How to pick an outsourcing supplier

July 27, 2006
Design teams that outsource noncorecompetency activities as part of a proactive business strategy are taking the right first step to future success.

John Jenkins
General Manager
Alcoa Prime Services
Whitehall, Mich.

The next step is to pick the right outsourcing supplier.

The right supplier will have extensive manufacturing experience. Suppliers must also understand how entire supply chains work to better pinpoint opportunities for optimization.

For example, lean manufacturing is a powerful tool that encourages suppliers to adapt for speed. However, lean is not the best tool for optimizing supply-chain performance. Applying lean methods to cut processing time of parts that have a lot of variation is the wrong tactic. A better approach tries to eliminate part variation (ideally) during design. Doing so let a shop doing secondary machining on a part switch to standard fixtures. Standardization in this case boosts throughput and repeatability by cutting setup time and rework.

Though the emphasis these days is on one-piece flow and a "less-is-more" philosophy, sometimes more is more. In another case, we helped a customer cut lead times 20% by ordering batch quantities of six instead of two or four. The change better balanced workflow and helped the design team hit cost targets.

Such breadth of knowledge across supply chains is one aspect of manufacturing-based expertise. Depth of knowledge within specific processes is another. While evaluating a heat-treat supplier for a multiyear contract, we found equipment nearing the end of its rated lifetime. Aging equipment can cause future problems. After further discussion, however, it became clear the supplier had a robust preventivemaintenance program in place. Our concerns were allayed.

Choosing suppliers wisely pays dividends in other ways. For example, a DoD customer was outsourcing its turning and EDM operations to two different shops. We recommended a supplier that could do both, cutting cycle time by four days and costs by 5%. In another case, an OEM needed a supply chain that could meet much shorter cycle-time targets than its existing one.

We steered them toward a machine shop that could do fully automated inspection at no extra cost. This necessitated moving inspection from the end of routing to the machining stage, a practice that eliminated a routing step and the associated costs. The point: Find suppliers who know what every potential supply-chain member can contribute. Test candidates on this point.

In sum, not all outsourcing suppliers are equally capable. The more urgent your need for support, particularly with highly engineered, complex components, the more you need a supplier with breadth, depth, and innovative manufacturing-based capabilities.

Alcoa Prime Services is a supplier of investment castings for aircraft and industrial-turbine engines.

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