What do you think of when you hear the term “outsourcing”? Do you think of increased efficiency, or do you worry about a loss of control? Deciding whether to outsource the production of rubber parts doesn’t have to be a difficult decision. In fact, you can make a convincing case for outsourcing even if you don’t have data from a recent time and motion study.
Elasto Proxy supplies rubber products to manufacturers who understand that rubber fabrication isn’t a core part of their business. These companies still need seals, gaskets, and insulation, but without the downsides that come from in-house manufacturing. Take the case of Marine MetalCraft as described in Canadian Fabricating & Welding magazine.
Outsourcing Case Study
Marine MetalCraft of Kingston, Ontario makes high-speed watercraft for fire crews, rescue patrols, and military personnel. The diesel engines in these boats are loud, so the company installs custom acoustic insulation. The welders and fitters at Marine MetalCraft are highly skilled but having them hand-cut acoustic panels with bolt holes produced inconsistent results.
Cost was also a factor. If a worker miscuts an acoustic panel, an entire sheet of material may go to waste. The cost of that scrap then becomes part of the cost of the job. Asking a well-paid welder to cut rubber by hand is expensive enough. Making the same cut twice adds the cost of rework. There’s also an opportunity cost since welders who are busy cutting rubber can’t join metal instead.
Marine MetalCraft’s decision to outsource its parts fabrication to Elasto Proxy enabled the boat-builder to use its labor resources more efficiently while reducing material waste and getting higher-quality components. The acoustic insulation that the boatbuilder buys is also easier to install, which saves time and money during assembly.
Outsourcing and True Costs
Could your business benefit by outsourcing parts production to Elasto Proxy? As the Marine MetalCraft example shows, outsourcing can mean better quality, greater consistency, and less material waste. You can also deploy your labor resources more efficiently and speed installation times. Plus, you’ll know the true costs of components for more accurate job costing.
If you haven’t performed a time and motion study recently, are you sure that in-house parts production is really less expensive? Remember that your costs fall into three main categories: direct labor, direct material, and manufacturing overhead. If any of these costs are incorrect, your financial statements may under-report inventory value and the cost of goods sold.
Direct Labor
Direct labor is the cost of converting rubber materials into finished products. This includes time spent on activities such as gasket cutting and bonding, but it also includes the cost of retrieving materials from inventory, moving them to your assembly area, and preparing or cleaning up after manufacturing operations. Are your labor operations as efficient as they could be?
Direct Materials
Direct materials are the cost of the materials that becomes part of your finished product. With acoustic insulation, it’s the cost of the rubber sheets and tapes or fasteners. Workers can discard miscut panels, but the cost of that material doesn’t disappear in the dumpster. Purchasing can always order more materials, but that ties up more cash in inventory. Is there room for improvement?
Manufacturing Overhead Costs
Manufacturing overhead costs are costs that you can’t directly attribute to rubber products, but that affect the total cost of production. Examples include the salaries paid to manufacturing managers and quality control personnel. When parts like door gaskets are difficult to assemble and install, do more than just your line workers get involved?
Talk to Elasto Proxy About Outsourcing
Elasto Proxy can help your company improve the efficiency of its operations. Plus, when you outsource your rubber fabrication to use, you can focus more on your core business. To learn more about the benefits of outsourcing, contact us.
