During the economic recession from 2008-2010, many small to mid-size companies across the plastic injection molding, metal stamping, and machining sectors endured large-scale consolidation and subsequent closings. In recent years, the economy has slowly crawled back and certain industries, most notably the automotive, are experiencing record growth and profits; demand for machined parts, especially from precision machining companies, is at an all-time high.
Currently, many companies can perform machining of some sort, however, there is limited capacity among world-class precision machining suppliers, globally speaking. With this in mind, procurement professionals face major challenges to locate and source capable machining supply partners. Each option must be approached from multiple angles and one must be conscious of all facets of the part and assembly before choosing the best supply partner for machining services.
Sourcing the right machining supply partner is more challenging than ever due to both internal and external headwinds. Too often, supply partners, across commodities, are chosen based on cost alone as a result of corporate procurement team cost reduction initiatives that focus on and reward cost reductions above all other KPIs.
While cost remains critical in any sourcing activity, we would argue that overall capabilities, experience, and quality are as important and should be weighted equally as part of the decision criteria. Before moving forward with a machining supply partner, a procurement professional must have a stringent supplier development process that ensures the following considerations are met and the results meet company goals: capabilities, experience, quality, and costs.
Machining Companies at a Glance
The machining industry has changed tremendously in the last decade and machining capabilities vary from company to company. Some focus on larger production runs at a lower cost, while others focus on low volume with greater options for customization.
Machining capabilities also vary from region to region. While there are many capable suitors in North America, Europe (most notably Germany) is known for their precision machining capabilities and many of these companies and machining processes are making their way to North America.
Modern machining companies are no longer just machining companies, most provide some form of value-adding services such as assembly, welding, plating, heat treating, painting, etc. It is extremely rare for a supply partner to only provide machining services. This industry development is why it is so critical for a procurement professional to find the right machining partner and for procurement teams to enter into a sourcing decision with a supply partner mentality, and not a supplier mindset.
When considering the capabilities of a potential machining supply partner, a procurement professional must analyze and evaluate every offering that partner provides or has the capacity to provide. One must ask, “Is this potential supply partner capable of meeting all of my business needs, and beyond, without the risk of problems during production?” Below are a few common, yet extremely critical questions a procurement professional should ask in regards to the capabilities of any machining company that is being considered for a program:
What type of machining services do they offer?
There are many different types of machining capabilities for a given component. It is important for a procurement professional to understand the many types of machining processes that a potential supply partner can offer. This is not only helpful for your understanding of the supply partner, but it may also save you on total costs. If a certain design calls for one type of machining, but a supply partner can offer another that will significantly lower costs due to a more efficient process, then it could make you look like a hero to engineering and your team when you mention this recommended process. Some of the most common machining processes include: turning, drilling, milling, boring, broaching, grinding, planning, shaping, and sawing. Some not-so- common machining processes include: grob spline forming, swaging, power skiving, etc.
What materials does the potential supply partner work with and what can they suggest?
There are many different materials that can be machined, most notably steel and aluminum variants. Certain supply partners specialize in the different material types so it is important to know not just what your potential supply base is capable of, but also what it is good at and specializes in. It is also important for the potential supply partner to understand all material variants and alternatives. Many components or products will be designed in other areas of the world and will kick off development builds in those regions, with the end goal to have production sourced in another region. In this case, it is always helpful to work with a machining partner that understands material equivalents (EN, SAE, etc.) and can suggest alternatives that are more available in the production region.
What tolerances and precision can the potential supply partner machine?
Almost as important as the material specialty capability is the capability for the supply partner to be able to machine to the size and tolerance you prefer. Not everyone can hit the precise tolerancing that some complicated components may require. Take for an example, an automotive transmission. This is a very complicated system that requires highly precise components that include, more often than not, very tight tolerances. There are a handful of good supply partners in the US that are capable of this. In Europe, there tends to be more availability of precise machining supply partners with the capability to machine tight tolerances. So, it is absolutely crucial to know exactly what the design tolerances are and how tight the potential supply partner can go, prior to sourcing them machining business.
What production services are offered by the potential supply partner?
It is important to inquire on the specific production services and/or secondary operations that are offered by the potential supply partner. Some programs will require simple machined parts and others may require full, finished, and tested assemblies. Do yourself a favor and ask these important questions:
• Can this particular supply partner finish machine the part, to print, or will they have to send out a portion of these services?
• Can they clean the part to your company cleanliness spec?
• Can they assemble the plugs and fasteners required to make it an assembled finished good?
• Can they do leak testing or conduct additional testing that is required by your company before final shipping?
Knowing answers to these questions ahead of time will save you the headache down the road.
What design capability does the potential supply partner have?
It’s one thing to take a prototype through production, but what if you require design services? Not all machining companies offer these services or are good at them. Ask each company you are considering whether they can work based on a drawing (digital or printed), whether they can translate the drawings to shop drawings, and whether they are capable of starting from scratch without the help of an initial design provided by you. Getting these questions answered upfront will allow you to be comfortable with your supply partner throughout the entire process.
Manufacturing, especially automotive manufacturing, is an industry where experience matters at both the individual level and at the company level. A procurement professional must be assured that the potential machining supply partner has sufficient experience in order to avoid future costly mistakes.
Ask about similar projects they have completed and parts they have machined. Further, don’t be shy about seeking references from past customers. A good machining company will have plenty that are willing to speak on their behalf and will welcome this due diligence.
Quality reduces total cost of ownership and saves valuable program time. Ask potential supply partners about their knowledge as it relates to industry codes and regulations. For automotive companies, being knowledgeable, experienced, and certified in various ISO/TS quality standards is recommended, and in many cases required, for certain OEMs and Tier Is. It is important to have the suppliers’ signoff on component manufacturing feasibility ahead of purchase order award to mitigate supply risk. Further, be sure to have potential supply partners describe how operations have continuously improved over the years to be as efficient and safe as possible.
As a rule of thumb, it is always recommended to attain at least three quotes from highly-qualified potential supply partners. Once attained, compare costs across the board as it relates to the program, keeping in mind that attaining an apples-to-apples comparison amongst machining companies is not always easy. One company might use a higher quality material or more precise cutting tools, meaning you can expect fewer costly mistakes in the long term. Some are priced higher because they are smaller shops that offer more customized services or less common machining processes.
While bulk can be cheaper, it might not be right for your specific project. Certain projects and designs will require machining processes that may offer higher tooling costs and lower piece costs, or vice versa. It is important to understand the full program costs before rushing into any sourcing decision.
Make sure that the RFQ you send to each supplier details the specifics of exactly what you are looking for. The supplier development initiatives and supplier capabilities assessments that you should be sending to each potential supply partner, along with the RFQ, should also down-select many of the unknowns and discrepancies. Also, a procurement professional must be cognizant of a potential supply partner’s location, as that may introduce costs that negate other cost savings.
There are many items a sourcing professional should be cognizant of and consider before choosing a machining supply partner. There must be full awareness of the bigger picture and not just the short-term cost savings or avoidances. Too often supply partners are chosen for the wrong reasons or for short-term gains. Understanding a potential machining supply partner’s capabilities, experience, quality, and costs will put you and your company in the best position to win in the long term. Keeping these four considerations in mind will ensure you choose the right machining supply partner, every time.