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Lean Manufacturing – Cutting Costs with a Tiered Supply Chain

Lean manufacturing is a simple concept: eliminate waste, cut costs and increase your bottom line. While the concept is simple, there are many ways to execute the process. One strategy is to make use of qualified suppliers, who in turn, make use of other suppliers until a tiered supply chain is born.

A great example of this system at work can be found in the automotive industry. In the past, car manufacturers would manufacture most every component and then assemble each car. To facilitate this process, they maintained an inventory of hundreds of thousands of parts. Today, those parts are distributed amongst several suppliers, each of whom maintains their own inventories.

A Tier 1 supplier provides complete systems and assemblies directly to the car manufacturer. A tier 2 supplier provides parts and components to the Tier 1 supplier. For example, a tier 1 supplier may provide a complete braking system to a car manufacturer, while a tier 2 supplier would supply the tier 1 company with brake components used on the final brake system.

This provides many cost saving advantages to manufacturers. Warehousing fees are eliminated because no inventory is kept. Cash flow is not greatly impacted since parts are paid for only when they’re delivered and parts are delivered only when they’re needed. Utilizing a tiered supply chain also provides a quicker turnaround of finished products, as well as a safety cushion in cases of spikes in demand. If an unexpectedly large order comes in, material is readily available and is only a phone call away from your tier 2 suppliers. As soon as the urgent demand is filled, these suppliers immediately start manufacturing parts to replenish their inventory, thereby restocking your parts cushion.

Lastly, this system allows manufacturers to take advantage of economies of scale. Instead of placing separate orders each day or each week, manufacturers will place six or twelve month orders that are then kept in supplier inventories. These large order volumes result in lower costs for all parties while strengthening the tier 1 manufacturer’s bottom line.

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Vetting Our Manufacturers

Deeco Metals prides itself on working with some of the best manufacturers in the world. How do we know they’re the best? We personally inspect their facilities to ensure that they meet our stringent requirements. Unlike many in our line of work, we don’t work with just anyone. All of our manufacturers are audited on a yearly basis to ensure that our customers are getting products of only the highest quality.

The process of finding manufacturers begins with having an engineer in the country that the mill is located in. Having someone local is important, because they can provide personal insight on mills that other searches simply can’t provide. It also helps to have someone who speaks the local language. Our on-site engineer reviews companies that we direct him to as well as recommends companies that fit our criteria. Once it is decided that a mill might suit our requirements, he arranges a trip to visit and inspect the plant.  At the same time, he may visit other existing suppliers in the area that might be of value.  At the time of his visit and after meeting everyone of importance, he spends time with the engineering & quality group to inspect their production and quality systems.  If he is satisfied that the plant can provide good quality parts, he forwards his approval to our President Desmond Sinclair.

Upon review of our engineer’s comments, Des will arrange a trip to that area to visit the newly recommended suppliers as well as our existing suppliers. Only after his review will he give his stamp of approval.  Des comes from a manufacturing and engineering background, so he’s familiar with what it takes to be a top quality manufacturer. From the quality of the machining equipment to the overall manufacturing process, he inspects the entirety of the plant to ensure it will fulfill our customers’ order requirements.

In some instances, our customers want and need to visit and inspect our plants. In most situations like this, Des has gone with the client to inspect the plant that will supply them or that already supplies them. In some cases, clients have gone on their own to inspect the mills. Other times, due to company policies, they’ve hired third party companies to do the inspection.  If this is your company policy, we can recommend some excellent third party inspection companies.

Once a company has reviewed our offering and determined that we would be a good fit, our clients send us a purchase order for the required material. It is most common that at the start of every project, the manufacturer has to construct new tools and dies to produce the desired component.  Our standard practice is to provide first article samples along with our supplier’s dimensional reports. Upon receipt of our sample and reports, our clients then perform their own dimensional inspections and material analyses on the sample and determine whether or not to approve the FAS (First Article Sample) to release the full production order. There is a 50% charge to our clients upfront for the tooling, followed by the remaining 50% once the first article sample is approved. If there is a problem with quality on the first article sample that cannot be rectified, our clients receive their initial 50% back.

From lean practices to top-of-the-line equipment, there are many theories on what it takes to be successful in manufacturing. In our experience, we’ve found trust and a good relationship to be the most vital components of success. That’s why we personally inspect each manufacturing plant. That’s why we allow our customers to do their own inspection. And that’s why we offer our first article approval process with a no risk refund. There’s nothing more important than knowing that your project is in good hands.

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Dealing with the Unexpected

It’s our job to make sure that our customers’ projects go smoothly. That means managing complications with manufacturers before they ever become problems for our customers. To be successful at managing the unexpected is a two-fold process. First, we make sure to always maintain a wide base of manufacturers. Having plenty of trusted plants on hand keeps us from ever having too many eggs in one basket. Second, we keep our eye on world events, always watching the political arena and keeping track of exchange rates.

In the end, it all comes down to foresight and flexibility. Once we had an Australian manufacturer producing special custom metal products for an architectural customer of ours. The Australian manufacturer began having financial problems and was purchased by another group. That group did not want to continue with the parts we were supplying, so we found two plants that could manufacturer the same type of product, one in Spain and one in Italy. We moved the tooling to these plants without our customer ever being affected. Then, when the Euro Dollar was introduced, the prices in Spain and Italy skyrocketed.  Before this affected our customer, we located a plant in Korea and moved all our production there. There were no hiccups with delivery, service or quality. It was a seamless transition, and we were able to maintain the price the customer had been paying.

Consistency is important in any industry, and manufacturing is no different. Being able to stick to consistent production and cost schedules is essential to long term success. At Deeco we make it a priority to maintain that consistency for our customers.

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Metal Engineering Experts

When we get an inquiry from a customer, we don’t simply hand it to one of our manufacturers and return with a quote. We take a look at the design of the part, and if it’s presently being manufactured we take a look at how. We have a great deal of experience with metal and metal manufacturing. We use this experience to engineer the part in all aspects. Our goal is to make parts lighter, and manufacturing cheaper without any sacrifice in structural integrity.

Often, we receive designs from engineers who have recently graduated. Many times they design products according to textbook standards, giving each part a machined surface. There are some software programs that use this as a default setting as well. We’ve found that in many cases a cast surface will work, and will save money on manufacturing. We also get inquiries with outdated material specifications. By recommending a substitute alloy with the same (or better) properties, we’ve been able to save customers 30 and 40% on materials.

These are just some examples of how we’ve been able to take a design and make it better. Times are challenging right now. Everyone’s looking to save money where they can. At Deeco Metals, we have the skill to cut costs without cutting quality.

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