be quick to no-quote your business, or refuse to do business with you at all.
Establishing and Developing a Supply Base: First and foremost, look for companies that have experience in your specific industry. Just because someone has extensive deep drawing experience with automotive inner door panels doesn’t mean they can build deep draw tooling for your double-basin stainless steel kitchen sink or your brass ammunition cartridges.
Reputation and references are very reliable ways find qualified sources, but you have to ask the right people the right questions. Ask for references. Find out what their customers say about their quality, integrity, past performance and workmanship. Ask how well they handle short delivery and crash programs. Do they have strong program managers? What type of products and tooling do they have exceptional strength in?
Visit their facility. Do they have the support services you require, such as: process modeling, surface strain analysis, CMM and inspection capability, laser scanning? What about reverse engineering capabilities? Do you need them? Are their tryout presses high quality and the appropriate size for your work? Do the presses have feed lines in order to tryout progressive dies?
How well staffed is their engineering department? Will you have a dedicated program manager? Is all of the engineering done onsite or do they outsource? If so, where to? Can they design in 3D solids? Do you need them to? How available are services and supplies such as foundries, tools steel suppliers, heat treating, plating and coating? Are these services readily available or is there typically five to seven days lead time?
Look for tooling suppliers that are cooperative and proactive in addressing problems. Insist they be part of a team - your team - that is dedicated to continuously improving design, manufacturing, assembly and serviceability of your process. Do they have resources to support these activities? Are they committed to building good relationships with your organization through continuous and cooperative communication?
Once you have established your potential supply base, the first obligation to communicate clearly and effectively lies with you. Your suppliers will need clearly stated (written) die design and build specifications. Make sure your technical requirements and acceptance criteria are written in a way that is clearly understood and make sure they agreed upon by the supplier in advance of any quotation.
Outsourcing can be a worthy consideration, but it is not a fail-safe strategy and there are many variables to consider. Regardless of your reasons to outsource, proper planning, sound execution and resolute follow-up are required and all have costs associated with them.