Buying Metal-Stamping Dies—Part 1
January 1, 2008Comments
Have you considered outsourcing as a to help reduce costs or improve your business relationships through better turnaround time and volume? It’s a worthy consideration, but you should be aware that outsourcing is not a fail-safe strategy and there are many things to consider beyond price.
Many contract-stamping manufacturers also have the ability to build their own tooling inhouse. On occasion, they may obtain tooling from an external tool and die shop. This is commonly referred to as outsourcing.
Outsourcing can result from high toolroom workloads and short customer delivery requirements. For some companies, outsourcing is part of an emerging or existing business strategy. Sometimes outsourcing just seems to make the most economic sense.
If you are considering whether to outsource your next tooling job, first conduct a make-buy study.
Knowing the total cost in a make-buy study begins by gaining a comprehensive understanding of the real internal costs for manufacturing compared with clear knowledge of your supplier strengths and areas of leverage. A high-quality make-buy study should include a thorough evaluation of the following:
Design and Engineering—Does the project require designers and engineers with varied experiences? Does the project require unique processes and engineering skills? Does your engineering department have the full range of capabilities and design tools (CAD, CAM and CAE) needed for the project under consideration? Will the project require extensive internal communications with management, manufacturing, engineering and quality disciplines? Do you have experienced project managers that can communicate effectively with internal and external customers and tool sources?
Cost, Price and Delivery—Do you know your fully allocated internal fixed and variable costs? Are they higher or lower than outside supplier costs? Would your internal marginal costs be lower or higher using an outside supplier? Did you account for your supplier’s geographic location? In-bound freight, taxes and duties can offset any perceived savings, not to mention the additional transportation time. Airfare, car rentals, hotel bills and meals can add up quickly, especially if the project develops problems.
Other Considerations—Products or processes that comprise your core business activity, especially those containing intellectual property (IP), are not good candidates for outsourcing, regardless of the cost savings. IP products that differentiate your company by providing better products at competitive prices usually provide enhanced market share and greater profits. The engineering know-how you developed for these products and processes should be kept internally as much as possible.
Do not overlook the possibility that you may have customers requiring you to have inhouse capability and capacity. They may not allow or permit outsourcing. Be sure to read your contracts thoroughly.
Regardless of your reasons to outsource, proper planning, sound execution, continuous communication and regular follow-up are essential elements and each has an associated cost.
