The priority of cutting costs in today’s manufacturing landscape is more heightened than ever before. From full inventory visibility to product design to shipping, manufacturers realize an optimized supply chain can significantly cut costs and lead times. As projects continue to become more complex and cost margins more narrow, manufacturing companies increasingly look to metal fabricators as partners capable of yielding the best product at the lowest cost. Custom fabricators, in turn, must provide all-in-one, strategic supply chain solutions that positively impact the bottom line.
ADOPTING A COST AVOIDANCE APPROACH
Manufacturers want to keep pace with demand, meet lead times and, most importantly, keep costs as low as possible. When sourcing metal parts, the temptation for many cost-focused purchasers is to take the short-term route — a cost reduction approach. They price-shop vendors and negotiate cost per part, transportation and setup costs. As a result, value is minimized and price becomes the predominant focus.
Shortsighted cost reduction is exacerbated when reduction targets are set. For example, if a buyer receives a bonus for achieving five percent reductions each year, they have little-to-no investment in delivering 15 percent in year one. Furthermore, buyers are unlikely to support metal fabrication processes that require high upfront costs, even if they might lead to larger cost reductions over time.
By shifting to a more proactive cost avoidance approach, purchasing can avoid future increases in costs and reap long-term benefits such as reduced material, assembly and shipping costs, and minimal holding and handling costs. In addition, value-add fabrication partners who support a cost avoidance approach have the potential to contribute to sales growth, improved margins, optimized cash flow and higher efficiency.
Proactively avoiding unnecessary costs along the supply chain fosters a sustainable partnership between manufacturer and fabricator. It is critical that custom fabrication partners fully understand all aspects of supply chain optimization.
ASPECTS OF SUPPLY CHAIN OPTIMIZATION
There are many aspects involved in optimizing a supply chain. We tend to focus on three main areas — part design optimization, fabrication process selection, and total cost of ownership.
Before production begins, a careful analysis of assembly drawings, geometry, mating components and function can better identify where design improvements and inefficiencies lie. Proactive part analysis usually results in a part being produced at a much lower cost through a thorough analysis of each component’s material, function and performance. A recent customer engagement yielded this type of result through the merging of two separate parts with fasteners into one inline punched and notched part that was stronger, lighter — and 40 percent cheaper than the other two parts combined.
Conceptual part engineering is also a crucial element in the design optimization and discovery phase. Similar to proactive part analysis, conceptual engineering evaluates how a product or part can be improved and costs saved, specifically in regard to material, assembly costs and weight.
Metal Fabrication Process Selection
Obviously, there are a variety of metal fabrication processes to choose from. Deciding between press braking, roll forming, stamping, turret punching, etc., ultimately comes down to which fabrication process will produce the highest quality product for the lowest cost. To help select the right process, consider four main factors: design, material, yield and assembly.
Design: Complex part designs with multiple bends and a lot of features, such as punches, notches, or slots, are great candidates for roll forming because multiple hits can be executed through continuous progressions. The linear process of roll forming allows for a number of other operations to be performed inline as well, such as embossing, and stamped or printed serialization. Other processes, such as stamping, require multiple hits and each hit has a charge associated with it. If you choose to punch a complex section, you risk the opportunity of not meeting certain hole specifications.
Material: When selecting material, opt for stronger, lighter metals, such as light gauge HSLA or structural steel. This way the profile can be reengineered to utilize less material content and drop gauge while maintaining structural integrity. Decreased material content and product weight greatly impacts material costs, freight costs and more all along the supply chain.
Yield: Although yield varies based on need, 5,000 ft of product is usually a good benchmark for high-volume production. If 5,000 ft or more of product needs to be manufactured, it is advantageous to consider roll forming or stamping. Both are well suited for high-volume productions because per piece setup and labor costs should decrease as production levels increase. Aluminum extrusions are similarly high-yield, extruding the aluminum billet in the same linear fashion as coil processing. While extruding can produce incredibly complex shapes, drilling, punching, and tapping occur as a secondary processes and make it significantly less efficient for certain metal fabrication projects.
Assembly: As more companies try to avoid holding high inventory levels, the number of manufacturers asking fabrication partners to assemble and ship directly to customers is growing. For custom fabricators who want to be viewed as a supply chain partner, one of the advantages of owning assembly, packaging and shipping responsibilities is the opportunity to streamline the supply chain. You can efficiently process an entire run for a customer, further establishing an all-in-one fabrication partnership.
Total Cost of Ownership
The cost of tooling and associated cost amortization terms help determine which fabrication process is most appropriate. There is no such thing as free tooling anymore. If a manufacturer does not own the tooling or does not choose to amortize it over time, they end up eventually paying for it in the future. Even partially owning the tooling ties up capital, and often requires additional payment or fees to manufacture with another supplier or in-house.
Beyond amortizing tooling costs, accurate forecasting of long-term product demand is also crucial to the success of any supply chain. Develop and implement a supply chain strategy that will help manage inventory to more accurately satisfy demand. At a high level of execution, accurate forecasting ensures enough product is produced to fulfill orders without creating surplus inventory.
Optimal inventory levels help grow business and minimize holding and handling costs. To achieve optimal inventory levels, choose a fabrication partner that offers a true end-to-end solution. By amortizing tooling costs, forecasting accurately and managing inventory levels, manufacturers can have full ownership of their investments.
Ultimately, developing a strategic supply chain network comes down to aligning with those who understand total cost of ownership. Form relationships with supply chain partners that are in tune to your organization’s existing market conditions as well as emerging trends and issues. They should understand the key value drivers of component costs and have a complete understanding of price versus total cost, holistically evaluating quality, proximity, switching costs and similar factors when making recommendations.
CHOOSING THE ALL-IN-ONE PARTNER
As manufacturing companies across industries continue to rely on their supply chain excellence to stay competitive and gain market share, choosing the right all-in-one fabrication partner becomes ever important.
A trusted supply chain partner that is in tune with an organization’s market conditions, challenges and opportunities is critical for success in today’s manufacturing landscape. From product design and prototyping to fabrication and assembly, an expert, all-in-one supply chain partner can help take a company’s business strategy to the next level.
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