How An OEM Supplier Integrates Cost Control Planning To Help You Save
May 20, 2016
Inconsistent metal manufacturing costs are not only frustrating, but they also prevent you from budgeting accurately. Fortunately, an OEM supplier that integrates cost control planning into its services can help you save money in the long run and maintain steadier costs.
While searching for the cheapest supplier is not always the best strategy (especially if you need minimal defects), the right metal manufacturer reduces your overall costs by using procedures to monitor expenditures and performance against the progress of your projects.
Learn more about how cost control planning works and why your contract manufacturer should offer it as a part of its services.
Factors Influencing Your Manufacturing Costs
Before your welding contractor estimates how much it will cost to manufacture a certain part, it takes your required quantity of parts into consideration. Next, it must factor in the pricing and availability of your material resources.
OEMs sometimes need a material that’s difficult to find. Perhaps it must be run in high quantities and special batch sizes. Choosing this material may be a strategic move, but such OEMs should be aware that their material price is going to be higher.
If high material costs aren’t a conscious decision, you should understand what materials are commonly available in the market, especially if you work with a small metal manufacturer. For example, a small supplier may not have the funding to pay for a 100-ton rolling of a special material.
Manufacturing methods are another factor influencing your production costs. Engineers at your OEM may inadvertently design a part that isn’t as manufacturable as it could be. When you include tolerances that are unnecessarily tight, you end up spending more money than necessary.
To help you keep manufacturing prices down, your supplier should offer product audits in which you collaborate to redesign parts. You and your supplier may be able to bring down the cost of a part significantly, as over-engineering has a drastic impact on costs. Lower costs allow you to meet your budget and increase margins.
Tactics Involved In Cost Control Planning
In addition to monitoring expenditures and performance, the right OEM supplier uses expert tactics to plan for and control costs. For example, your metal manufacturer should:
- Track the progress of projects
- Compare manufacturing processes against projected completion
- Measure how closely the budget is followed
- Take action to reduce costs intelligently while maintaining precision
These steps are usually effective, but other processes (such as quality control) must be in place to ensure high product quality and consistency. You have to make sure a product is made properly each time, or else it may suddenly fail. You’ll end up paying for low-quality parts in the form of production line inefficiency or increased warranty claims.
You should also remember that there is a law of diminishing return when you become over-involved in auditing your supplier. Of course, initial cost-control measures can reduce your price, but monitoring production and redesigning parts becomes even more costly past a certain point.
You must be able to trust your supplier to tell you when a product has reached its minimum cost. Studies show that OEM and supplier relationships built on trust are significantly more profitable for businesses.
You and your contract manufacturer share a common goal: to support the streamlined production of well-designed, precisely made parts at optimal costs. Understand that it’s a collaborative process. Together, you can work to increase profitability and grow your business.
Contact Miller today to discuss cost control planning with your next project.