Four Main Reasons to Outsource Overflow Work to ETM

This past week has been a busy week with overflow customers – these are customers that make their own products, but are so busy, they are willing to pay extra to build outside. We consider this a great compliment. The folks that do this work every day have decided to trust ETM to make parts as good as they do. Even more importantly, they are willing to pay more than their internal costs. Why would they do that? Here are the four main reasons:

1) They ran out of time.

Most OEMs make the decision to outsource early on through some sort of make versus buy decision process. Perhaps they thought they had more capacity and decided to make the parts only to find out they really didn’t have the time. Now they are under the gun and the extra cost of outsourcing is better than the potential loss of business for being late.

2) Outsourced manufacturing is cheaper than union over time.

Sometimes during the make versus buy decision OEMs know they are over capacity, but overtime is planned or the overtime cost is less than outsourcing. At other times – typically when the labor is expensive or the shop bottleneck is expensive – outsource makes sense financially. In these situations there is enough time to get a good price and a reasonable delivery time.

3) New orders outstrip capacity.

Our best customers have a great design that takes off faster than planned. They simply cannot keep up with production. In this case, they look at the total lifetime revenue of the customer and quickly make a decision to outsource to maintain the customer relationship. If business continues, then they add the capacity directly, but if it doesn’t, they avoid the added costs. Even companies used to adding temp labor still have to find, hire and train the temp labor (plus pay the 25% mark-up). Outsource allows for immediate ramp up and the workmanship is guaranteed.

4) We simply do it better.

One company has an older laser which does fine for most of their products, but sometimes it makes sense to outsource parts to our faster last (or even faster EM Punch). Another company is developing products that require tricky welding and they’re welders have been struggling to make the parts. Sometimes we can innovate in fixturing to help them save money. Sometimes we can spot weld the part instead and they don’t have the spot welder.

No matter what the situation, ETM Manufacturing specializes in custom solutions for custom sheet metal. Sometimes this means helping you keep the product in your plant and we help improve your process. Sometimes, this means we build your product in our plant, put your name on it and send it directly to your customer. Most times, we work together to figure out the right amount to outsource that works for you. Interested? Call me to sort out the best approach.

from ETM Manufacturing http://etmmfg.com/3518
from American Quality Management http://aqmauditing2014.tumblr.com/post/126119340210