For those of us who play in the manufacturing and metal fabrication game, the field of play and the rules of play are constantly shifting. Consider original equipment manufacturers’ (OEM) purchasing and engineering departments as Team #1 and metal fabricators Team #2.
The four boundaries of the field of play are; trust, accountability, reliability, and respect.
The play between the teams revolves around harmonizing their internal dynamic criteria to mutually benefit both teams.
The goal of the game for each team is to play their requirements so that at the end of the game, both teams are winners. A tie game is the perfect game.
The game of manufacturing and metal fabrication is played with, but is not limited to, CNC milling, CNC turning, precision sheetmetal, automatic screw machine, welding & weldments, and subsidiary supporting processes.
In a tie game, OEM purchasing/engineering, and metal fabrication are both winners at the intersection of quote, purchase order, delivery, and payment.
For OEM purchasing/engineering, the outsourcing challenge is finding fabricators to meet their cost, quality, and delivery requirements.
For metal fabricators, the challenge is developing a competitive supply chain, skilled work force, and customers who pay.
Creating strategy and building teams that can win (a perfect tie), is always a struggle on both sides as changing internal pressures endemic to each team impact every play. Therefore, mutual understanding of those internal forces influencing the play tactics of both teams leads to smoother play and quicker results.
Medium to small-large original equipment manufacturers typically out-source to local metal fabricators as the efficiency/cost of internal metal fabrication shops is always difficult to justify. Purchasing typically calls the play when choosing a metal fabricator.
In order to successfully meet management budgetary cost and delivery goals, purchasing generally sees pricing as the primary tactical play. Unfortunately, low pricing as the primary play is often gained at the expense of quality, scheduling, and relationships.
Most purchasing department personnel have never been in a fabrication shop let alone worked in the industry and so have no background on how to evaluate for success. Furthermore, having no actual operational fabrication experience, quotes are (typically) offered only to the two or three fabricators closest to the office as company protocol requires two or three quotes for evaluation. Pricing is always the primary justification when quality or scheduling fall short of production requirements. Although parts can always be rejected due to quality or even scheduling failures, rejections place purchasing right back at square one starting fabrication and scheduling over again. This in turn, creates hard feelings on both teams and impacts future ability to play together successfully as a mutual trust relationship has been broken. The view that there is always another shop is an error in critical thinking on several levels as there are not an unlimited number of quality shops and the metal fabrication world is small and the word gets out quickly.
Most metal fabrication shops are owned by people who are unemployable! They totally prefer to work for themselves. This tends to provoke a mindset as independent as Patrick’s pig….to employ an old saying. Stable business relationships in fabrication are vital and, oddly, some of the best fabrication shops seem to be owned by very unemployable people! Solid relationships built with expert craftsmen ALWAYS pay off in dollars and cents.
For example, although machining resources typically offer both CNC milling and CNC turning, purchasing should understand the following. Machinists are craftsman. As such they are, of course, skilled in the operation of many types of fabrication equipment. However, career machine shop owners usually have a specific personal affinity for one type of machining; say milling. They LOVE everything about milling and are true geniuses in working a mill to its ultimate productive capability. By necessity they offer CNC turning and other processes in order to have a balanced shop…but milling is their primary skillset! This is where Norfab Engineering’s industry knowledge and experience pay off. A far better price and delivery is gained by knowing the owner’s primary skillset because his productivity is greater allowing him to be extremely competitive within that skillset which results in lower pricing and consistent on-time delivery. Parts placed in the right place for the right reason is always the winning power play. This core concept works for both teams on each every such play!
However, the most overlooked and yet most effective tactic that leverages a winning game EVERY TIME….is money. Relationships of trust, accountability, and reliability are irrevocably destroyed every day over money.
OEM’s endeavor to leverage purchasing budgets by insisting upon a 30-day payment cycle. This hoary tradition is mis-applied in today’s highly competitive, fast-paced marketplace. Metal fabricators work against very tight margins severely impacted by the constant variance in commodity and process pricing. Machine shops are not banks. To compensate for long receivables cycles they bump up pricing in an effort to cover the dynamics in commodity and process pricing. OEM’s can benefit financially by simply paying 50% with purchase orders and the balance at 10 days after delivery. The cash flow impact to the machine shop is dramatic and typically results in lower part pricing. The annual net financial delta via parts pricing to the OEM can be dramatically greater than any 30-45 day payment delay gains.
Viewing the interaction between OEM’s and fabricators of any kind really is much like a contest between two teams. What is typically overlooked by both teams is the financial value added across-the-board, that is gained thru mutual understanding of the dynamics impacting each team. The concept of building mutual relationships based on trust, accountability, and reliability are far more valuable today than ever before.
Norfab Engineering, Inc is a truly unique out-sourcing provider that, at no cost to the OEM, can impact annual purchasing budgets up to 15% by leveraging nearly thirty years of direct relationship experience working with metal fabricators of all types to deliver reduced pricing across a broad range of metal fabrication processes. Even if pricing is measured in pennies saved, dollars will appear annually on the bottom line. Norfab Engineering, Inc is a competitive coach in stretching purchasing dollars and budgets.