Everything About Outsourcing In The Manufacturing Industry

Outsourcing of components started in the year 1970 and it has become very successful in the 1990s. Most of the companies started outsourcing the components to reduce their internal labor costs.

The outsourcing of the components has become one of the regularly used practices in major manufacturing industries since you need not have to maintain different functions under one roof. The outsourcing of components yields benefits to the organization in different ways. To successfully outsource components/products, you should be having enough technical persons by your side and the costing division should be one of the key players in outsourcing the components. When you are about to outsource the components/ products you should be having all the basic requirements correct and there should be fitting supporting departments in order to achieve the required quality on time for minimal cost. In this article, we will discuss the Outsourcing of components in the mechanical oriented manufacturing industry

Reasons For Outsourcing?

• Reduction in Overheads
• In order to improve the focus on their core objective
• Improve the production efficiency
• Reduction in manpower
• Less Inventory
• JIT can be followed

Reduction In Overheads:

Overhead cost is one of the major junk which affects the growth of an organization. Overhead costs are the cost other than the M+L cost. It includes Maintenance cost, additional manpower cost (Managers), Space, Power cost, Material movement cost, Raw material storage cost.

Improve The Focus On Core Objectives:

If the excess man power is eliminated and most of the components are outsourced, it will help the organization to utilize the available manpower for some other value added activity which will be either to increase the productivity or improvement activity related to the core objectives.

Improve The Production Efficiency:

This will help in improving the production efficiency by eliminating the unwanted non value added activates which is being done by them. Say for example, if a person is making sub assemblies which are to be assembled in the final product the sub assembly part can be made as osp items like and the manpower which is being utilized for the NVA can be used for increasing the production and thereby increasing the sales turnover of the organization.

Reduction in Manpower:

Outsourcing of components will really help in reducing the manpower at in-house. Since most of the components are outsourced, there will be nothing much to deal in the in-house. After using all the available man power effectively, there will not be any need for additional manpower for that particular kind of work.

List of commodities that can be outsourced

In the present situation, almost all the components can be outsourced from vendors who are ready to be a supply partner in the manufacturing industry.

Here is the list of commodities that can be outsourced at an affordable price

• Machining
• Plastics
• Rubber
• Sheet metal
• Springs
• Casting (GDC, PDC, Sand casting)
• Surface treatment process
• Fasteners
• Electrical Items
• Sensors
• Stickers
• Consumables
• Calibration
• Engineering services
• Maintenance
• Inspection activities
• Heat treatment
• Jig& fixtures, Tool Making dies
• Gauge Manufacturing
• Sub Assembly
• Manpower

Types of Outsourcing:

Basically, the outsourcing of components will be carried out in two methods one is the PO category (buy) and the other thing is the OSP (Make)

PO:

The category of items where the supplier bears the 4M-s (i.e.,) Man, Machine, Material, and Method to produce the output based on the customer requirement is the PO items. A purchase order will be released from the concerned customer and based on which the supplier will have to plan for the material and deliver the components on time with the set quality standards.

OSP:

This category of items will be dealt with by the customer providing the material to the recognized supplier. The supplier whose only role is to manufacture the component as per the recommended design and deliver it on time without compromising the Quality.

Inter department support for successful outsourcing:

• Corporate planning
• Purchase
• Methods/ IED/ ME
• Supplier sourcing
• Supplier Quality Engineering

Planning:

The planning department plays one of the key roles in the outsourcing of components because the planning department will be in continuous contact with the Marketing team. Based on the product requirement forecast given by the marketing team the schedule will be released to the concerned supplier. Another task of the planning team is to release the purchase order to the concerned supplier on time so that the delivery of the required component will be met on time.

Purchase:

Then comes the purchasing team. The role of the purchasing team is to follow up on the items which have been already released as a PO by the corporate planning team in order to meet the on-time delivery of the products to the esteemed customers. Being a buyer is a timid task since he/she is responsible for the accounting of components which has been received from the supplier premises.

IED/Methods/ME:

Methods team being one of the strongest technical teams in any manufacturing unit they are responsible for all aspects of the development of a firm. They play a crucial role in the outsourcing of components by helping solve the issues faced at the supplier end. Be it jig & fixture, process studies, the IED department will have to make a huge contribution to bringing in the components on time. The main role of IED team is improving productivity by reducing the time of assembly at various assembly stages and also pitches in where ever required to support other struggling teams.

Supplier Sourcing:

The supplier sourcing team plays a major role in the on-time delivery of the components from the supplier end. The SSD team is responsible for the development of new /additional sources on the request from the concerned buyer. New/ Additional source will be created if there is a failure in OTD by the regular vendor or if the existing vendor is not capable of meeting out the drawing requirements provided by the customer. The SSD team digs deep and starts developing a vendor based on the previous failures faced by the existing supplier. When a correct source has been identified by the SSD team, it is a mandatory process that at least three consecutive lots are received in good quality condition from the supplier. After this tedious process SSD team also helps in problem-solving together with the IED and supplier Quality team.

Supplier Quality Engineering:

One of the technically strongest teams in any manufacturing firm due to the analyzing capacity and problem-solving capability of the engineers SQA/SQE helps in Outsourcing of components on time by solving the Quality issues on time. Other than the problem solving, the supplier is being validated by the SQA team for every one year to ensure the components are received from the supplier end in good condition. On-time problem solving together with the IED department works very well for the company to bring in the quality items on time. Working on past failures as a preventive measure will also help to bring the components on time which will help and ensure the on-time delivery of the products to the customers.