How a Short Domestic Supply Chain Saves on Long-Term Costs

It’s an age-old question for original equipment manufacturers (OEMs) – are the cost savings from offshore outsourcing worth the potential supply chain risk? Lower cost regions and countries can seem appealing from a profit margin standpoint. But in our experience, the longer the supply chain, the more the total cost of production can increase, and the higher the risk for something to go wrong that cannot be easily handled from far away.

Many manufacturers have felt this strain during the COVID pandemic, with overseas shipments halted. Ports are overrun with product, causing bottlenecks in domestic freight, and in some cases charging $1,500 fees for container space. But before those challenges come into play, let’s talk about quality.

Stainless Foundry & Engineering (SF&E) has worked with many manufacturers domestically who have struggled with an overseas partner – both prior to and during COVID. Our technical expertise and proximity to our OEM customers have helped us take over failing projects, successfully produce parts, and get quality products into their hands. The following are two stories of common risk scenarios we have helped our customers overcome. In the end, we were able to save the customers money, even with a higher cost per part.

Client Risk Scenario 1: Failing Inspection

An OEM with extremely stringent design requirements outsourced part production overseas, however production became stalled when the parts were unable to pass radiographic testing (RT) and liquid penetrate testing (PT). Given the high specification, the unique shape, and the distance between the OEM and the part producer, it was difficult to solve the issue. In addition, the OEM specifications, drawings, and procedures were copied and slightly modified by the overseas foundry without a full understanding of the impact they had on the alloy being used.

SF&E Solution:

When SF&E began working with the OEM to attempt to solve the issue domestically, our engineers did not have the option to redesign the actual part. Knowing that the specifications and the design parameters needed to be maintained, after three rounds we were able to find a way to change the setup, feeding and casting to get the material to flow properly and pass inspection.

First, we identified a thin wall section in-between thicker sections. This was likely causing the RT failure since it would be difficult to properly feed the area to achieve solidification. We used the customer’s recommended setup and were able to pass RT inspection. We failed a visual inspection and fluorescent PT inspection, mainly on lettering of the part. In addition, we had more grinding, welding, and scrap than we would have liked for this part.

In the second sample, we modified the gating and rigging based on the results of the first sample. Once again we passed RT and failed visual and fluorescent PT inspection, however did see improved results in the lettering.

In the third sample, we built a core box for the lettering, modified the rigging location and size, and added a filter to reduce oxides in the casting. This time, we passed RT inspection, we passed visual inspection, and we passed fluorescent PT inspection with minimal rework. We significantly improved the lettering to meet customer specifications. And, we brought grinding, welding, and scrap to the level we planned for on this part, making this part as cost-effective as possible to our customer.

When the customer approached us about a second product, we followed what we learned in solving the first challenge and were able to produce excellent quality castings on the first attempt.

Client Risk Scenario 2: Inconsistent Quality

An OEM was successfully producing a part in the U.S., but decided to outsource to another country as a cost-saving strategy. About a year into overseas production, the OEM observed inconsistent quality, which was causing delays on the supply side. The defects were identified after they arrived at the facility, causing the OEM to sort through hundreds of parts. Communication breakdowns prevented the OEM from solving the issue with the overseas producer. Coupled with the investment the OEM was making in large order volumes, the inconsistency forced the OEM to search for a domestic alternative.

 SF&E Solution:

The first thing the SF&E team did when working with the customer was to go onsite to their facility and walk through the production process manually. We observed the setup, machining, and final assembly. In doing so, our team identified something unusual. The main points for machining, which ultimately set up the critical assembly features, were not in the typical location because the part was inserted upside

SF&E developed and engineered custom gauges that would check the casting in different configurations to make sure the prime location points were always in place and consistent. As a best practice, we have one set of gauges at SF&E and the customer keeps one set so we are using the same inspection tools. Production with consistent quality has been running smoothly ever since.

Additional Advantages: Lead Times and In-House Capabilities

SF&E is always a quick drive or airplane ride away from our customers, providing us the ability to respond, react, and solve issues in a short amount of time. Because of our ability to serve customers in close range, we have invested heavily in reducing lead times while improving quality. Progress over the past four years has involved new equipment purchases, production process changes, separating commercial work from high specification work, introducing (and bringing back) new alloys, the growth of in-house machining, welding, and non-destructive testing (NDT) capabilities, as well as new partnerships with vetted third parties to supplement capacity. All of these initiatives have helped SF&E guarantee some of the shortest lead times in the industry, from 4-8 weeks depending on the product.

Lessons Learned

The longer the supply chain, the larger the risk for disruptions. The cost of disruption and the subsequent correction needed is often higher than the intended savings on price per part. With a shorter supply chain and a team of experienced partners, OEMs are able to communicate with their foundry quickly and face-to-face if needed.

With a shorter supply chain, customers have the ability to keep less inventory and ramp up batches when needed. For the two SF&E customers above, in the end, the shorter supply chain was able to meet their cost-effective goals without sacrificing quality.

If you are struggling with overseas delays or looking for a new foundry partner to meet your lead time and quality needs, contact SF&E today at sales@stainlessfoundry.com.