|In the outsourcing matrix, the lower the strategic value and criticality of the part being molded, the better candidate it is for outsourcing. The reverse is also true: Unique or proprietary processes tend to be more profitable and should be kept in-house.|
That's the wrong reason, says Jeff Mengel, CPA and consultant with Plante & Moran LLP (Auburn Hills, MI). "Outsourcing is a strategy," says Mengel. "Outsourcing should be the result of proactive planning, not reactive to a specific situation."
Reactive outsourcing often happens when a molder or moldmaker takes on a job for which it lacks skills, capabilities, or machine time. Sometimes it's a moldmaker taking a mold job for a cheaper price, and then deciding there's absolutely no way he can do it for that and subs it to a smaller shop down the street. However, says Mengel, "If it's a question of keeping people busy, I won't outsource."
Proactive outsourcing as a long-term strategy is done as a way to expand business, reduce personnel, or acquire new technology or skill sets that a molder or moldmaker doesn't have in-house. "You can't have all the skill sets necessary," says Mengel. "Do what you do best, then outsource the rest."
|DEVELOPING A SUCCESSFUL WORKING RELATIONSHIP |
Kiran M. Gandhi, senior manager of operations management consulting for Blackman Kallick Bartelstein LLP (Chicago, IL), notes that a successful working relationship with an outsource supplier requires treating that company as an extension of your own manufacturing facilities. That means developing a clear communications channel to maintain quality. Other tips Gandhi offers include the following:
"Outsourcing frees your time to concentrate on developing innovative new products and services, and becoming more proactive to the needs of your customers and marketplace," Gandhi adds.
There are also unique activities that can be outsourced. For molders, this might include services such as EMI/RFI shielding, painting, coatings, or even silk screening or other decorative processes. For moldmakers, a unique activity would be texturing or etching cores and cavities, or electroless nickel or teflon plating.
Third, there are what Mengel calls "unique assets." These are processes more difficult to duplicate than machining or molding. "Anyone can buy a machine, but some processes require an expertise," he says, "such as rapid prototyping."
There are several things to consider when developing an outsourcing strategy:
Mengel says that Plante & Moran's recent surveys reveal that 40 percent of molders say they have moldmaking capabilities. However, many molders outsource much of their mold requirements to mold shops. "Saying they do it and actually doing it are two different things," he adds. "For molders, building molds internally did not correlate with financial success."
Unique activities for which you already have equipment and the skill set to do in-house are probably best kept in-house, Mengel notes. Typically, unique or proprietary processes tend to be more profitable because they require higher levels of expertise and specialty equipment.
"Figure out where it makes sense to outsource based on this matrix [p. 11]," says Mengel. "Keep the unique and proprietary processes in-house and then have a strategy in place to outsource work as it moves into the commodity quadrant."
|Contact information |
Plante & Moran LLP, Auburn Hills, MI
Jeff Mengel; (248) 375-7334