Gear designers have options when exploring cost reductions within a component, from using different material grades and leaner processing to incorporating less-proven offshore suppliers. While individually, these options may provide lower costs, consequently they might drive higher costs in other areas of the supply chain. It’s important to look holistically at the supply chain and focus on total cost of ownership.
Whether you are managing a supply chain or partnering with an experienced company like TimkenSteel to do so, you should recognize that each stopping point in the creation of your gear presents an opportunity for performance and savings. For example, if your application requires a more costly raw material, you may discover savings by customizing that material to your downstream suppliers’ equipment or processing capabilities.
Using integrated systems to improve the flow of information and materials within the supply chain can dramatically reduce inventory costs and investment in working capital.
Remember these points to help control costs within the supply chain:
• Consider all the capabilities of the supply chain when making sourcing decisions. Make sure you’re conducting due diligence to select the right suppliers for the right roles. Look at factors such as their physical location, technical and management expertise, demonstrated process capabilities, planned lead times, historical quality performance and warranty claims data, etc.
• Understand material utilization, projected scrap rates and how much material is needed to manufacture the desired components. Ask yourself if there are opportunities in the design phase of the project to minimize material requirements.
• Understand how to communicate well and help facilitate a smooth transition between suppliers. Know the handoff points and understand how you can automate the communication process and share information electronically between compatible systems.
• Consider where you can eliminate redundancies. For example, can you sequence or combine inspections while ensuring quality?
• Identify opportunities to utilize open capacity in the supply chain versus making investments in new capital equipment.
• Be careful to manage working capital and take advantage of trusted regional or localized supply partners. Evaluate safety stock, required WIP and planned delivery times carefully to manage the inflow inventory and conserve cash.
• Continuously analyze and manage logistics costs for each part of the supply chain and combine freight pick-up and delivery destinations where possible.
• Design raw material thermal treatment for optimal machinability within the supply chain and for customer gear cutting and finishing, which ultimately affects gear performance.
• Review options to combine operations within the supply chain. Suppliers like TimkenSteel offer turnkey processing from melt-to-component manufacturing, which could allow you to focus on core competencies.
The most important part to managing a complex supply chain is having the expertise to know where you can improve. This includes identifying and mitigating problems early in the process, reducing inefficiencies and sources of variation and devoting resources to drive out costs. Open, proactive communication with suppliers and customers is also key to identify and implement comprehensive continuous improvement initiatives and reduce the total cost of ownership.