Having issues with quality from an offshore supplier, a commodity buyer worked with PFI Precision Machining to develop a solution that resulted in significantly lower total procurement cost.
Problem with Offshoring
A commodity buyer of machined parts used in an automated assembly cell was directed to reduce costs. In this cell, the assembly process is highly automated. The component parts are fed into automatic feeders and the assembly machine produces a complete final assembly in seconds. The plan to reduce costs was to find the lowest part price that could be obtained from a qualified vendor, ultimately resulting in an offshore source. Unfortunately, the assembly machine frequently shut down because of undersized parts. Attempts to have the offshore supplier implement a permanent fix were not successful.
PFI's lowest cost Solution
Eventually PFI was given an opportunity to get involved with this project. PFI worked to offer the total lowest cost solution. Considering the total procurement cost including occasional downtime, overseas freight, duties, expediting, and the cost of having a three-month lead time, which slowed down design improvements and adjusting to market volume increases or decreases, the customer’s overall total cost was much less and the quality of PFI’s finished part much higher.
Results of Reshoring Manufacturing
Now their shop operations enjoy a very high uptime on the assembly cell, in addition to quick response to design or volume changes. The process engineer said that the total cost of the offshore sourcing attempt was several hundred thousand dollars. “It is difficult to say exactly how much because so many of the costs were difficult to measure”, “To be honest, I don’t think management really wants to know, I am just glad it is over”
Taking into consideration the per unit cost, equipment downtime from parts out of specification, overseas freight, duties, expediting and long lead times, this commodity buyer realized a greatly reduced total cost, and a greatly reduced stress level.
