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The CWM OEM eNewsletter from Chicago White Metal Casting and its CNC & Contract Mfrg. Divisions |
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Issue
No. 2, Summer 2005
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Advanced
Magmasoft®
Process
Simulation
Manufacturing: When Should It Stay or When Should It Go Offshore? The following article is based on excerpts from a story on this subject in the April 18, 2005 issue of Design News, which discusses the recent report on the cost of offshore manufacturing in China by Nicholas Dewhurst, V.P. of the product design consulting firm Boothroyd-Dewhurst, and David Meeker, who has a 20-year background in design engineering and consulting, and is also now a teacher at M.I.T. The conclusions apply to any low-cost labor market. The authors state in the study that many companies pursue cheap labor without recognizing that labor can make up just a small fraction of total manufacturing costs for many products. Looking back at 10 years of design-for-manufacturing cost-reduction work, Dewhurst estimates that labor costs for typical product assemblies are just four percent, versus 72 percent for parts and material costs, and 24 percent for overhead. In addition to overestimating labor costs, a number of costs associated with offshore sourcing are not fully added to the calculation: often overlooked, according to the report, are shipping costs, especially shipping losses, travel, communication, and vendor selection. Also often missing are the costs of dealing with engineering and marketing changes, higher prices for certain materials offshore, legal work, new workforce training, theft and piracy. And finally, the cost of poor quality that can require constant vigilance to maintain. Dewhurst and Meeker make the case that all of these added and hidden costs come to, conservatively, at least 24 percent of final manufacturing costs, and for many products, lower labor rates cannot cover these added expenses. The study argues for leveraging product reengineering to create lower cost product designs. Part count reduction resulting in significant cost savings should be at the heart of such product redesign programs. Low offshore labor rates are often mistakenly viewed by many companies as the easier alternative to large unit cost savings. What about redesigning the product for lower costs and then offshoring it? They caution that the newly optimized design will still be subject to the extra 24 percent offshoring costs. CWM
would point out that die casting, along with plastic injection molding,
is a primary manufacturing process that can deliver substantial unit cost
savings through product redesign. For many products, where the properties
and look and feel of metal are important, advanced die casting technology
can dramatically reduce part counts and improve product performance. Significant Improvement Achieved in On-Time Delivery Record Several years ago CWM identified client delivery performance as a service area requiring improvement and established annual goals that continually raised the bar. Through weekly order status meetings, where all department heads come together to proactively review upcoming requirements, plus the efforts of a dedicated team and advancements in technology, we have realized significant improvements in our delivery record. For 2005 we established an on-time delivery goal, as measured against customer acknowledgments, of 96%. As of March of this year, CWM's on-time delivery performance stands at 95.4%. We feel that the efforts we have focused on in meeting client delivery requirements are on the right track. Major Reductions in Chemical & Process Water Use, Strong Recycling Efforts Scored As a charter member of the U.S. EPAs National Environmental Performance Track program, CWM in March of this year submitted its annual report detailing the progress the company has made in its new 3-year commitment, as well as in its ongoing commitments, to environmental initiatives. The
long-term goal of the program is to enable strategies leading to significant
reductions in pollution, waste, environmental and human health impacts,
with a decrease in regulatory burdens. CWM's latest report to the Performance
Track program included: Recycling of 9,300 lbs. of magnesium machining chips through processing into small, solid blocks used for desulfurization in steel production; Recycling of 10,000 lbs. of office paper, 12,000 lbs. of corrugated materials, 1,000 lbs. of plastic stretch film, 71,000 lbs. of steel, and 445 wood pallets. Chicago White Metal was the first die caster to achieve ISO 14001 registration for its environmental management system and has served as a mentor facility for the EPA to the die casting industry. To forward this issue to a Colleague: If you would like a colleague to see this issue of "CWM Solutions," just copy and paste the following Internet link in your Email message: http://www.cwm-lit.info/cwmOEM/05-2.htm To Unsubscribe: If you do not wish to receive CWM's OEM Newsletter in the future, we will remove your name from our permission-based OEM E-mail list. Send an Email to: cwm-remove@e-int.com Place "Remove My OEM Email Address" in the subject line, and say "CWM OEM Newsletter removal" in the message space. Be sure the Email address you are using for this message is the same as the one we used to address you. We apologize if we received your original permission in error. To Change Your Email Address: If you are in the process of changing your Email address, send your new address to us at: cwm-change@e-int.com Place "Email Address Change" in the subject line, and include "For CWM OEM Newsletter" in the message space. Please include your full name, city, and state or province, so we can locate and remove your previous Email address. To Add an Address to Our OEM Newsletter Email List: Send "Name, Title, OEM Company name, and City, State or Province" with the Email address to: cwm-add@e-int.com Place "CWM OEM Newsletter" in the subject line, and include in the message space: "Add name to CWM OEM Newsletter list." Note that your information will never be shared with anyone outside the CWM organization.. Back to Top
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