The Case for Outsourcing
“Business owners face many more challenges today than in previous years,” says Bill Sopko, owner of Stamco Industries, Inc., Euclid, OH. “In the stamping industry, helping each other where it makes good business sense, possibly through outsourcing, can lighten the load.”
Case in point: Before incurring significant debt for new machinery, three stampers recently formed alliances with Stamco to use available stamping capacity. This article illustrates how pooling resources makes strategic, operational and financial sense.
Increased Capacity–Atlantic Tool & Die Company
A mid-sized stamping company headquartered in the Cleveland, OH suburb of Strongsville, Atlantic Tool & Die Company (ATD) provides precision stampings and value-added assemblies, via processes such as staking, tapping and riveting. A customer—part owner of a stamping plant that was closing due to declining orders—recently asked ATD to take over 40 to 50 part numbers. Along with the production work, ATD also was required to take on a number of additional tools for a press more than 220 in. long, exceeding the company’s capacity.
It was an all-or-nothing proposition, and ATD felt compelled to find a way to accommodate all of the new work. That’s when ATD president Mike Mehwald contacted Stamco’s Sopko. Mehwald knew Stamco was capable of single-hit, progressive and transfer stamping, with its 800- to 3000-ton press capabilities. And, in particular, he knew the firm housed two presses with bed lengths of 264 in., perfect for the project at hand.
“We jointly agreed on the quantities Stamco would process, and the purchase price ATD would pay to buy the parts from Stamco,” explains Richard Dombroski, ATD general manager. “The outsourcing relationship required construction of a large spacer to enable six sets of dies to function properly on Stamco’s biggest press.”
The spacer not only raises the level of the dies for proper operation, but also includes a nitrogen cushion to allow parts being processed to draw properly. Most of the stamped parts are for a major automobile manufacturer, including components for fan shrouds and parts for the body structure under the auto’s rear window.
Stamco’s 264-in. machine bed is used in this progressive-stamping process. Engineers from ATD and Stamco worked together to make prototypes, or pre-production-approval parts (PPAP), before entering full production. Operationally, Stamco functions as one of ATD’s production centers. All project requirements are supplied by ADT customer-service associates and ATD’s purchasing department provides raw materials. Stamco produces the required components and ships them to ATD for further processing within the ATD welding department.
“Stamco’s flexibility and input helped us engineer a way to produce these parts to the advantage of both companies,” says Dombroski. And, according to Dombroski, outsourcing the work to Stamco allows ATD to maintain a level of open capacity to accommodate additional orders as they come in, and keep the new-business pipeline filled.
Enhanced Capability–ODM Tool & Manufacturing
ODM Tool & Manufacturing, McCook, IL, a medium- to heavy-gauge metal-stamping and assembly manufacturer located near Chicago, recently was contracted to design and build tooling to stamp pickup-truck transmission mounts for a Tier 1 rubber-molding company. Finished parts route to a major automotive OEM. During the stamping process, a large portion of each mount is coined to reduce the thickness of the steel to accommodate the rubber molding. The pressure needed to coin the parts exceeded the 1500-ton capacity of ODM’s largest press.
Determine if Outsourcing is Right for Your Company …by considering these areas of concern:
• Develop confidentiality agreements, if necessary.
• Ensure there are no legal issues or conflicting customer. • Understand the logistics of the start-up.
• Have a clear understanding of the financial arrangement.
• Ensure cooperation between each company’s engineering teams.
• The outsourcing company always assumes responsibility for quality and timely delivery.
• Take care to not hurt each other’s reputation in the market place.
• Without confidence and trust between each company, outsourcing won’t work.
Facing a quickly approaching and demanding deadline, ODM president Carl Michaelsen III called Sopko, based on their relationship forged through several years of membership in the Precision Metalforming Association. When they met to discuss the outsourcing project, Michaelsen and Sopko quickly agreed to terms that benefited both companies.
ODM shipped the die for the project to Stamco for its engineering team to review, and ensure that the die would operate properly in Stamco’s 3000-ton press. In 17 days, Stamco was able to adjust its production schedule to set up the die, obtain all necessary materials and steel, and work with ODM engineers on trial runs for PPAP. A final tryout at Stamco, attended by ODM personnel and representatives from the Tier 1 customer, proved successful and the part entered production to meet the OEM’s deadlines.
An Alliance for Growth and Cost Savings–Enterprise Welding & Fabricating
Enterprise Welding & Fabricating, located in the Cleveland, OH suburb of Mentor, specializes in laser cutting, CNC press-brake forming, welding, fabricating and painting. A long-time supplier of large suspension assemblies for a major semi-trailer suspension manufacturer, Enterprise recently was awarded a significant increase in orders. When orders for suspension assemblies were modest and volumes relatively low, the firm’s processes proved efficient and economical. However, the sudden increase in orders and volumes required its engineers to reevaluate production processes.
Working with the OEM customer, the Enterprise management team decided that hard tooling and stamping the suspension-assembly components, rather than continuing with laser cutting and press-brake forming, was the way to go. Already familiar with Stamco’s capabilities through previous work, the OEM suggested a partnership between Enterprise and Stamco.
“Enterprise has the welding and assembly expertise and Stamco has the stamping equipment and the knowhow to produce large, complex high-volume stampings,” says Enterprise general manager Chris Weinkamer.
Stamco stamps this part for ODM Tool & Manufacturing, a pickup-truck transmission mount of 5.2-mm-thick high-strength low-alloy steel. A large portion of each mount is coined to reduce thickness of the steel to accommodate rubber molding around the part, to provide vibration dampening. The pressure needed to coin the parts exceeded the 1500-ton capacity of ODM’s largest press.
Nine large progressive dies were built at a cost of $750,000, which the OEM covered. For this tooling investment, the OEM realized an annual savings of $1 million. And, because of the increased volumes, the OEM also agreed to purchase mill-quantities of steel, which further reduced its costs. In the end, stamped parts were shipped to Enterprise for welding, assembly and finishing.
Benefits of this alliance were three-fold:
• Lowering its manufacturing costs enabled Enterprise to remain competitive and keep the work in the United States.
• Stamco increased the volume of work it was doing for the OEM, and increased its stamping capacity.
• The OEM will save millions of dollars during the life of the alliance.
Outsourcing Creates New Opportunities
These alliances illustrate the benefits of stampers outsourcing to increase capacity, expand capabilities and spur growth without significant investments for new equipment or plant space—some of the many strategic, operational and financial advantages of outsourcing. MF
Related Enterprise Zones: Presses
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