A leading global manufacturer of biomedical products for the life sciences industry, ranking among the top 300 companies in the United States with over 3 billion dollars in annual revenue, was looking to outsource the machining and assembly of a key product line, in order to resolve a variety of business issues.
Making Financial Sense
The OEM clients could no longer justify the continued capital and operational investment required to keep their facility open. With an immediate capital investment requirement reaching close to 1.5 million dollars, the client was, in fact, grossly under-utilizing their assets.
“Maintaining their machining and assembly operations just didn’t make financial sense,” expressed Mike Iassogna, VP of Operations at Tier ONE. “Running one or two shifts means they can’t utilize their capital investment and won’t make back a return. With over three shifts, multiple customers, and operating 24 hours a day, up to seven days a week, we get a greater return, making it a much more cost effective investment for us than for them.”
The transition would enable them to free up valuable budgetary resources by eliminating a number of significant capital and operational costs while receiving the products they need; allowing limited capital and resources to be focused at higher value added aspects of their business.
Highly Skilled Local Workforce Guaranteed
The increasing difficulties securing a reliable workforce of skilled machinists for their operations was a critical issue for the clients and one of their principle considerations for investigating outsourcing options.
Tier ONE presented a comprehensive Workforce Study that outlined the ways in which it is able to develop and maintain its highly skilled workforce – emphasizing the superior employee and manufacturing productivity levels in Connecticut.
Fair Pricing Solution
To address the OEM’s concerns about how a move to Connecticut was going to affect their pricing, Tier ONE came up with an equitable solution that avoided the time-consuming process of quoting each individual part.
Tier ONE agreed to trust the OEM’s current standards and to price accordingly off their standards.
Successful Transition, Lasting Results
The complicated transition planning process was strategically laid out, with careful attention paid to every detail. Documentation for each part was verified and updated. Samples were requested and Tier ONE performed a complete inspection, matching each part to its corresponding drawing. Where necessary, reverse engineering was performed to create updated documentation so that the transition was possible.
To ensure the transition process would run smoothly Tier ONE examined the tooling and fixturing requirements. In order to manage all the parts that make up a particular assembly, a production schedule along with a transition schedule for each part was carefully mapped. In some cases existing machines and fixturing was moved directly to Tier ONE, in other cases processes and fixturing were independently developed.
Highest Quality Products Every Time
Committed to delivering the highest quality product, Tier ONE provided a detailed analysis of the inspection process.
Two years later, during a routine inspection, the client’s service technician commented on how the products were “much better compared to the ones that were produced at the facility that was closed-down. Those produced by Tier ONE”, he said, “are very smooth and get to top speed without vibration.” He added that he no longer found the “imbalance problems they had prior to Tier ONE manufacturing.”
Impactful Year over Year Results
The OEM client continues to benefit from significant year over year savings. The approximate dollar value in annual savings includes:
- $1.5M in capital expense (required every 7 – 10 years)
- $750K in labor (approx. 10 heads)
- $1.6M in inventory
Since assuming the client’s inventory, Tier ONE has increased turns from 3 to 6, allowing them to reduce their inventory through smaller lot sizes. Pull systems and Kanbans being used have improved on delivery times. Additionally, because of the use of Kanbans for common parts and quick change set-ups, Tier ONE is able to offer competitive pricing on all parts, whether low or medium volume.