Another Way To Source Your Production

Rick called me last week to tell me his good news. Sales of their electric version were doing much better than expected.  In fact, they were swamping his existing stamping supplier.  After congratulating him on the success of the product line, I had to ask why he was calling.  ETM does not currently offer stamping services.  Rick knew that but he has been impressed with our sheet metal fabrication and he knows if he sends us more business, we could add an in-house powder coat line.  This is the kind of customer we like – someone who appreciates our hard work and wants to get us to the next level.  So of course we are going to try and help him.

To best help Rick, we needed to ask the tough questions first:

1. Why not help his existing supplier ramp up to the higher volume? In many cases, this saves an OEM duplicate NRE for tooling and avoids wasting valuable ramp up time. Easy solutions include adding a second and/or third shift as well as adding more equipment. In Rick’s case, his supplier had run out of room to add equipment and can’t find the people to staff a second shift. The real kicker was the supplier was using small lot production methods instead of continuous flow.
2. Why not source to a low labor cost area like the Midwest, Mexico or China? While Rick is investigating this, he knows that heavy steel parts like his will cost money to ship here. He also knows the cheapest way to do this with a continuous flow set-up (aka few people needed). With such little labor needed, the shipping costs will outweigh the labor savings. Any quality issues that require rework will be hugely expense to return or replace.
3. Why not build this part in-house? Rick’s company already has a good size manufacturing area and their steady progress in lean has opened up some space. Their growth though will fill up most of the newly found space. Besides, do they really want to invest in learning new manufacturing techniques instead of launching new products? I think Rick already knows the answer to that question, which is why he called ETM.

Working with an existing supplier to expand their capability has its advantages. We already have several years of working together and as a result, we work well together.  The quote to purchase order process is fast and efficient because we both know what each other need to be successful.  Everyone in our shop is aware of their documented and undocumented quality standards.  We have direct access to their engineering team to propose solutions or get questions answered.  All this comes with using an existing supplier so the ramp up is much shorter and a lot less complicated.

The big advantage to Rick is reducing lot size. In order to save shipping costs, Rick is ordering monthly to ship a full truck, which in turn creates a very full assembly line and eats up a lot of cash while assembly burns through the inventory every 30 days.  Rick’s company needs that cash to fund their growth, but they also need the freight savings to keep cost competitive.  By adding stamping capability to ETM’s manufacturing services, we can fill up a truck every 2 weeks with sheet metal fabrications as well as metal stampings.  Rick ads quick capacity, cuts the assembly floor WIP in half, and frees up half his metal A/P cash.  Good job Rick!

from ETM Manufacturing http://etmmfg.com/3632